Deloitte Touche Tohmatsu Limited (DTTL) today launched the Water Tight 2012 report, which explores the future of the global water sector in the year ahead. The report examines how major global trends such as population growth, increasing economic development, and urbanization, coupled with the changes in climate patterns, underscore the importance of effective public policy and private sector water stewardship in managing this finite and shared resource. The growing demand for water is making conservation and efficient use central issues, particularly as governments, utilities, and the private sector come under increasing pressure to be stewards of this precious and shared resource. The report states that a clearer water pricing will play an important role in how customers better manage their water usage.
“There is a compelling case for utilities either to increase water prices or create a better pricing system that addresses scarcity issues, allows them to invest in the replacement of ageing infrastructure, and provides them with a satisfactory financial return,” says James Leigh, Global Leader for Water, DTTL. “Increasing water prices, however, is a difficult political decision, as domestic water usage is considered a basic human right. As such, raising awareness of water related issues and educating the public about the necessity of more effective water pricing is crucial.”
According to the report, one potential solution for affordable prices and sufficient financial returns is tiered pricing. As water usage increases so would the price. Tiered pricing has already been successfully implemented in Israel, Australia, Hong Kong, Japan, South Korea, and parts of the United States.
“The true value of water is not adequately reflected by the current pricing which can lead to ineffective resource management,” says William Sarni, Director and Practice Leader, Enterprise Water Strategy, Deloitte Consulting LLP in the United States. “For most business sectors water is an essential resource. Therefore, effective water management is critical in ensuring business continuity and providing businesses with the social license to operate, and as a result, avoiding operational, regulatory, and reputational risks. Tiered pricing and increased prices are likely to improve water efficiency and increase innovation, while acknowledging the human right to water through appropriate policy adjustments.”