Budget 2017's water price hike: What you're not hearing about the 30% increase

Budget 2017's water price hike: What you're not hearing about the 30% increase
PHOTO: The Straits Times

At the Budget 2017 announcement, there were many important points raised by Finance Minister Heng Swee Keat, and we'd like to talk about as many of them as possible. But Singaporeans seemed fixated on just one issue - the price of water.

And it's not surprising, when you think about it. Just like water makes up 70 per cent of a human body, many Singaporeans think "the 70 per cent" are to blame for this newly announced price increase of 30 per cent.

30%! So much!

Knowing that the increase would be significant, Environment Minister Masagos tried to cushion the blow by announcing much earlier in the month that there would be a water price increase. But even then, I don't think anyone expected such a significant increase.

It was only at Budget 2017 where the actual specifics were revealed. Minister Heng, in his Budget speech, tried to defend the increase by providing four main points: that production of water through desalination and NEWater plants were costly, the last time they increased the price of water was in 2000, the increase would be phased in slowly, and lastly, that households will be given rebates to defray the increased costs.

Read also: Budget 2017: 5 things that may affect you directly

How is water priced in Singapore?

Assuming you're not one of the three people who look at their utilities bill regularly, here's the surprisingly complicated water pricing structure in Singapore.

Firstly, there's the basic Water Tariff, which for households is currently $1.17 per cubic metre before GST if you use less than 40 cubic metres per month (i.e. anyone who doesn't live in a bungalow), and $1.40 per cubic metre if you use more than 40 cubic metres of water a month (i.e. people who can afford it). The Water Tariff makes up the bulk of your water cost each month.

Secondly, there's a Waterborne Fee and the Sanitary Appliance Fee. The Waterborne Fee is a variable fee and is currently charged $0.28 per cubic metre based on your usage. The Sanitary Appliance Fee is a fixed fee charged at a flat rate of $2.80 per fitting per month based on how many toilet bowls your property has. These two charges help offset the cost of maintaining, operating and expanding the country's sewage systems.

Still with me? Good.

The third and final fee is the Water Conservation Tax. The government introduced this tax back in 1991 and set it at 30 per cent of the Water Tariff if you use 40 cubic metres of water or less each month, or 45 per cent of the Water Tariff if you use more than 40 cubic metres of water each month. It doesn't represent the cost of producing water, it's just a way to encourage you to conserve it.

So how does the announced increase in water price affect these charges?

The main point is that the increase affects ALL the various charges. What's interesting is how they've increased at different rates. Most households in Singapore use 40 cubic metres of water or less each month. The Water Tariff, for us, will only increase from $1.17 per cubic metre of water to $1.19 later this year, to $1.21 per cubic metre from July 2018. That's just an increase in 4 cents, or 3.4 per cent of the current Water Tariff.

Over the same period, our Water Conservation Tax will increase from 30 per cent to 50 per cent of the Water Tariff, or an increase of 26 cents per cubic metre of water, or a 76.4 per cent increase of the current Water Conservation Tax. While this seems like a significant amount, it's in line with the Government's consistent call in the past 25 years to conserve water.

However, what is very curious is the decision to merge the Waterborne Fee with the Sanitary Appliance Fee. The official reason is to be "more reflective of the volume of used water discharged". In other words, just because your household has three toilet bowls doesn't mean you go to the toilet three times more than the household with only one toilet bowl. That seems fair.

What doesn't is how the Waterborne Fee has now jumped from $0.28 per cubic metre of water to $0.92 per cubic metre of water over the next two years. That's a 64 cent increase per cubic metre of water, or a seeming 228 per cent increase!

Thanks to PUB here's a quick table of the new water price changes:

Graphic: Public Utilities Board

And yes, these values are pre-GST.

That's not how math works

Before you jump on the comments box and start flaming me for being a sensationalist troll, I know that I haven't included the Sanitary Appliance Fee. But let's look at a scenario - an HDB 5-room flat that, according to Singapore Power's website, uses just 17.5 cubic metres of water a month. Let's assume there are two toilet bowls in the flat.

The Waterborne Fee would currently be $4.90, and the Sanitary Appliance Fee would be 2 x $2.80 = $5.60, for a total of $10.50.

Come July 2018, the Waterborne Fee (which includes the Sanitary Appliance Fee) for the same amount of water usage would be $16.10. Even though it's not a 228 per cent increase, it's still a 53.3 per cent increase, and that's still pretty alarming.

Read also: Twitter users share how to save water after Budget 2017's water price hike announcement

But all that being said, let's just put things in perspective

Assume you live in a 5-room HDB flat that uses an average of 17.5 cubic metres of water a month. Currently, you'll be paying $37.10 a month.

By July this year, assuming the same water usage, water will cost you $41.85 a month. By July 2018, assuming the same water usage, it'll set you back $47.95 a month.

Yes, that's almost a 30 per cent increase, but in real terms, it's only $10.85 more a month by 2018. It's not that much more.

All in all, over the next two years, assuming your water usage stays constant, you'll be paying $1,012.50 for water, about $122.10 more than you normally would. But here's the thing, as the owner of a 5-room flat - you'll also be getting up to $260 in U-Save Rebates during that time, so there's still a net benefit from the government.

The water price increase seems to be mainly to discourage businesses from wasting water, and with the U-Save rebates, is designed not to have a major impact on Singaporeans. But since this is just one of many small cost increases in Singapore over the past couple of months, one is led to wonder why our government seems determined to give us so many bitter pills to swallow.

Budget 2017: Heng Swee Keat receives warm welcome back in Parliament

The article first appeared on MoneySmart

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