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Establishing social tariffs on water services in Portugal

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In Portugal, the uptake of connections to existing wastewater infrastructure is slower than expected. A study by ERSAR, the water regulator, suggests that this may be due to the high cost of connection. While in average it only represents 26% of monthly income, for low income households in some municipalities the cost of connection can reach three times their monthly income. To address this issue, ERSAR has recommended service providers to eliminate the connection charge and compensate this loss of revenue by increasing the fixed part of the tariff gradually over a five year period. In this way, all users will contribute to pay for the cost of connecting the unserved.

On another perspective, ERSAR has studied also affordability of services by users, which have enabled to say that there is no major macro-affordability problem in Portugal. At the municipal level, the cost of 10m3 of water and sanitation services as proportion of average household income is 0.39% for water and 0.17% for wastewater – reaching maximum values of 0.99% for water and 0.81% for wastewater in the most expensive municipalities.

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Protecting consumers by monitoring water services affordability in Portugal

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ERSAR has developed a set of indicators to benchmark the performance of the more than 300 service providers. Starting in 2011, the set of indicators includes a macro-affordability indicator that tracks, for each municipality, the cost of consuming 10m3 of water as proportion of average household income. Colour ratings are given to municipalities: “green” when the cost is below 0.5% of household income, “yellow” when it is between 0.5% and 1%, and “red” when it is above 1%.

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