Gavin Dufty St Vincent de Paul Society Victoria address to the Vic water Sustainability Task Group
Vic Water Sustainability Task Group Issue covered in presentation Profile of Victoria – in particular low income and disadvantaged Victorians Pricing and tariff design. Basic protections, what's critical
Profile of Victoria – issues covered in this section Profile of Metro and non Metro Victoria Mean and medium Victorian Equivalised disposable income (real in pocket $) Vinnies demand for utility assistance Pension and Benefits amounts Poverty lines (working /not working) Profile of difficulty paying utility bills Bill Size and Price shock
62.7
22.5
9.3 4.6 0.9 70 60 50 40 30 20 10 0 % of population
Priciple source of income Victorian capital city
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Income source
% o f p o p u la tio n
Balance of state priciple source of Income 60.0 50.0 40.0 30.0 20.0 10.0 0.0
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29.7 8.1
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Income source
Equivalised Disposable Household income Victoria
Dollars per week
540
518
520 500 480 454
460 440 420 Mean income
Median income
Percent of total
Emergency relief Assitance for Utilities bills 2001-2004 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%
5.62% 3.11% 1.70%
Percent of total Percent of total Percent of total 2001-2002 2002-2003 2003-2004 Year
Pension/Benefit rates For example the currently maximum fortnightly pension payments (till June 30 2005) for statutory income recipients are[1]: Pensions (Aged and Disability) Single rate $476.30 Couple rate $397.70 each per fournight. Sole parents $476.30 Partnered parents $360.30 Unemployment
$326.50
[1] Centrelink, a guide to Australian Government Payments, 20 march – 30June 2005
Poverty Lines
Head in workforce Couple Couple plus 1 Couple plus 2 Couple plus 3 Couple plus 4 Single person Single parent plus 1 Single parent plus 2 Single parent plus 3 Single parent plus 4
Including Housing $ per week
Yearly income poverty line
$426.04 $512.12 $598.21 $684.29 $770.37 $318.48 $408.87 $494.90 $580.98 $667.06
$22,154.08 $26,630.24 $31,106.92 $35,583.08 $40,059.24 $16,560.96 $21,261.24 $25,734.80 $30,210.96 $34,687.12
Poverty Lines Head not in workforce Couple Couple plus 1 Couple plus 2 Couple plus 3 Couple plus 4 Single person Single parent plus Single parent plus Single parent plus Single parent plus
1 2 3 4
Including Housing $ per week $365.80 $451.88 $537.97 $624.05 $710.13 $258.25 $348.57 $434.66 $520.74 $606.82
Yearly income poverty line $19,021.16 $23,497.76 $27,974.44 $32,450.60 $36,926.76 $13,429.00 $18,125.64 $22,602.32 $27,078.48 $31,554.64
Unable to pay electricity, gas or telephone bills on time by equivalised gross household income quintiles Victoria Lowest quintile
Second quintile
Third quintile
Top two quintiles
All person
Percent of total
18.4%
13.5%
16.4%
8.8%
12.5%
Total number
119,048
82,620
107,912
123,640
457,875
Unable to pay electricity, gas or telephone bills on time by selected household composition categories Victoria
Couple only
Couple family (depende nt child/ren)
One parent family(de pendent child/ren)
Lone person househol ds
All person
Percent of total
5.0%
13.9%
36.9%
11.1%
12.5%
Total number
47,050
158,599
63720
51504
457,875
Bill size and price shock $200 water bill can range between 44% of medium equivalised weekly income. To as much as 61% for an unemployed person‌‌not to mention other bills and housing commitments.
Prices and people - issues covered in this section: Income/demand Elasticity's Tariffs Fixed charges Seasonal Tariffs
Price
Elasticity of
Demand
Description of group
Indoors
Outdoors
Total
Upper, middle & lower income group
-0.13
-0.38
-0.17
Upper income group
-0.14
-0.47
-0.19
Middle income Group
-0.12
-0.46
-0.17
Lower income group
-0.14
-0.19
-0.14
Upper and middle income groups
-0.13
-0.47
-0.18
Elasticity Significantly indoor elasticity’s for water are very similar regardless of income with estimations of a 10% price increase giving a 1.3% water reduction outcome. However for outdoors water usage the elasticity’s for demand for various income groups varies significantly. Lower income groups having an elasticity of only -0.19 while the middle income group has an elasticity of –0.46 and higher income group’s having elasticity’s of -0.49.
Tariffs and Tariff design
Research suggests that price structure may be a more important influence on water demand that the magnitude of marginal price itself[1]. This indicates that not only pricing of water is considered important but also the “look and shape” of the tariff may play a critical role in determining the end outcome. [1] Shelia M. Cavanagh et al, p32
Fixed charges „
„
A Water tariff structure with a high fixed rate relative to the consumption charge also limits the potential of any pricing signal created by reduced water consumption because it takes relatively large decrease in water consumption to noticeably reduce the bill. In addition these types of tariff penalise low volume households (flats and low income) see income / demand elasticity's.
Seasonal Pricing „
„
Seasonal pricing presents significant issues that I believe limits the effectiveness of such a tariff in reducing consumption. This includes, the current domestic billing and collection cycles. Such a tariff will result in customers not responding to the price signal until as much a four months after the actual water consumption had occurred (three/four month billing cycle and one month collection cycle).
Seasonal Pricing „
In addition seasonal pricing only place a premium on saving water in the hotter months and do little to encourage people to reduce excessive water usage in the more temperate / cooler months of the year. As such this tariff design sends distorted pricing signals implying that water saved in summer is “worth more� than water saved in winter.
Pricing and Concessions „
Water pricing (utility pricing for that matter) should be developed in regards to the concessions framework. Failure to do this can undermine the purpose of the concessions (to increases access to and affordability of water). In worst cases can lead to “gaming�.
What are critical issues issues covered in this section Appropriate tariff design and concessions Credit and debt management including: Defined billing and collection cycles Optional payment arrangements (flexibility with debt and credit collection) “hardship programs” Clear information including: usage, consumption and assistance available
What are critical issues Appropriate tariff design and concessions framework As mentioned previously - low elasticity means large potential for price shock. Greater the amount “fixed changes” the greater the price shock Tariff design should always be considered in relation to concessions - so they complement each other to benefit the user.
What are critical issues
Credit and Debt management that is focused on household needs not companies demands. Billing and collection cycles that allow minimum 24 working days before punitive actions. (remember who cant pay 2 pension periods) Clear notices and information to encourage and assist people to contact your call centre Staff training – so respond in a meaningful manner Other strategies payment arrangements (ongoing and arrears plans) Targeted debt write off – hardship strategies
What Are Critical Issues
Information provision No point hiding what assistance you can offer people if they don’t know they wont ask for it! Water usage/conservation information and support (concession and others) Water consumption information particularly important if there are large seasonal variations Alternative billing and payment options
Address to the Vic water Sustainability Task Group Gavin Dufty Locked bag 4800 Box Hill Victoria 3128 Gavind@svdp_vic.org.au „