Environmental Commissioner renews call for full-cost water pricing

Elizabeth Brubaker

The Environmental Commissioner of Ontario (ECO) is once again calling on the Ontario government to promote the full-cost pricing of water. In his Annual Report for 2010/2011, released last week, the ECO argues that water charges should be levied to promote conservation, pay for municipal infrastructure, and cover the province’s costs of managing the resource. Although he mentions the need to build full-cost recovery into the water charges paid by industries, he focusses on the prices that municipalities charge for drinking water and sewage treatment.

The ECO discusses at length the “missed opportunities” under Ontario’s Water Opportunities Act, an act passed in November 2010 to conserve water resources, sustain municipal water infrastructure, and support Ontario’s water industry. He criticizes the provincial government for not using pricing to achieve its goals. Many of his comments echo those in Environment Probe’s submission to the government about the act – Ontario’s Water Opportunities Act: A Missed Opportunity to Price Water Responsibly.

Municipal water, the ECO writes, is “grossly underpriced.” This creates two problems. First, water users don’t have incentives to save water. Ontarians are among the world’s biggest water users. Ontario households use about twice as much water as do their European counterparts. This water use has “substantial economic and environmental costs,” the ECO explains.

The second problem with low water prices is that they leave municipalities with insufficient funds to invest in the water and wastewater infrastructure. Chronic under-investment has resulted in a $34-million backlog of repairs and replacement across the province.

Following is an excerpt from the Supplement to the Annual Report, in which the ECO expounds upon his concerns:

While the WOA cites water conservation as an important goal, the ECO is disappointed that the Act fails to address one of the key tools for achieving this goal: water pricing. Ontarians’ excessive consumption of water can be attributed, at least in part, to the fact that water is grossly underpriced in the province. The cost of treating and delivering clean water right to our taps is high. Yet, most municipal providers in Ontario charge artificially low water and sewer rates that are a small fraction of those in most other countries, and that are a small fraction of the true costs of the services. Instead, most Ontario municipalities heavily subsidize their water and wastewater systems through property taxes and provincial grants. Increasing the cost of water and wastewater services can not only provide a major incentive for conservation, but it can also provide an important means for ensuring the long-term sustainability and financial self-sufficiency of water and wastewater systems.

The WOA represents the government’s third effort within the last ten years (following the Sustainable Water and Sewage Systems Act, 2002 and the Financial Plans regulation under the Safe Drinking Water Act, 2002) to regulate requirements for financial planning of municipal services. After three successive forays, it is extremely disappointing that the government still has never mandated full-cost pricing. Extensive data demonstrates that water and wastewater users who are metered and charged an appropriate volume-based rate will reduce their water use.

Although the WOA does not explicitly mandate full-cost pricing, requirements for municipalities to undertake financial planning and to meet performance and conservation targets could indirectly drive municipalities to increase water and sewer rates. Municipal councils, however, are typically reluctant to raise water and sewer rates for fear of political backlash. Accordingly, the ECO strongly urges the provincial government to support municipalities in implementing full-cost pricing by conducting a well-articulated public education program that explains the necessity for water and sewer rate-hikes, and that also communicates the expected benefits of long-term sustainability planning. Experience from municipalities that have taken steps to price water more appropriately (such as Guelph and Edmonton and numerous cities in Europe) demonstrate that real environmental and financial benefits, such as reduced pressure on water resources and more sustainable infrastructure, can be achieved with no sacrifice to a high standard of living.

In the Annual Report, the ECO also addresses a number of important water quality issues that Environment Probe has worked on in recent years, including municipal sewage and agricultural runoff.

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