Water fee hike not a deterrent for wasteful households

Water fee hike not a deterrent for wasteful households
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There is never a good time for bad news. And so it is with the just-announced hike in water charges which will affect everyone, both households and businesses. The change, says the government, is to bring water prices more in line with the value of it or, in the words of one Member of Parliament (MP), to “bring up the awareness of the importance of water.”

Whether you agree with the rationale for the increase or not, the fact is that Singapore has and will always have a water situation, given its small physical area and an increasing population with insatiable demands.

So the increase of 30% in water prices is meant to, hopefully, curb wastage.

But how will it play out for a HDB household?

Before we get to that, let’s first be reminded of the revision, as it is so helpfully laid out on the Public Utilities Board’s website here:

As you can see, the changes in charges will be implemented in 2 phases, first from 1 July this year, and then on the same month in 2018.

There are 3 components to consider in our calculation:

  1. Water Tariff rate

  2. Water Conservation Tax

  3. Waterborne Fee (Sanitary Appliance Fee). Do note that the Sanitary Appliance Fee, which is presently a separate item by itself, will be combined into one cost structure under the Waterborne Fee once the changes take effect.

With that in mind, let’s consider the changes on a HDB 5-room flat which uses less than 40 cu m of water each month.

Here is a bill for February 2017:

On the first item, the price of water is currently $1.17 per cubic metre (cu m). In the above example of 12.6 cu m, this comes up to $14.74.

From July, it will be raised to $1.19 per cu m – which means it will cost [1.19 x 12.6] = $14.99, an increase of $0.25.

On the second item, the Water Conservation Tax, it will be 35% of $1.19 per cu m, instead of 30% of $1.17 as it currently stands.

So, for 12.6 cu m, the tax will be:

35% of $1.19 = $0.42 per cu m

12.6 cu m = [12.6 x 0.42] = $5.29

The third item is the Waterborne Fee. The above example sees the householder paying a total of $9.14 for both the Waterborne Fee and the Sanitary Appliance Fee. [Remember that these 2 components will be combined into one item from July.]

In future, the Waterborne Fee will be $0.78 per cu m, a $0.50 increase from the current $0.28.

So, for 12.6 cu m, the household can expect to pay [12.6 x 0.78] = $9.83.

In total, the bill under the revised charges will be:

Water tariff: $14.99

Water Conservation Tax = $5.29

Waterborne Fee = $9.83

Total bill: $30.11.

That is an increase of $1.81, or 6.4%, from the bill under the current set-up.

This seems t be in line with what the PUB has said – that “one- and two-room HDB households will see no increase in their water bills while an average four-room flat household may see an increase of $5 a month after rebates.”

The government will be handing out permanent GST rebates/U-Save vouchers to households, which are as follow:

So, taking all into consideration, the rise in water charges seem to not be significant, and the rebates and vouchers will offset the increases.

Which gives rise to the question: if the revisions upward were meant to discourage wastage, why give rebates and vouchers to offset the higher costs?

Well, apparently according to the authorities, wastage is set at a threshold of 40 cu m per household per month.

Anyone who use, for example, 50 cu m of water will be paying, under the revised fee table:

Water Tariff: $59.50

Water Conservation Tax: $21

Waterborne Fee: $39

Total: $119.

This is about $23.40 more than what the household would be paying under current charges, based on the same 50 cu m. (From 2018, the difference will be higher because of higher charges.)

Will that be a big enough deterrent in curbing wastage or excessive use of water?

An extra $23 a month does not seem to be any disincentive to watch the tap, especially for bigger households and if there are also rebates and vouchers provided to offset the costs.

Professor Ng Yew Kwang of Nanyang Technological University’s Division of Economics said that there should have been a larger, one-step increase “to give a larger awakening effect for saving water”, instead of the phased hikes to be rolled out this July and the next, reports the Straits Times.

Perhaps he is right.

It is puzzling why the government is taking a phased approach which weakens the deterrent effect. Is it because a bigger increase will be politically sensitive?

Are there so many households using such large amounts of water – perhaps in the range of 50 to 80 cu m of water per month – that such an increase is warranted? If so, how many are there? Why not raise the price by a bigger amount to have a meaningful deterrent effect?

But perhaps the only way to really know if the hike has achieved its aim is to see if the use of water has decreased in the months after the new charges take effect.

The answer is likely to be no.