Is Cost Recovery a Feasible Objective for Water and Electricity?

Is Cost Recovery a Feasible Objective for Water and Electricity?

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Given the relatively small segment of the population that faces genuine affordability problems in Latin America, there appears to be a promising case for using targeted subsidies to reconcile the cost recovery objective with social protection concerns. Social tariff schemes of various kinds are already widespread in Latin America, but they suffer from a number of design flaws. Increasing block tariff (IBT) structures are the most prevalent form of social tariffs in the region. These are likely to be more successful in the electricity sector than in the water sector because the correlation between consumption and income is much stronger in the case of electricity than water. Moreover, IBT structures in electricity tend to be much better designed than in the case of water, with lower fixed charges, lower subsistence blocks, and steeper gradients. A number of more sophisticated social tariff schemes are also being applied that combine consumption criteria with some form of socioeconomic screening. These are generally found to perform better than IBTs, although they also present significant room for improvement.US$0.20-0.40/m3 Tariff sufficient to cover operating and some maintenance costs Tariff insufficient to cover basic ... full cost of modern water systems in most high- income cities Residential Industrial Average tariffs (US$/m3) 1997 2003 1997anbsp;...

Title:Is Cost Recovery a Feasible Objective for Water and Electricity?
Author:Vivien Foster, Tito Yepes
Publisher:World Bank Publications - 2006


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