13.2  Different types of water tariff

There are four types of tariff that are most often applied in the water sector. Different countries or areas may adopt different systems depending on their policies and circumstances. For example, in some places all households with a piped connection are required to have a water meter that measures the volume of water used. In other places, water meters are not compulsory. The four main types of tariff are as follows:

• Uniform flat rate: The consumer pays a flat rate regardless of how much water is used. This tariff is used in areas that are not metered. While, for the customer, the expense of installing and reading meters is eliminated, this tariff does little to discourage water wastage by consumers, and everyone pays the same no matter what their consumption.
• Single-block rate: The consumer is charged a fixed rate for each unit (or block) of water used, based on meter readings. A block is defined as the quantitative interval of water consumed (in cubic metres), for which a given tariff is set. This is a fairer system, as people only pay for what they use, and also it encourages water conservation.

• Two-part tariff: In this tariff, in addition to charging for the volume of water consumed, a fixed charge is imposed. This fixed charge is to cover several items that are not related to the level of water consumption, such as the cost of meter reading and billing, repayment of loans, and capital improvements.
• Rising block tariff: Here the consumer pays more as consumption increases. A certain basic allowance of water, the first block, is supplied at a minimal price (or even free) and subsequent blocks of water are charged at increasingly higher rates. The rising block tariff encourages water conservation but is sometimes seen as being disadvantageous to large families who tend to use more water. In these circumstances, a financial subsidy can be given.

There is another tariff, which is not very widespread, called the ‘seasonal tariff’, which is applied in Chile (Whittington et al., 2002). The tariff is low in the rainy season and high in the dry season, thus encouraging water conservation when water is scarce.