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Implications Of Water Tariff Structure On Water 2 Demand In Santa Cruz Island (galapagos Archipelago)

World Water Congress 2015 Edinburgh Scotland
10. Management of water resources
Author(s): Maria Reyes Perez
Nemanja Trifunovic
Saroj Sharma
Maria Kennedy


Keyword(s): Sub-theme 10: Management of water resources,


M.Reyes1, N. Trifunović1, S. Sharma1, M. Kennedy1,2

1 UNESCO--IHE Institute for Water Education, Department of Environmental Engineering and Water Technology, P.O. Box 3015, 2601 DA Delft, The Netherlands
2 Delft University of Technology, Faculty of Civil Engineering and Geosciences, P.O. Box 5048, 2600 GA Delft, The Netherlands
E-mails: m.reyesperez@unesco-ihe.org, n.trifunovic@unesco-ihe.org, s.sharma@unesco-ihe.org, m.kennedy@unesco-ihe.org.

1- Introduction

The island of Santa Cruz, located in the Galápagos Archipelago has experienced significant increase in tourism with consequent growth of local population over the past two decades. The rapid increase in number of hotels and restaurants has raised pressure on water resources needed to satisfy the customers' needs.

The municipality of Santa Cruz has not been capable of coping with current expansion rates in order to provide good quality water services. Financial constraints, limited personnel and tariff structures are the main reasons that restrict the capacity of the Department of Potable Water and Sanitation (DPWS) to manage the water supply system. Therefore, the municipal water service has been perceived as low and unreliable and of non- drinking quality (Liu and d'Ozouville 2013). Consequently, local population need alternative supplies, such as bottled water as the main source of drinking water, and purchase of bulk water supplied by trucks.

The two main settlements on the island are Puerto Ayora and its suburb, Bellavista, with total population of approximately 14,500 (INEC 2010) and both have independent water supply systems. Puerto Ayora has a fixed monthly tariff for each category of customers and lacks individual water metering. Bellavista has a metered system, with a fixed water tariff of USD 1.21/m3 (GADMSC 2012). Yet, 32% of water meters are faulty (measured in January 2014). Consequently due to the difference in tariff structures, the water demands in these two settlements vary significantly. .

This paper assesses the impacts on revenues due to faulty meters (Bellavista) and fixed tariffs (Puerto Ayora). In addition, several scenarios of water tariff and water meter management have been developed and analyzed in order to examine the benefits. Finally, the information regarding overdue bills and willingness to pay by different categories of users has been examined.

2- Research Methodology

The study was based on the information gathered during the fieldwork conducted from September 2013 to January 2014. Questionnaire-based interviews were carried out with local population and relevant authorities dealing with water management on the island. Moreover, specific data regarding tariffs and information on water meters in Bellavista were provided by the municipality. Based on a survey of 374 premises, the water demand was quantified for different categories in order to estimate the specific demand, the actual payments and willingness to pay. In addition, an attempt was made to reconcile all the data from the survey with the information available at the municipality. Several scenarios were then drafted in order to draw conclusions on the most suitable strategy for improving the current situation of the DPWS.

3- Results and Discussion

3.1- Assessment on revenues

The revenues from water supply vary extensively between the two settlements. For Puerto Ayora, the billed revenue (using fixed tariffs per category) was approximately 175 000 USD for 2200 service connections, based on the water cadastre 2013. Calculations with fixed tariffs shows an average water price of 0.31.USD/m3 in Puerto Ayora. On the other hand, even though Bellavista has a higher price per m3 and only approximately 450 service connections, the percentage of faulty meters generates a revenue loss of approximately 50%.

Furthermore, the overdue bills are also a major obstacle, especially in Puerto Ayora, where the customers cannot be forcefully disconnected due to the lack of installed water meters/valves. In 2013, the number of customers who did not pay on time increased by approximately 15% by the end of the year, while in Bellavista increased to 8%. This implicitly proves the lack of proper management because the customers in Puerto Ayora appear to be increasingly encouraged not to pay on time in the absence of punitive measures. The rate of expansion of the settlement and the increase in number of water connections only contributes more towards this trend.

Table 1 shows approximate deficit for the DPWS in 2013. The cost of supplying water includes only operation and maintenance costs. The total collected revenue includes overdue bills and the lack of payments.

Table 1- Financial deficit for Puerto Ayora and Bellavista

Finally, two scenarios were created for each settlement assuming an increase of current tariffs by 20% and 40%. The reduced deficit for the DPWS is not significant in Puerto Ayora, since it decreases by 15 and 20%, respectively. In case of Bellavista, the deficit reduces by 37% and 75% for 20% and 40% increase in tariff. Moreover, additional scenarios were developed for Puerto Ayora, assuming installation of water meters and implementation consumption-based tariffs of (1.21 and 2 USD/m3). With these options, the annual revenues will increase to 650,000 and 1,000,000 USD respectively.

3.2- Analysis on willingness to pay for different categories

After assessing the surveys carried out in both settlements, around 90% of the local population would be willing to pay more for a better supply service. However, 30% of surveyed households responded not to pay a water bill at all. Furthermore, other questions regarding the water payments were included in order to determine the actual expenses on water and arrive at socially acceptable increase. The complete details on this will be mentioned in the full paper.

4- Conclusions

Due to a lack of proper management and revenue collection, the DPWS has experienced significant losses. If this would be improved systematically, establishing standardized penalties, suspension of the service, etc., the department would ameliorate significantly the supply system and satisfy better their customers. Nevertheless, due to numerous constraints, the described inefficiencies still continue; the service cannot improve and consequently tariffs may not be increased due to a low service level. Furthermore, political interests do not allow the DPWS to abolish fixed water tariffs in Puerto Ayora, which is the main cause of a high water demand. Changing this would significantly improve the situation. Additionally, in Bellavista, water-meters should be managed better and have regular maintenance. GADMSC (2012). Plan de Desarrollo y Ordenamiento Territorial (2012-2017). Santa Cruz-Galápagos, Fundación Santiago de Guayaquil, Universidad Católica de Santiago de Guayaqui, Conservación Internacional, AME Ecuador. 1: 470.

González, J. A., et al. (2008). "Rethinking the Galapagos Islands as a complex social-ecological system: implications for conservation and management." Ecology and Society 13(2): 13.

INEC (2010). Censo de Población y Vivienda del Ecuador 2010. Ecuador, Instituto Nacional de Estadísticas y Censos.

Liu, J. and N. dÂ’Ozouville (2013). "Water contamination in Puerto Ayora: Applied interdisciplinary research using Escherichia coli as an indicator bacteria." GALAPAGOS REPORT 2011-2012: 76.

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