, to encourage recognition of water’s true value and to provide incentives to consumers to waste it less and use it more sparingly. Provided, of course, that appropriate provisions are made for vulnerable and disadvantaged sections of society who would by such a general increase suffer an increased proportional burden on their (lower) disposable income. The high level of water customer debt that now exists points to ability (or willingness) to pay problems that would only get worse under a large price increase, especially in times of austerity; though the cost of water services versus the cost of satellite television and mobile telephone service contracts more gleefully accepted is commonly cited as evidence of the existence of skewed prices and priorities, here.
More for less? Or better for the same? Cue the incremental price signal. As every card-carrying economist will by now be crying out, it’s not the overall price of water that matters, it’s the marginal price where and when it’s scarce that counts. If the unit price of water could be varied to reflect its scarcity value, customers would be informed and incentivised to use it less in times when it is in natural short supply. The net outcome might then be that a better balance could be struck between the needs of people and the environment in times and places of water shortage. Moreover, whilst the overall price of water may vary more than now, the price paid need not increase overall.
Ofwat’s economists, charged by government
with the task of ensuring ‘value for money’ for customers, and the Environment Agency’s economists and water managers, charged by government with ensuring the efficient and effective allocation and use of water resources and protection of the environment, would sign up to such a system, it seems. And in times of austerity, particularly, we need to find ways to improve matters by doing things smarter.
Conditions precedent. For such a system to be able to work in practice, some fundamental changes would be needed. First, water abstractors would need to pay for water taken from the environment by volume, on an availability-varying sliding scale of permissions and charges, instead of on a fixed licensed quantity basis. That means licensing reform. A rising block abstraction model, with abstractors being allowed to abstract at higher and higher daily rates ( X, Y, Z Ml/d) as flow levels rise above a hands-off flow level (A) and a stack of higher flow thresholds (e.g. B, C ) is one option (see Figure 1). This approach might encourage abstractors to take more from vulnerable sources at times of plenty, and less at times of scarcity, so as to provide protection to the environment when and where it needs it most, without
|96| ENVIRONMENT INDUSTRY MAGAZINE Figure 1: The rising block abstraction model
source: Fenn & Wilby, WWF-UK, Discussion Paper Nr 4, The Itchen Initiative
necessarily reducing overall abstractable volumes in the round, or even deployable outputs in low flow spells. The unit charge rate as well as the permitted abstraction rate could also be varied by availability of water in the environment, with the unit cost of abstraction rising as water availability falls. WWF-UK is currently investigating the viability of such an approach with Southern Water and South West Water.6 Second, water users, including all households, would need to pay for water services according to the amount used, on a measured basis and under a variable tariff regime; users might pay on a rising block tariff, with higher unit rates applying as consumption increases, so as to discourage high use. Higher unit charges might be levied at all times in areas that are now classified as over-abstracted, and in particular times when drought creates natural scarcity and environmental stress. That means more metering, which is on the way (with ‘full’ (aka 90~95%) metering of households being planned for most of England and Wales by 2020). But, it should be noted, most of the meters being installed are still of the ‘dumb’ rather than the ‘smart’ type, with limited capability for communicating real-time consumption data to customers, and limited capability for facilitating flexible tariffing regimes.
For metering, volume-based charging and scarcity charging to be able to deliver good results for both people and the environment, we need ‘smart tariffing’ to convey resource and price signals at an appropriate resolution; and that means being able to vary the charging rate not just from month to month, but from week to week, and day to day, and even hour to hour, in line with the variation in demand (e.g. between the average and peak week, between week-days and weekends, and between morning and evening peak hour periods). A forward-
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