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Cost-Reflective Tariffs Improve the Commercial Viability of Hawassa Utility, Ethiopia

carryingDespite the country experiencing high inflation levels, resulting in increased cost of providing water    services, the tariff structure in Hawassa town,
Ethiopia, had remained unchanged since 2004. This resulted in the town’s utility – Hawassa Town Water Supply and Sanitation Services Enterprise (HTWSSSE) – being able to meeting only 70% of its operations and maintenance costs.

This problem was exacerbated because the funding received from the Regional Government and the City Administration, was limited. Network expansion and maintenance could not be carried out as expected, which led to low operational inefficiency.

These factors hampered the utility’s ability to provide efficient, sustainable and equitable water services to its target population. This had a negative impact on the poorest of the population, many of whom lack adequate access to the water supply, thus having to rely on expensive and unreliable water sources for their domestic needs.


Through an institutional and utility reform project, USAID’s Sustainable Water and Sanitation in Africa (SUWASA) supported the utility to develop and implement a revised, cost-reflective tariff structure. This was achieved by assessing consumers’ ability and willingness to pay for improved water services, and carrying out consultations with stakeholders to arrive at a suitable tariff structure that promotes efficient water usage and target subsidies to the poorest.


The new tariff was approved by the Hawassa Town Administration in June 2012, and was implemented in July 2012.


According to, Letta Yetamo, General Manager of HTWSSSE, the utility is now not only able to cover all its operations and maintenance costs, but it is also left with a surplus that it uses to repay a loan from the Water Resources Development Fund (WRDF). Operating revenue has increased by over 80%, with monthly revenues currently estimated at ETB 2,088,822 (USD 112,893).


“With our current revenues, we are able to undertake regular maintenance of the distribution network and reduce on water losses arising from leaks”, he states. The new tariffs also bring benefits to urban poor, who can now access clean, safe water at a subsidized rate of USD 0.16 per 1,000 liters of water consumed.


‘Implementation of the new tariff structure has opened new horizons for enhanced performance and improved service delivery,” Yetamo points out.

 

                           


            

Current Issue: Africa Water & Sanitation & Hygiene March-April 2017 Vol.12 No.2