Projects of Policy and Regulation Sector

Water Tariff and Affordability Study in Arusha, Tanzania

Organization: DH Infrastructure

Description

The Arusha Urban Water Supply and Sanitation Authority (AUWSA) wanted 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 components of the project included a cost-of-service study and a willingness-to-pay study. For the of the cost-of-service study, AUWSA wanted a financial model that they could use for future tariff filings to the water sector regulator. They also wanted the model to allow them to forecast the impact of increased debt service on its financial performance and tariff levels. AUWSA wanted a willingness-to-pay study to understand how much they could charge for new water connections and septic tank vacuum truck services.

Service Provided

DHInfrastructure developed and administered a willingness-to-pay survey (contingent valuation method) to 477 households to understand existing customers' willingness to pay for water and sewerage improvements. We held focus group discussions to supplement the survey. For the tariff study, DHInfrastructure reviewed AUWSA's historical and planned costs, customer consumption patterns, and recent operating performance. Following this review, we developed a set of recommendations for determining revenue requirements, allocating costs, and designing tariffs. We then built an Excel-based cost-of-service model that implemented these recommendations and forecast tariffs for 10 years. We trained AUWSA staff on the use of the model and developed an implementation and transition plan for adopting the proposed tariff recommendations.