Pre-Paid Metering is Anti-Poor!


Joachim Ezeji

Today in Nigeria, all the 36 State Governments and the Federal Capital Territory (FCT) have each set up a State Water Supply Agency (SWA) charged with the responsibility of providing potable water supply to the urban and in some cases their semi urban communities.

From Lagos to Calabar; Kano to Port Harcourt; and Owerri to Birnin Kebbi sad tales of high operational costs, poor revenue, epileptic power supply, inadequate funding, ill-motivated personnel, aging plants and machineries have remained the undoing of many of the 36 state water utilities in Nigeria.

The result is that many Nigerians lack sustainable access to clean drinking water, and those for productive activities. The tragedy in all these is such that if sustainable water supply is a ladder in economic development with higher rungs representing steps up the path to economic well being, there are roughly 80% of households, three-quarter of Nigerians, who live lacking support to get a foot on the first rung of the development ladder.

A typical case is the Lagos State Water Corporation. Here, the water distribution network can only reach one in every three of the 15 million inhabitants of the city. Yet, they projected population growth of 4% per annum of the city means that the city’s water demand, will double by the year 2020. The cost of meeting current and projected demand has been put at around $2.5 billion over the next 20 years.

A World Bank 2003 reportstressed how the abysmal performance of public utilities has come to symbolize the poorest aspects of governance in Nigeria. Using Lagos as a reference the report revealed that being neglected and close to collapse, the publicly run Lagos State Water Corporation holds the dubious distinction of having the highest recorded level of unaccounted-for-water in the world. Only 4 percent of its water production capacity goes towards the creation of revenue.

Unaccounted-for-water is the most common measure of the efficiency of a water company. The World Bank defines it as “the difference between the quantity of water supplied to a network and the metered water by the customer” It has two components; physical losses due to leakage from pipes; and administrative losses due to illegal connections and under registration of water meters.

No doubt water tariffs must be set and where necessary raised to meet the costs of water supply, which continue to increase due to more advanced treatment, greater distance to be traveled, lower groundwater tables, and more costly distribution in densely populated areas.

However water metering can be detrimental if water prices are set too high. An unaffordable rate structure can threaten the health and welfare of economically disadvantaged populations if they cannot afford to pay for a necessary amount of water.

One way to try to avoid this problem is to calculate an average monthly consumption rate needed to cover key human needs and then charge a basic rate for this amount and a higher price for any consumption above that amount. Can Pre-paid metering guarantee this?

It must however be noted that the objectives guiding tariffs are anchored on the goal to protect consumers while achieving and maintaining the financial viability of utilities. Pre-Paid metering does the later and ignores the former!

These objectives often include; (i) serving the urban poor; (ii) using lifeline rate for the urban poor; encouraging demand management; developing schemes that ensure self-sufficient operation and maintenance etc. Again Pre-paid metering is not in tandem (i) and (ii) above!

For any water utility to maintain or restore a lead to consumers on water efficiency, it must get on top of its leakage problems. Leakage by water companies in England and Wales fell by around 20 million liters a day (ml/d) in 2005/06 because of strict regulation by the Office for Water (OFWAT).

The overall leakage in England and Wales was close to 3,600ml/d in 2006 compared to nearly 5,000 ml/d just a decade earlier. OFWAT took action that required a utility like Thames Water to make a substantial reduction in leakage, and the company entered into a legally binding agreement with the regulator (OFWAT), committing it to spend GPB150million of its own money to step up the program of water mains replacement. It also risks being fined if it does not meet its future leakage targets.

But here, who regulates Nigeria’s urban water utilities? There must be an independent regulator before these utilities would demand Pre-paid water metering, as if this is the only vital fulcrum in their performance improvement plans.

It is germane to underscore therefore, that at the state level, a model water supply services regulatory law has been prepared in association with the World-Bank supported Water Investment Mobilization and Applications Guidelines (WIMAG).

WIMAG provides a basis for water supply reform legislation including the establishment of State Water Regulatory Commission and licensing procedures for all water service providers. It provides an equitable approach to water pricing in Nigeria.

In tandem with the National Water and Sanitation Policy (2000) and the National Water Resources Bill (2007), WIMAG and the model State Water Supply Services Regulatory Law (WSSRL) insists that each state of the federation with a State Water Agency (SWA) must establish a regulatory commission that is empowered to issue licenses for the provision of water supply services by both government and private sector entities; define minimum service requirement; set tariffs; define rights and obligations of the water service providers; and define performance standards.

Further to the foregoing, States are to ensure that water service providers are autonomous bodies subject to regulation by the state regulatory commission; and that the regulatory commission is not subject to the direction or control of the state governor or any other person in respect of any determination, report or inquiry; and that the sector is structured to prevent misuse of monopoly power.

Above all, WIMAG demands that Nigerian States should incorporate principles of good governance into the structure and operational procedures of state water agencies, particularly; equity, accountability, efficiency, transparency and public participation. States are also required to establish appeals mechanisms for decisions taken by water service providers under their jurisdiction.

Till these things are rightly done it would amount to sheer mischief for State Governments and their SWAs to adopt such an extreme measure as Pre-paid metering of drinking water. In this context is the fact that beyond everything else, water is a “social service”, because it is a life and death issue for all living things especially humans.

Nigerian SWAs need not be reminded that there are many ways to set and collect water tariff beyond using pre-paid meters. What is simply required is to achieve such is team discipline and corporate focus. These attributes are on reign in parts of Europe and North America where many homes as at today are not even metered, talk less of being pre-paid.

In South Africa the introduction of Pre-paid meters is already causing serious problem despite the provision for FREE basic water (200 liters per household per day) as a lifeline support for the poor!

Commoditizing drinking water by selling it as a recharge card anywhere in Nigeria will further expand poverty, boost misery and upscale ill health.

We should not allow this to happen!