New era / new solutions: The role of alternative tariff structures in water supply projects

Water utilities face different challenges that may force them to seek prioritized objectives. When doing so, particular projects may have to be developed, being important to understand their impact on water tariffs, and thus, on customers. Such consequences may bear an increased relevance in cases stressed with, e.g., resource scarcity, poverty, and the need for infrastructure investments. The resulting cost and revenue variability demand a comprehensive study. If the first may require a stochastic modeling (in major cost components) in order to consider its inherent uncertainty, the second needs to be modeled following context-specific objectives set by the relevant stakeholders. The solutions achieved will likely promote distinct revenue sources, as well as diversified water tariff structures. A multi-objective optimization model (i.e., a Framework for Suitable Prices) is built to deal with those diversified requirements (e.g., stochastic energy costs, affordability, cost recovery, or administrative simplicity). The model is solved through achievement scalarizing functions with several weighting coefficients for a reference point, so as to provide a significant perception of possible revenue options (and their impact) to the decision makers. The proposed method is applied to a case study, Boa Vista Island in Cabo Verde, in which the background characteristics, namely water sources availability (e.g., the adoption of desalination technologies), economic development and other contextual factors were considered. The key role of tariff structure selection is displayed, instead of assuming it a priori, giving important insights regarding project feasibility.