What is a fair price?

Consider for a moment the great contribution water makes to our quality of life – indeed to life itself. Most of us rely on municipal water service, and our health depends on the quality of the water supplied. Most Canadians have been putting this service inadvertently at serious risk by not paying a sufficient price for its provision. According to the National Round Table on the Environment and Economy, unmet water and wastewater infrastructure needs in Canada were $38-49 billion in 1996, and capital costs for the following 20 years will be in the order of $70-90 billion.

There is one clear way to deal with this problem. We need to pay realistic rates for water service which are sufficient to cover their true cost. In other words, we should pay a fair price that will recover the full cost of water delivered to the tap, one that is based on actual quantity used. Those who use more water should pay more and those who use less should pay less. Experience has shown that one important result will be users recognize the real value of this resource, and will use it more efficiently and wisely.

The price Canadians pay for water varies significantly across the country. Analysis of the 1999 Municipal Water Pricing Survey prepared in 2001 indicates that the average domestic water user (assuming 25 000 litres per month) pays $1.14 for 1000 litres. This value has increased substantially in recent years from about 82 cents per 1000 litres in 1991, and nationally, now includes a waste treatment component of about 39%. Correcting the problem of the undervalued water resource would involve minimal change. However, in some cases, economically rational pricing would also require an increase in water metering, which in turn would reduce demand enough to postpone the need for new facilities for years, with significant savings for each year of postponement.

Even with the price, water would still be the best bargain going, compared with other liquids we consume – and which, unlike water, are not delivered at our taps year-round. Bottled water, for example, is in great demand at $1 500 for 1000 litres, or 1000 times the price for the same volume of high quality tap water! Just compare the price of tap water with the typical cost of some other beverages. 

In 2001, the average Canadian daily domestic use of fresh water was 335 litres per person. At least half of this amount is unnecessary and wasteful. Common causes of waste at home are leaking faucets, faulty plumbing, and over-use of water for watering the lawn and washing the car. Much of this waste would be reduced if we had to pay a fair price for water. As our usage becomes more efficient, we would not only produce less wastewater, we could also afford better treatment for it. In fact, wastewater usually becomes easier to treat if it is less diluted at the treatment plant, as there is less water to be removed from the sludge. The result would be multiple savings and a better environment.

The same principle applies to industrial, agricultural, and commercial users. If major industries with their own water supplies were also charged for the amount they withdraw from their source of water, reuse would increase and a more efficient use of water would result. In fact, recycling has been called an automatic solution to the water quality problem. The cleaner the discharge required by regulations, the easier and more economical it is to reuse that same water instead of pumping in fresh supplies. Realistic pricing of water for large-volume agricultural uses such as irrigation would tend to lead to greater efficiency in its use, and therefore to conservation.

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