Spain faces call to double water tariffs

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A recent conference in Madrid tackled the thorny issue of how to achieve cost recovery through appropriate water pricing mechanisms. There were some surprising conclusions.

Spanish municipalities will have to raise their water tariffs by 100% over the next five years in order to resolve the growing challenges of financing Spain’s water sector, a Madrid conference heard in January.

AEAS – the association of Spanish water supply and treatment companies which organised the conference on water pricing – is convinced that this is the only way to address the problem. Added to the capital investment entailed in the government’s €19 billion water quality plan, there is also the estimated €5 billion cost of modernising the country’s leaky sewerage systems.

At the same time, desalination and wastewater reuse – which are required to complement depleted conventional water resources – and the uncontrolled expansion of irrigation are putting pressure on operating costs, as is the need to pump more water and to maintain under-utilised plants that guarantee supply in periods of drought.

Also European funding for Spain is set to fall by 40% in the period to 2013, compared with 2000-2006, José Luís González, ex-director of Spain’s European Commission representation, told the conference. This is a significant reduction given that Spain has, to date, received no less than €21 billion in EU funding for water infrastructure.

Europe’s generosity has contributed to the unsustainability of the Spanish water sector’s economic model, according to Enrique Cabrera of the Universidad Politécnica de Valencia. Subsidising infrastructure has kept tariffs artificially low, he argues.

While Environment Ministry data puts cost recovery in the water sector at between 50% and 90%, depending on the area, Adrian Baltanás, director-general of the lobby group Asagua and ex-head of public water company Acuamed, asserts that real cost recovery in the Spanish water sector is no higher than 30%. While charges generally cover the costs of water supply, wastewater charges are much too low, he claims. Xosé Sanchez, the mayor of Santiago in the north-western region of Galicia, told the conference that his city has a 10-year investment programme for wastewater treatment and rainwater run-off infrastructure worth €140 million, while net receipts for water services total only €600,000 per year.

But Olga Ruiz, general secretary of the consumer organisation FACUA, said huge price variations between regions and even between neighbouring municipalities, combined with the lack of a regulatory framework to set uniform standards of service or to make billing more equitable and transparent, enormously complicates any effort to establish what the appropriate price for water should be.

Both Enrique Cabrera and Alberto Fernández of WWF España pointed out that the lack of available data on existing infrastructure or on operational expenditure makes the process of calculating the right price for water services to ensure cost recovery additionally uncertain.

Some of those responsible for water services at the municipal level, such as Xosé Sanchez and Ibon Areso, president of the Consorcio de Aguas Bilbao-Bizkaia, are very sceptical about the willingness of local politicians to “pay the political price” of raising water charges for domestic users to a sufficient level so as to ensure cost recovery. Tariffs paid by industry more closely reflect costs, said Areso, because “there isn’t the same political price to pay.”

Nevetheless, Manuel Marchena, deputy mayor of Seville and president of the city’s public water company EMASESA, asserted that domestic consumers are prepared to pay the true cost of their water services if they are properly informed.

He said that in Seville, “by making water billing fairer through charging per person, by allowing public participation in the company’s decision-making process and by a sustained public information campaign, we have managed to get public acceptance for prices which balance costs.”

In general, delegates felt that making water charges reflect costs will prove difficult to achieve within a five-year timeframe – at least for domestic users.