A Simulation Model for Understanding the Consequences of Alternative Water and Wastewater Tariff Structures: A Case Study of Fayoum, Egypt

Egypt has successfully made the transition to high quality piped water services. Currently 98 % of urban households and 96 % of rural households have access to piped water services, primarily through private connections for the exclusive use of household members. Now that water supply coverage with piped networks has been largely accomplished, the water and wastewater utility companies in Egypt face new challenges. One of the most pressing is the need to generate revenues that are sufficient for a financially sustainable future. Today most of the financial resources needed by the water supply sector come from government development grants which finance capital expenditures and some subsidies to cover operation and maintenance costs. The Egyptian government wants to reduce this financial support and encourage the water and wastewater sector to gradually become financially self-sufficient. In this chapter we present a simulation model that was designed to assist the Egyptian Water Regulatory Agency to better navigate the tariff reform process. We simulate the effects of alternative tariff structures on customer water use, which in turn affects utility revenues and costs. The different tariff structures are compared in terms of their achieving the following four objectives: (1) financial cost recovery, (2) economic efficiency, (3) fairness and equity, including affordability, and (4) tariff simplicity.