Description
The Arusha Urban Water Supply and Sanitation Authority (AUWSA) asked DHInfrastructure to conduct a tariff and willingness-to-pay study as part of an African Development Bank (AfDB) funded Project to improve and expand the water and sanitation network in Arusha City. The two key components of the project included a cost-of-service study and a willingness-to-pay study to understand consumers' willingness to pay for AUWSA services. As part of the cost-of-service study, DHInfrastructure was asked to develop a financial model that AUWSA could use for future tariff filings to the water sector regulator, as well as to estimate the impact of increased debt service to its financial performance and on tariff levels. The willingness-to-pay component was conducted to help AUWSA understand consumers’ willingness to pay for water, sewerage, or septic tank vacuum truck services and to inform affordability concern should tariffs be increased.
Service Provided
DHInfrastructure conducted a willingness-to-pay and tariff study. For the willingness-to-pay study, DHInfrastructure developed and administered the willingness-to-pay survey (contingent valuation method) instrument to 477 households and conducted 4 focus groups. The contingent valuation survey was conducted to understand existing customers’ willingness to pay for water and sewerage improvements, while focus group discussions were conducted to provide a qualitative assessment of willingness-to-pay and perceived affordability of AUWSA services. For the tariff study, DHInfrastructure reviewed AUWSA’s historical and planned costs; customer consumption patterns; and recent operating performance. Following this review, DHInfrastructure developed a set of recommendations for AUWSA to consider for how it should determine its revenue requirement, allocate costs, and design tariffs. To this end, the DHInfrastructure team built an Excel based cost-of-service model that implemented these recommendations and provided 10 years of tariff estimates. DHInfrastructure team members also conducted training sessions for AUWSA staff on the cost-of-service model so that it could be used in future tariff filings. Finally, DHInfrastructure developed an implementation and transition plan, a set of steps AUWSA would need to complete to adopt the proposed tariff recommendations.