Full-Cost Rates for Water and the Chimera of “Affordability”
Published on March 12 2013
"In recent years, Canadian municipalities have realized that the price we pay for water and wastewater services must rise. We’ve needed to move towards sustainable systems not just from an environmental perspective, but also to meet social and financial sustainability requirements. Historically, water and wastewater prices have not reflected the true cost of providing those services. Starting in the mid-2000s, major municipalities have increased their water and wastewater rates with yearly increases well above inflation (as much as 8-10 per cent above CPI).
Such increases have understandably caused concern about the “affordability” of the prices which residents are charged for water and wastewater services. A recent Association of Municipalities of Ontario (AMO) publication entitled Towards Full Cost Recovery: Best Practices in Cost Recovery for Municipal Water and Wastewater Services raised this issue, but the purpose of this note is not to argue that affordability should be ignored in rate design. Rather, we argue that there is a need to ensure that all goals are adequately considered and balanced when examining rate proposals and that discussions regarding rate design are based on the best available evidence."
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