The analysis of financially sustainable management strategies of urban water distribution network under increasing block tariff structure: A system dynamics approach

Abstract

Financially self-sustainable management of urban water infrastructure assets in IBTs structure is a significant challenge faced by policy makers. In this paper, a novel causal loop diagram is developed to model dynamics of feedback loops and interactions between physical, financial, and consumers’ sectors in order to assess financially sustainable management strategies of water distribution networks in IBTs structure. Developing a system dynamics (SD) model for policy analysis of urban water management according to IBTs structure, is the main contribution of this research. In the presented model, results of different financial and rehabilitation strategies are compared by means of financial, environmental, social, and service performance indicators. The proposed model is implemented for Isfahan province in Iran, demonstrating that prices set to finance full cost of the service through higher blocks of consumption decrease annual fee hike rate of lower blocks of consumption. However, penalizing higher blocks has no considerable impact on the amount of total water volume purchased. Households outflow to the lower blocks slows down the growth rate of utility’s revenue that consequently results in deterioration of network pipes and leakage. Larger price differentials between consumption blocks causes reduction in the utility’s revenue and underlines the need for debt-based financing.