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URBAN WATER TARIFF POLICYENVIRONMENTAL QUALITY ENGINEERING

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INTRODUCTION

Issued by PURC in accordance with the PURCAct, 1997 (Act 538)

Applies to urban water rate setting in Ghana GWCL is in charge of urban water supply in

Ghana

Urban areas defined by GSS as communitieswith population more than 5000

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OBJECTIVES

To ensure that rates provide an optimumbalance between the interests of theconsumers and investors.

Consumer interest: Low tariffs and improvedservice quality

Investor interest: Profit maximization

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POLICY STATEMENTS: Tariff structures

1. Jurisdiction-Policy applies to activities of GWCL only;

secondary market providers exempted.

2. Uniformity of tariffs

-GWCL tariffs should be uniform irrespective ofdifferences in cost of supply

3. Rising block tariff structure.

-Inefficient mechanism for delivery of affordablewater supply services to the poor

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POLICY STATEMENTS: Tariff structures

4. Lifeline tariffs-Set at levels to reflect affordability but not less

than basic operational unit cost.

5. User categories and cross subsidies

-Non-domestic tariffs should be higher than thedomestic tariffs irrespective of supply cost.

6. Infrastructure development charges

-Does not support the imposition of infrastructuraldevelopment.

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POLICY STATEMENTS: Tariff structures

7. Connection and reconnection fees-Connection fees set to recover full cost of

connection from mains.

-Reconnection fee set to recover reconnection cost

plus penalty to act as deterrent.

8. Assisted access to the poor

-promote/ support initiatives to help the poor

9.Levels of service

-Same tariff structure for domestic customersirrespective of LOS and unit cost of supply.

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POLICY STATEMENTS: Cost recovery10. Short term cost recovery

-tariffs shall be based upon cash flow requirementsplus an increasing allowance for depreciation.

11. Medium to long-term cost recovery-shall include allowances to returns on total

capital.

12. Direct operational unit costs

-that of sold and paid for water expected to fall asefficiency improves.

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POLICY STATEMENTS: Cost recovery13. Capital investment including capital maintenance

-shall be included in tariff calculations.

14. Working capital

-GWCLs cash flow stream shall allow for any changes in

working capital requirements.

15. Taxation

-not considered within tariff determination as GWCL

has no tax obligations.

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POLICY STATEMENTS: Cost recovery

16. PURC costs- Currently not carried through to the tariff although

PURC reserves the right to impose a regulatory charge

sometime in the future.

17. Capital valuations and regulatory capital value

Regulatory asset value shall be the net value of assets

18. Return on capital

- Short term: what is required to finance interest

payments

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POLICY STATEMENTS: Cost recovery

-long term: shall be set on achievement of full costrecovery

19. Capital structure

-considered to be a GWCL management issue

-has no bearing on tariffs except when there are

debt obligations to be satisfied.

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POLICY STATEMENTS: Environment

20. Water use management-employment of tariffs as consumption reduction

mechanism not supported

-supports employment of awareness and educationcampaigns by operators

21. Leakage control

-supports concept directed towards the achievementof economic level of leakage

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POLICY STATEMENTS: Constraints

and other factors

22. Cash flow

-the cash flow position of GWCL shall beconsidered in tariff determination.

23. Affordability

-affordability constraints is incorporated into tariffstructure.

-lifeline rate for domestic customers is principalmechanism for incorporation.

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POLICY STATEMENTS: Constraints and

other factors24. Currency-tariffs shall be determined in GH

POLICY STATEMENTS: Process25. Tariff review periods

-major tariff reviews to be undertaken every 5 years byPURC

26. Tariff review process-shall include the publication of draft tariff proposals,public consultation, the publication of finaldeterminations, and an appropriate appealprocedure

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POLICY STATEMENTS: Process

27. Interim reviews

-quarterly interim reviews to be undertaken

-inflation, exchange variations and anyextraordinary changes in the operatingenvironment must be taken into account.

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CONCLUSION

It is a laudable policy