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HomesingaporeWater price revision needed for PUB to cover operating costs, invest in...

Water price revision needed for PUB to cover operating costs, invest in water infrastructure: Amy Khor

SINGAPORE: Water prices need to be revised so that national water agency PUB can continue to invest in the country’s water infrastructure and sustainably cover its operating costs to ensure a reliable and secure water supply, Senior Minister of State for Sustainability and the Environment Amy Khor said on Wednesday (Oct 4). 

Dr Khor was replying to a question by Leader of the Opposition Pritam Singh, who asked if there was any leeway to delay the increase in water prices with a view to having PUB use its profits generated towards the costs instead. 

Member of Parliament Poh Li San (PAP-Sembawang) and Non-Constituency MP Leong Mun Wai (PSP) also filed questions relating to how recycling requirements on large water users affect business costs, and whether there have been changes in the cost of producing NEWater and desalinated water since 2017.

On Sep 27, PUB announced that water prices in Singapore will rise by 18 per cent over the next two years

The increase translates to an additional 50 cents per cubic metre of water, split into two phases: a 20-cent hike on Apr 1, 2024 and a 30-cent hike on Apr 1, 2025.

After the 2025 revision, three in four households will see a less than S$10 increase in their monthly water bills. For businesses, three in four will see their water bills rise by less than S$25 a month while three in four hawkers will foot an increase of less than S$15 monthly.

Deputy Prime Minister Lawrence Wong has since announced a slew of new cost-of-living measures to help Singaporean households cope with rising prices.

Water prices were last increased by 30 per cent in two phases from 2017, and before that in 2000.

In accounting for the latest increase, PUB pointed to how the costs of producing and supplying water have risen “substantially” since 2017, due to external pressures.

Average electricity market tariffs have increased by about 37 per cent; construction costs have risen by 35 per cent; expenses for essential chemicals in water treatment have grown by 33 per cent; and maintenance expenses have also gone up by 18 per cent due to higher manpower costs, said PUB.

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Dr Khor cited these figures in parliament on Wednesday to show that the increase in water prices was necessary to “catch up” with rising costs.

“Together, these cost pressures have led to an increase in PUB’s operating expenditure by around 30 per cent since the last water price revision in 2017,” Dr Khor told parliament. 

“PUB has undertaken various measures to moderate the impact of these cost drivers. These include leveraging energy efficient technologies to reduce energy consumption, harnessing engineering solutions to offset construction costs, and optimising and digitalising processes to reduce chemical and maintenance expenses.”

Dr Khor added: “Besides right-pricing water to safeguard our water security, it’s also important that we manage the growth in our water demand. This is especially so in the non-domestic sector, which will account for about two-thirds of our water demand by 2065.”

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In a supplementary question, Mr Singh asked why the recent increase was of such a short interregnum as compared to before the last price revision in 2017. He also asked if there was space to delay an increase. 

“Is there any scope, policy space for the government to delay this increase with a view towards the profits generated by the authorities vis-a-vis water and the supply of water?”

Dr Khor replied that the cost of producing and supplying water has exceeded current water prices due to the cost pressures mentioned, resulting in a need for a price revision to ensure that PUB is able to sustainably cover operating costs and continue to invest in water infrastructure. 

Responding to Mr Singh’s query on profits, Dr Khor said: “If you look at the financial statements of PUB, in 2020, net operating income was +S$10 million but in fiscal year 2021, net operating income, before government grant, is -S$109 million and it has actually widened to -S$264 million.”

While she noted that it has become positive after government grants, she added that whatever was generated in terms of net income was ploughed back and reinvested to fund the operating expenditures of the water system – and it was not enough. 

PUB had to borrow from the market and issue bonds –  for example S$800 million in green bonds last year – to fund long-term infrastructure projects. 

“So there is no profit. Everything is actually reinvested or used,” Dr Khor said. 

For his second question, Mr Singh asked if the government would reconsider the utility of the water conservation tax. 

A water conservation tax is one of the three components of water pricing, the other two being a tariff and a waterborne tax. The water conservation tax is a percentage of the tariff and is meant to encourage water conservation. All three components will see an increase this time round for domestic and non-domestic potable water.

Mr Singh said that household water consumption patterns have been on a downward trend and questioned the relevance of the water conservation tax as compared to the implementation of more water-efficient features in the household.

“(Water efficiency features are) a more effective policy tool to encourage a lower consumption of water and achieve the outcome that the ministry is looking at with regard to ensuring that every Singaporean sees the first drop of water as a very scarce resource,” Mr Singh said. 

He asked if the water conservation tax was achieving the policy purpose that it was intended for, or if water efficient features were a likelier source of realising water savings among households. 

Dr Khor responded that both were needed. 

“The water conservation tax, really is a tax … to incentivise to reflect the scarcity value as well as to incentivize consumers to use water wisely.”

Mr Leong asked if it was possible to replace the two-tier pricing with multiple bands instead. 

“This is fairer because, as you have said, most of the future increase in water consumption will come from the larger users in the non-household sector,” he said. 

Potable water currently costs S$2.74 (US$2.01) for every 1,000 litres, or per cubic metre, before tax for most households, up to 40 cubic metres. 

Households that consume more than 40 cubic metres a month currently pay S$3.69 per cubic metre for the exceeded amount. Less than 4 per cent of households do so, Dr Khor noted in her reply to Mr Leong. 

She added that the average household consumes about 15 cubic metres of water each month.

The higher pricing was to encourage those who use more water to “use water wisely and conserve water”, she said. 

Mr Leong also asked if the ministry could confirm that the current water pricing fully took into account the cost of producing water from local sources. 

“If so, can Singaporeans expect that – barring unforeseen changes in the ingredient cost, including energy – the water price will not shoot up drastically after the expiry of the Johor water supply agreement in 2061?”

Dr Khor replied that to ensure water security, Singapore uses a blend of sources from local catchment, imported water, desalinated water and NEWater. 

“When I say cost of producing the next drop of water … we also take into account investments, long-term investments to meet future water demand. And that will take into account the fact that water demand will increase and we will have to invest in additional capacities,” she said. 

Related:

Cost of treating and supplying water in Singapore up significantly, says PUB

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