Chapter Eighteen: Revenue Including billing and Collection

1 Chapter Eighteen: Revenue Including billing and Collection

Revenue management system is an important aspect of any water supply system as it governs the financial and technical sustainability to the utility. Apart from fixing a tariff structure, billing and collection of revenue play an important part in the overall administration.

1.1 Tariff Fixation

Tariffs are instruments for recovering the cost of providing adequate water supply service to customers and must reflect not only the fixed costs of the supply system but also its operating expense and long-term sustainability. Tariff rates must satisfy the following requirements:
(a) Adequacy: The revenues generated from a water rate schedule must be sufficient to meet the revenue requirements of the Utility. The rates should be able to promote the Utility’s financial viability and growth,
(b) Public Service: The tariffs must be set at a reasonable level that reflects the Utility’s role as a public utility providing a public service,
(c) Equitable and Socialized Pricing: The tariffs must equitably distribute the cost of the service to all classifications and sizes of connections. Their structure should define a relatively low fixed rate for some minimum level of consumption to benefit the low income users, and higher rates for those who use greater quantities of water,
(d) Affordability Level: The tariff rates must be kept affordable to the Low Income Group (LIG). For this reason, the minimum and maximum charges may be specified for the average income of the LIG within the service area,
(e) Water Conservation: The tariff rates must encourage the wide water usage needed to attain economies of scale, but must also discourage unreasonable and wasteful usage of water,
(f) Enforceability: The tariff rates must be fair, reasonable and transparent. They should be justifiable and acceptable to the consumers.

For this reason, the practice is for the water tariff to be fixed by the Utility in consultation with the users, considering basically the capacity of the users to pay and costs of the O&M, as well as other relevant factors. (Source: https://www.slideshare.net/esmeraldoerandio/rural-water-supply-volume-iii-operation-and-maintenance-manual-PHILLIPINES).

The water supply charges in urban utilities are proposed by the respective utility and approved by EWURA after completing its regulatory procedures. Tariffs in small towns and rural water supply schemes are approved by RUWASA. Tariff setting takes into account the ability of the system to meet the following expenditures:
(a) O&M cost (Recurring and non- recurring establishment cost),
(b) Depreciation,
(c) Debt services and doubtful charges,
(d) Asset replacement fund.

It is recommended that the tariff structure should be reviewed periodically/ annually to cater for changes in the market.

1.2 Categories of Consumers

Among the different categories, the domestic consumers are the privileged class of people in terms of supply of water and of consumer’s collection of taxes mainly because they use water for their healthy existence. The other categories include commercial complexes, Hotel/restaurants, Industries/ Bulk consumers/ offices/institutions; largely use water and are usually charged with a higher tariff. Therefore, the distribution of cost incurred on the maintenance of such a system for each class of consumers including un-privileged people should be logically and appropriately determined with reference to the level of service rendered. Finally, a projected income on account of water charges should take into account the various factors itemized in the previous section.

1.3 Methods of Levying Water Charges

The methods of levying water charges can be any one or more of the following:
(a) Metered consumption of water,

(b) Non-Metered System:
(i) Fixed charge per house per month (depending upon the size of the house) or per connection per month, or
(ii) Fixed charge per family per month or per tap per month/per household, or
(iii) Percentage of payable value of the property.

1.4 Distribution of Bills to the Consumer

The distribution of bills to customers may be done either electronically through customer’s mobile phone (especially in urban areas) or can be done by operators specially authorized for this purpose or meter readers and bills can be distributed at the time of meter reading.

1.4.1 Payment of Bills by Consumer

The payments can be accepted at any one or more ways of the following:
(a) Counters at water utility office,
(b) At bank / banks authorized for accepting payments,
(c) Via customer mobile number through authorized Commercial Banks,
(d) Door to door/on the spot recovery by authorized person (in case of delayed/accumulated bills),
(e) Payment via the mobile phones using MPesa, Tigo Pesa, T-Pesa, Halopesa or Airtel Money for Tanzania (2019).

1.4.2 Delayed Payments

Since water is being treated as a commodity consumed, the advance billing is generally not carried out. It is therefore ‘a must’ to levy penalty/interest on the delayed payments of the bills. Computerization overcomes many of the defects in the manual system, is fast and gives control on the system.

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