158
7 Water Pricing
Nature of water supply from hydraulic engineering. The water infrastructures and
their water supply have many functions and purposes involved with many interests.
China could not suitably define the nature of water supply from hydraulic engineering. Such poor and mixed definitions have consistently undermined the tariff
reform process.
Characteristic of supply agency. This issue relates to the first. After over 10 years,
China has not yet completed the institutional reform of hydraulic engineering. Inadequate governmental resources for public interests have resulted in partial reform,
particularly in small-scale projects (Jiao 2005; Sun 2014). As the key player in water
tariff reform, this characteristic of the agency disrupts attempts at pricing reform.
7.4 Urban Water Supply Tariff
The rapid development of urban utilities in China started in the late 1970s. In the
1980s and early 1990s, the public utilities in China were operated and managed in a
form of government and enterprise integration in management institutions, a single
governmental source and investment in capital, a state-owned enterprise monopoly
in operational mechanisms, and a strict plan in pricing formulation. This approach
resulted in conflicts between rapid urbanization and infrastructure shortages, lower
efficiency and poor service, and a heavy governmental burden.
2
In 1984, facing a shortage in water sources, insufficient supply capacity, and
severe use deficit, combined with fast-increasing demand before 2000 due to social
and economic development, the State Council promoted urban water pricing reform
to save water by cancelling flat charges, metering and implementing volumetric
charges for domestic use in large- and medium-sized cities after 1986 (State Council
1984). In 1988, the Urban Water Saving Temporary Regulation introduced a planexceeding overcharge for non-domestic use and a volumetric charge for household
use. It stipulated that new building projects should install a water meter in each
household, while already existing residences should install a household meter within
a defined time period (Ministry of Construction 1988). Prior to these measures,
poor metering made it impracticable to implement efficient pricing methods, such
as volumetric charges. Thus, to promote water saving and alleviate urban water
shortage, the government reformed urban tariff structures and installed meters.
In the 1990s, China accelerated economic institutional reform. The Implementation Methods for State-owned Urban Water Supply, Gas and Heating Enterprise
Transferring Operational Mechanism aimed to promote the self-operation, selffinancing, and self-development of enterprises in adaptation to the market mechanism. It defined cost recovery and low profits for residential tariffs, with higher rates
for industry and commercial supply. If a tariff did not meet cost-recovery targets and
generated no profit, an enterprise could request government regulation (Ministry of
2 30-Year Reform and Development of Urban Utility in China, available at https://www.china.com.
cn/economic/txt/2008-11/18/content_16786580.htm.
7 Water Pricing
Nature of water supply from hydraulic engineering. The water infrastructures and
their water supply have many functions and purposes involved with many interests.
China could not suitably define the nature of water supply from hydraulic engineering. Such poor and mixed definitions have consistently undermined the tariff
reform process.
Characteristic of supply agency. This issue relates to the first. After over 10 years,
China has not yet completed the institutional reform of hydraulic engineering. Inadequate governmental resources for public interests have resulted in partial reform,
particularly in small-scale projects (Jiao 2005; Sun 2014). As the key player in water
tariff reform, this characteristic of the agency disrupts attempts at pricing reform.
7.4 Urban Water Supply Tariff
The rapid development of urban utilities in China started in the late 1970s. In the
1980s and early 1990s, the public utilities in China were operated and managed in a
form of government and enterprise integration in management institutions, a single
governmental source and investment in capital, a state-owned enterprise monopoly
in operational mechanisms, and a strict plan in pricing formulation. This approach
resulted in conflicts between rapid urbanization and infrastructure shortages, lower
efficiency and poor service, and a heavy governmental burden.
2
In 1984, facing a shortage in water sources, insufficient supply capacity, and
severe use deficit, combined with fast-increasing demand before 2000 due to social
and economic development, the State Council promoted urban water pricing reform
to save water by cancelling flat charges, metering and implementing volumetric
charges for domestic use in large- and medium-sized cities after 1986 (State Council
1984). In 1988, the Urban Water Saving Temporary Regulation introduced a planexceeding overcharge for non-domestic use and a volumetric charge for household
use. It stipulated that new building projects should install a water meter in each
household, while already existing residences should install a household meter within
a defined time period (Ministry of Construction 1988). Prior to these measures,
poor metering made it impracticable to implement efficient pricing methods, such
as volumetric charges. Thus, to promote water saving and alleviate urban water
shortage, the government reformed urban tariff structures and installed meters.
In the 1990s, China accelerated economic institutional reform. The Implementation Methods for State-owned Urban Water Supply, Gas and Heating Enterprise
Transferring Operational Mechanism aimed to promote the self-operation, selffinancing, and self-development of enterprises in adaptation to the market mechanism. It defined cost recovery and low profits for residential tariffs, with higher rates
for industry and commercial supply. If a tariff did not meet cost-recovery targets and
generated no profit, an enterprise could request government regulation (Ministry of
2 30-Year Reform and Development of Urban Utility in China, available at https://www.china.com.
cn/economic/txt/2008-11/18/content_16786580.htm.