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.

Water tariffs used in Ethiopia

In Ethiopia, the rising block tariff is used for both domestic and non-domestic users. The National Guideline for Urban Water Utilities Tariff Setting recommends that no more than five blocks should be used. The recommended blocks for medium and large towns are shown in Table 13.1. The Guideline also recommends a set of block ranges for small towns.

Table 13.1 Guideline water tariff blocks and ranges for medium and large towns in Ethiopia. (MoWE, 2013)

Block	Block range (m3 per month)
	Domestic users	Non-domestic users
1st	0–5	0–5
2nd	6–10	6–10
3rd	11–15	11–25
4th	16–20	26–40
5th	>20	>40

Based on these block ranges, the price paid by each customer is calculated according to the volume of water they use. The actual costs of water supply differ from town to town, depending on various factors such as the ease of treatment of the raw water and the cost of laying distribution pipes, etc., so the price paid by consumers also varies between towns.

The following example uses the pricing of water to domestic users in Harar, where there are four blocks for domestic consumers. Table 13.2 shows the price in birr paid per m3 for each block.

Table 13.2 The rates for water in Harar for domestic customers. (Mohammed, 2015)

Block	Volume used per month (m3)	Price per m3 (birr)
1st	0–5	5
2nd	6–10	9
3rd	11–20	13
4th	>20	26

Here is an example of how a water bill is calculated based on these blocks. Imagine the household of Abdul Aziz and his family, who live in Harar and use 12 m3 of water per month.

Calculation of the water bill for Abdul Aziz’s household:

The first 5 m3 will cost 5 x 5 = 25 birr.

The next 5 m3 will cost 5 x 9 = 45 birr.

The remaining 2 m3 will cost 2 x 13 = 26 birr.

The total bill for the month will therefore be 25 + 45 + 26 = 96 birr.