Tariff Suitability Framework for Water Supply Services

Abstract

Water supply (WS) tariffs have evolved significantly in the past decades, although in a varying fashion around the world. Indeed, this development is linked to increasingly demanding requirements, or objectives that have to be achieved by water utilities (e.g., stricter quality standards and infrastructure maintenance levels, cost recovery, social concerns and environmental protection demands). The perception of WS tariffs as a powerful management tool, subject to context dependent objectives, raises the concern on how utilities prioritize them. This hierarchy is desirable due to the possible conflicting nature of objectives. From that point of view, and on the basis of protecting the public interest, the fitness between objectives set by the utilities and actual needs may require a broader institutional approach. The need for regulatory activity may be required in the context of too much arbitrariness in tariff setting procedures. For this objective, a regulatory tool is set, based on multicriteria decision analysis (MCDA) modeling methods, to provide a requisite framework capable of considering the multiple dimensions of WS tariffs and the assessment of specialists, practitioners and other legitimate stakeholders in the ‘tariff setting’ decision making process. The specified tariff suitability framework (TSF) will work as a regulatory tool, taking into account the utilities’ particular context and background factors. The outcomes allow to determine the tariff suitability and to build tailored policy recommendations, which are critical aspects for a sound regulation.