160
7 Water Pricing
After years of implementation, at the end of 2001, the residential water tariff
increased from 0.14 to 1.27 RMB/m
3 , with most cities basically realizing cost
recovery and 14 cities piloting a block tariff system. However, problems existed in the
tariff components, formulation mechanism, and enterprise operational mechanism.
The regulation had only aimed to solve enterprise deficits and reduce governmental
subsidies, rather than to develop a saving incentive pricing mechanism. Moreover,
the water supply enterprises were a state-owned monopoly with little incentive to
improve efficiency and reduce costs (NDPC et al. 2002a).
Therefore, the NDPC and other organizations urged the acceleration of both urban
pricing and enterprise operation mechanism reform. The focus of pricing reform
was to promote protection and efficient use. Both tariff level and structure were
regulated. It was stipulated that the block tariff should be introduced in cities above
the prefectural level before the end of 2003 and in other cities before the end of 2005,
while water use plan and quota management and overcharge for quota-exceeding use
would be implemented for non-household use (NDPC et al. 2002b).
Prompted by similar concerns and responding to low tariffs in some regions that
were failing to facilitate water saving, in 2004 the Office of the State Council required
the regulation of the urban tariff under full consideration of the upstream water tariff
(the water supply tariff from hydraulic engineering), water resources fees, reasonable
profits, water quality improvement, and network and metering upgrades. The block
tariff implementation was accelerated to obtain full coverage before 2005 and to
enlarge blocks in those cities implementing the tariff. The “one household, one
meter” improvement was strengthened to support this reform and quota and plan
management for non-residential use (Office of the State Council 2004). The policy
was comprehensive and covered many aspects of pricing, but no focus was identified.
Next, a phase of water tariff increases followed. Most cities designed regulation
programs under the “small step and fast pace” policy, including Beijing (Beijing
Development and Reform Commission 2004) and Zhengzhou (Zhengzhou People’s
Government 2005). However, after the first step, the tariff remained unregulated for
an extended period due to social stability issues, such as high CPI in 2006 and 2007,
the Beijing Olympics in 2008, and so on.
In early 2009, several cities started a new-round tariff regulation to solve accumulated problems. In July 2009, the NDRC and MOHURD clarified the overall
reform requirements, including promoting the saving, protection, and rational allocation of new-round tariffs; improving timing and planning based on considering
social affordability; and conducting extensive explanations to facilitate public understanding and support. The stepwise plans were suggested in regions not regulated for
a long time. The residential block tariff and non-residential quota-exceeding overcharge were again positively promoted. Additionally, tariff groups were simplified
into residential, non-residential, and special water use. The non-residential group
included industry, commerce, and public agency, while the special group included
bathing and carwash purposes or was defined by the relevant local authority (NDRC
and MOHURD 2009).
The 2009 NDRC Notice indicated that the block tariff had not been fully implemented, although required before 2005. Additionally, a new perception of block
7 Water Pricing
After years of implementation, at the end of 2001, the residential water tariff
increased from 0.14 to 1.27 RMB/m
3 , with most cities basically realizing cost
recovery and 14 cities piloting a block tariff system. However, problems existed in the
tariff components, formulation mechanism, and enterprise operational mechanism.
The regulation had only aimed to solve enterprise deficits and reduce governmental
subsidies, rather than to develop a saving incentive pricing mechanism. Moreover,
the water supply enterprises were a state-owned monopoly with little incentive to
improve efficiency and reduce costs (NDPC et al. 2002a).
Therefore, the NDPC and other organizations urged the acceleration of both urban
pricing and enterprise operation mechanism reform. The focus of pricing reform
was to promote protection and efficient use. Both tariff level and structure were
regulated. It was stipulated that the block tariff should be introduced in cities above
the prefectural level before the end of 2003 and in other cities before the end of 2005,
while water use plan and quota management and overcharge for quota-exceeding use
would be implemented for non-household use (NDPC et al. 2002b).
Prompted by similar concerns and responding to low tariffs in some regions that
were failing to facilitate water saving, in 2004 the Office of the State Council required
the regulation of the urban tariff under full consideration of the upstream water tariff
(the water supply tariff from hydraulic engineering), water resources fees, reasonable
profits, water quality improvement, and network and metering upgrades. The block
tariff implementation was accelerated to obtain full coverage before 2005 and to
enlarge blocks in those cities implementing the tariff. The “one household, one
meter” improvement was strengthened to support this reform and quota and plan
management for non-residential use (Office of the State Council 2004). The policy
was comprehensive and covered many aspects of pricing, but no focus was identified.
Next, a phase of water tariff increases followed. Most cities designed regulation
programs under the “small step and fast pace” policy, including Beijing (Beijing
Development and Reform Commission 2004) and Zhengzhou (Zhengzhou People’s
Government 2005). However, after the first step, the tariff remained unregulated for
an extended period due to social stability issues, such as high CPI in 2006 and 2007,
the Beijing Olympics in 2008, and so on.
In early 2009, several cities started a new-round tariff regulation to solve accumulated problems. In July 2009, the NDRC and MOHURD clarified the overall
reform requirements, including promoting the saving, protection, and rational allocation of new-round tariffs; improving timing and planning based on considering
social affordability; and conducting extensive explanations to facilitate public understanding and support. The stepwise plans were suggested in regions not regulated for
a long time. The residential block tariff and non-residential quota-exceeding overcharge were again positively promoted. Additionally, tariff groups were simplified
into residential, non-residential, and special water use. The non-residential group
included industry, commerce, and public agency, while the special group included
bathing and carwash purposes or was defined by the relevant local authority (NDRC
and MOHURD 2009).
The 2009 NDRC Notice indicated that the block tariff had not been fully implemented, although required before 2005. Additionally, a new perception of block