National Water Act, 1998 (Act No. 36 of 1998)Pricing Strategy For Raw Water Use Charges7. Application of Pricing Strategy to Different Categories of Water Use/User Sectors7.2 Water Services Authority Sector |
| 1) | Free raw water for basic human needs |
Section 56(6)(c) of the Act provides that in setting a pricing strategy for water use charges, the Minister must consider measures necessary to support the establishment of tariffs by water services authorities in terms of section 10 of the Water Services Act, 1997 and the use of lifeline tariffs and progressive block tariffs.
In terms of this pricing strategy for raw water use charges, the above requirement will be accomplished by providing the raw water requirement for basic human needs (defined as the essential needs for drinking, food preparation and personal hygiene which is put at 25 liters per capita per day) free of charge to water services authorities. The main objective of this strategy is to promote the introduction of differential lifeline tariffs at third tier by ensuring that the first step of a progressive block tariff structure to provide for the basic needs component for local government domestic users, will exclude the raw water charge or portion thereof, as determined in terms of Chapter 5 of the Act.
The raw water pricing strategy provides that the cost of water at the resource for meeting basic human needs in the areas of water services authorities be borne by the "economic users" of the relevant water management area, system, or government water storage works. This includes the use of water above the basic needs component in local government areas.
The implication of this provision contained in this raw water pricing strategy is that the cost of water ex source for basic human needs will not be cross-subsidised within the water services authority sector alone, but by all user sectors within a specific water management area, State scheme or system. This will lead to increases of the sectoral raw water charges that will be applicable if the basic needs component is not provided free of charge.
In order to calculate the relevant sectoral raw water charges to be imposed in each water management area, system or scheme, information must be readily available on the annual basic needs requirement of each water service authority. This information can be obtained from water service development plans (WSDP) prepared i.t.o the Water Services Act, 1997, but should also be subject to verification. The prescribed procedure to access free quantities of raw water will ensure that realistic estimates of basic needs requirements are provided and also that no raw water will be supplied free of charge before the relevant local authority has committed itself towards implementing lifeline tariffs.
The following procedure is prescribed for implementing the abstraction I supply of free raw water by/to water services authorities:-
| • | Water services authorities may apply to the responsible authority in writing for the free raw water allocations from water resources or State storage dams after they have submitted the information contained in the draft WSDP required under section 13 of the Water Services Act, 1997. Particular information that must be provided with the application is the following: |
| ➢ | Domestic user population (permanent residents only) and expected growth rate. |
| ➢ | Total annual water use and expected growth rate. |
| ➢ | Detail regarding the yield of own sources and the expected annual supply from any State storage dam or system. |
| ➢ | Written declaration of intent of the introduction of lifeline tariffs i.t.o the Water Services Regulations. |
The application must be routed through and supported by the relevant second tier bulk supplier or Water Board where applicable, which must be responsible to coordinate the applications.
| • | The responsible authority will then determine the first annual quantity of raw water that must be passed through free of charge to the relevant water services authorities. In cases where a bulk supplier or water board and/or the local authority have own sources and supplementary water is supplied from a State dam or system, the quantity of free water will be determined as that portion of the basic needs requirement that has to be supplied from the State dam or system, which will be based on the percentage that the required supply from the State dam or system makes out of the total annual demand. |
| • | Information regarding possible free quantities of water and current raw water tariffs will then be conveyed by the responsible authority to the relevant water services authority with the request to: |
| a) | set tariffs in accordance with the Tariff Regulations for Water Services to be promulgated in terms of section 10(1) of the Water Services Act, 1997 and |
| b) | reduce the tariff of the first block of the rising block tariff structure for households to contain the subsidy provided by the free water allocation. |
| • | The resulting block tariff structure must then be submitted to the responsible authority for approval of the free water allocation. Compliance with rising block tariff structures as required in terms of the regulated norms and standards set by the Minister in terms of section 10(1) of the Water Services Act, 1997 is a precondition for a free raw water allocation. The essence of the strategy will also be reflected in the said water services regulation. |
| • | Only those water services authorities which have applied for free raw water supplies for basic needs will be considered for such purposes and the relevant free quantities for these authorities and resulting sectoral charges for the rest of the water management area, scheme or system will be published annually when the charges are formalised. |
| • | Auditing will take place through information required to be provided by water services authorities in terms of the regulations to be promulgated under section 9 of the WSA, 1997. |
| • | Where water boards or other bulk water suppliers are involved, the relevant body will receive the bulk allocation of free raw water, which must be passed on to the qualifying local authorities. |
The principle of subsidising the basic human needs component of domestic water use in the areas of water services authorities will apply to charges to recover water resource management costs and also charges related to the development and operation of State dams and future dams to be owned by Catchment Management Agencies.
| 2) | Water resource management charge |
The current method of determining catchment management charges for water supplied from Government water schemes - relating to the estimated proportional activity costs of water conservation (invasive plants and water weeds removal) and water utilisation (abstraction, storage and afforestation permit control) - is consistent with the new strategy and will be continued. However, adaptations will be made after the registration of all water users in the particular catchments has been accomplished and more accurate data on sectoral water use becomes available (currently the extent of water use in the relevant catchments is based on estimates).
Charges for the full recovery of the other allocated water resource management costs in terms of 5.3.1 will be introduced once the majority of the water users in the particular water management area in which the scheme is located have been registered. Water resource management charges for the water services authority sector will also reflect the fact that only the "economic" uses of water from the water management area, scheme or system will contribute towards cost recovery (i.e. excluding basic human needs).
| 3) | Water resource development and use of waterworks charge |
This charge will be based on the method described in 5.3.2. The determination of unit costs for water supplied from Government water schemes, based on the notional loan approach, will be replaced by determining the unit costs through the proposed new approach (depreciation and return on assets) as set out in this strategy. The principle of excluding the water requirements for basic human needs for purposes of setting 1st tier prices will be introduced as described in 1) above. This charge will be introduced from April 2000.
A maximum increase equal to the producer price index (PPI) + 10% over current tariffs for the first number of years of the new pricing strategy will be implemented. In the change-over from current to new water use charges no reduction of charge levels shall take place. The objective is to reach the target charges within ten years. Thereafter, annual tariff increases will be limited to the inflation rate (PPI).