Why water costs more despite unchanging price

LAST Tuesday's article ("Time to tighten the tap on cheap water"), argued that while prices for Singapore's electricity and gas are higher than for water, the price for water has not increased since 2000.

Such comparisons are inaccurate.

Electricity and gas prices depend on a tariff set by the provider, and are reviewed each quarter by the Energy Market Authority, which looks at two key components: fuel and non-fuel costs.

The fuel and imported natural gas costs are tied to oil prices, which can change according to global market conditions. The non-fuel cost is the cost of generating and delivering electricity to consumers, which includes power generation costs, the grid charge, market support services, the power system operation and market administration fees.

The argument in the article that Singapore's water prices are lower in real terms as compared with electricity and gas, while the total water cost has also fallen, based on the median monthly household income, misses several points.

Water is charged by the unit consumed, along with the water conservation tax at 30 per cent, which the writers did not include.

Hence, although the price of water has remained unchanged since 2000, the bill for individual households varies - and how much they pay depends on their monthly consumption plus the additional water conservation tax, which, when added up, can be substantial.

The water conservation tax is a tool to discourage water wastage, and to reinforce the message that water is precious.

The writers also cited the median household monthly income to determine that the cost of water usage has fallen due to the rise in household incomes.

However, this did not take into account the differences in incomes and water usage patterns of households. For example, water consumption in one-room and two-room Housing Board flats is substantially lower than the national average, but in landed properties they are higher than the average. Similarly, average household incomes vary according to dwelling type.

Thus, not all households spend similar proportions of their incomes on water bills.

Francis Cheng

A version of this article appeared in the print edition of The Straits Times on June 22, 2015, with the headline 'Why water costs more despite unchanging price'. Subscribe