Determining Appropriate Water Prices of The Provincial Waterworks Authority

Abstract

This research aims to study the appropriate pricing of tap water of the Provincial Waterworks Authority by using the principle of pricing equal to the average economic marginal cost, which is considered an efficient price for resource allocation and reflects the opportunity cost of using resources by changing the market price to the shadow price or economic price that reflects the real opportunity cost. The data analysis method uses descriptive statistics to analyze the general characteristics and quantitative analysis by analyzing the demand model of tap water demand to find the additional tap water demand to consider the investment plan to increase the production capacity of tap water in the future and to calculate the appropriate tap water price. The results of the study found that the appropriate pricing of tap water of the Provincial Waterworks Authority by using the principle of pricing equal to the average economic marginal cost that does not take into account the investment in the part of the government subsidy into account resulted in the calculation result of 18.58 baht per cubic meter. When compared to the current average water price of 19.13 baht per cubic meter, it was found that the current water price is higher than the price that reflects the opportunity cost of using resources efficiently. The Provincial Waterworks Authority should have a plan to review the determination of water tariffs along with an investment plan that is appropriate for future water demand, along with increasing operational efficiency in order to have capital to support future costs instead of relying on government subsidies and to be able to reflect the actual costs to water users. However, when considering the sensitivity analysis, it shows that if the operating costs change, it will affect the calculation and determination of water tariffs using this method. Therefore, it should consider collecting variable water tariffs by automatically adjusting the water tariffs from uncontrollable operating costs in order to reflect the cost of water supply appropriately.