Assessing social concerns in water tariffs

Abstract

In the European Union, water supply services are referred to as ‘services of general interest’, meaning that they are subject to multiple, potentially conflicting, public service obligations. This paper considers empirical data for Portuguese municipalities and provides a comprehensive approach to assessing the social dimension by evaluating whether the concerns of universal access to water services for basic needs, affordability and equity are embodied in the corresponding water supply tariffs. Accordingly, ‘essential minimum quantities’ (EMQs) of water for representative households are calculated and then compared with the lowest tariff block's upper limit, by water utility. Next, charges underlying the EMQs are calculated and compared with the average income of each representative household, by municipality. The results show that, in general, the EMQs are enclosed in the first block of consumption and also that the corresponding water charges do not represent a disproportionate burden on average household size and income. Nonetheless, our findings indicate that, when considering the 20% poorest households, the water charges raise affordability concerns in an important number of municipalities. Further, the results show that there is a socio-economic inequity that favours the better-off households.