Water tariffs vary widely in their structure and level between countries, cities and sometimes between user categories (residential, commercial, industrial or public buildings).
Economic theory predicts that unregulated private utilities set the price of their product at a level that allows to extract a monopoly profit.
In many developing countries tariffs are set below the level of cost recovery, even without considering a rate of return on capital [ref].
In developed countries water and, to a lesser degree, wastewater tariffs, are typically set close to or at the level of cost recovery, sometimes including an allowance for profit[ref].
Tariff structure and levels are influenced in some cases by the desire to avoid an overly high burden for poor users.
Political considerations in water pricing often lead to a delay in the approval of tariff increases in the run-up to elections.
They are typically measured based on the volume of water supplied, sometimes after subtracting an allowance made for estimated or actual outdoor use.
The OECD conducted two surveys of residential water tariffs in 1999 and in 2007-08, using a reference consumption of 15 cubic meters per household and month.
The database of the International Benchmarking Network (IB-Net) for Water and Sanitation Utilities includes tariff data from more than 190 countries and territories tariffs.ib-net.org.
[7] In addition, surveys of tariffs for commercial and industrial customers in selected OECD countries have also regularly been conducted by the consulting firm NUS.
Since the late 1980s there has been a trend in OECD countries away from decreasing-block tariffs, which are apparently only still found in some cities of the United States.
Where fixed charges exist as part of two-part tariffs, there is a shift toward the reduction or even abolition of large minimum free allowances in OECD countries.
According to one method, the highest water and wastewater tariff in the world is found in Bermudas, equivalent to US$7.45 per m3 in 2017 (consumption of 15 m3 per month).
There are few countries that maintain national tariff databases, usually those with a specialized regulatory agency for the water sector such as England (OFWAT), Chile (SISS), Colombia (CRA) or Peru (SUNASS).
Utilities in four of the surveyed cities provide residential water and wastewater services for free: Dublin and Cork (see Ireland), as well as Belfast and Ashgabat in Turkmenistan.
[12] and $1.60/m3 in Seattle [13] The highest water and wastewater tariffs were found in Aarhus, Denmark (US$9.21/m3), Essen, Germany (US$7.35/m3; not included in the OECD survey) Copenhagen, Denmark (US$7.09), and four Australian cities (Perth, Brisbane, Adelaide and Sydney) where the tariff for the benchmark user ranged from US$6.38/m3 - US$6.47/m3.
In many large countries (China, France, Germany, India, Mexico, South Africa and the United States) the process of price adjustment takes place at the municipal level.
Some countries, such as Germany, stipulate by law that all the financial costs of service provision must be recovered through tariff revenues.
Tariff increases are often considered a politically sensitive issue and have to be decided by the Cabinet of Ministers or a National Pricing Commission.
Some countries have created regulatory agencies at the national level that review requests for tariff adjustments submitted by service providers.
The review process is typically based on transparent and objective criteria set by law, in an attempt to move decision-making at least partly out of the realm of politics.
On the other hand, utility bills paid by those fortunate enough to be connected to the network are very low in some developing countries.
It measures the share of bills in the income of the poor, defined in an OECD affordability study as the lowest decile of the population.
[4] The OECD concludes that in half its member countries (15 out of 30), affordability of water charges for low-income households "is either a significant issue now or might become one in the future, if appropriate policy measures are not put in place.
On the other hand, utility bills paid by those fortunate enough to be connected to the network are often relatively low, especially in South Asia.