Supply, Demand and Pricing of Water

Mr Seah Kian Peng asked the Minister for the Environment and Water Resources (a) whether the price of water now reflects the full cost of water services, including the cost of transporting waste water and the building of all water infrastructure; and (b) if not, what is the extent of the Government subsidy and to what extent will prices have to rise in order to reflect full cost recovery and not just the long-run marginal cost of water.

Mr Seah Kian Peng asked the Minister for the Environment and Water Resources whether the provision of average water consumption figures of households of the same housing type in the same block or street to allow consumers to compare and contrast their consumption patterns with their neighbours has been effective in spurring water conservation.

Mr Melvin Yong Yik Chye asked the Minister for the Environment and Water Resources if he can provide an update on PUB's efforts in the past two years to support companies with high water utilisation rates in their initiatives to recycle or reuse water.

Mr Melvin Yong Yik Chye asked the Minister for the Environment and Water Resources whether domestic households can pay a lower water conservation tax when their water bills show that they have used less water than the national average for their housing type for a consecutive period of six months.

Both Mr Seah Kian Peng and Mr Melvin Yong have raised questions related to the supply, demand and pricing of water. Indeed, water remains an existential issue for Singapore.

First, let me address Mr Seah’s concern over our future water supply. Long-term planning to meet water demand has always been at the top of my Ministry's agenda. At the recent Committee of Supply debate, I had shared that the Public Utilities Board (PUB), our national water agency, had completed its Water Master Plan 2016 review. This plan outlines Singapore's long-term water supply strategy for the next 50 years. The plan not only seeks to ensure water adequacy to meet future demand, but also caters for resilience against contingencies, such as prolonged dry weather and other disruptions to water supply sources.

Our total water demand is projected to double by 2060. While we seek to augment supply from local catchments, there is a limit to this, as two-thirds of Singapore is already water catchment. To ensure long-term water security, we plan to double our NEWater and desalination capacities by 2030. By 2060, these two sources will supply up to 85% of our water needs and also help to reduce our vulnerability to weather uncertainties.

We are now developing our third and fourth desalination plants, which will be ready in 2017 and 2019 respectively. At the Singapore International Water Week last month, I announced that we would build a fifth desalination plant on Jurong Island, with the capacity to produce 30 million gallons of water per day.

The fifth NEWater plant will commence operations at the end of 2016. We are also enhancing our used water system ahead of demand. PUB will be implementing Phase 2 of the Deep Tunnel Sewerage System, or DTSS in short, over the next 10 years. This superhighway, designed to last the next 100 years, will allow us to collect used water more efficiently. Our water reclamation plants and NEWater factories will be expanded progressively to treat and recycle every drop of used water collected. PUB aims to increase Singapore's used water recycling rate from the current 30% to up to 55% in the long term, by capturing used water more effectively and improving treatment technology.

Hence, I would like to assure Members that the Ministry and PUB are actively planning for and implementing infrastructure to meet long-term water needs and enhance our resilience.

But simply enhancing supply is not sustainable. Mr Melvin Yong has rightly pointed out the importance of water conservation, in both the non-domestic and domestic sectors.

A large share of our water demand growth will come from the non-domestic sector. Hence, PUB has put in place extensive measures to encourage companies to use water efficiently, including recycling.

Since 2015, PUB has required the submission of Water Efficiency Management Plans (WEMP) for large water users that consume 60,000 cubic metres or more a year, equivalent to 24 Olympic-sized swimming pools. These plans help companies become more aware of their water usage patterns and identify ways to reduce consumption. More than 600 large water users have submitted their plans. PUB will study the data collected, with the aim of developing water efficiency benchmarks and good practice guidelines, including that for water recycling, for different sectors.

PUB also implements the Water Efficient Buildings certification programme which recognises building owners who put in effort to raise water efficiency. Further, PUB, together with SPRING Singapore and industry stakeholders, has developed guidelines, tools and best practices to help users improve water usage efficiency. Other enabling measures include a Water Efficiency Manager Course for Facilities and Operations managers, as well as system consultants and certification bodies in water management.

Companies can also tap on a Water Efficiency Fund (WEF) for water efficiency studies and projects. Last year, there were 203 successful WEF applications with a total approved funding of $3.9 million. Projects supported include water recycling projects and installation of private water meters to help companies better detect leaks and monitor water usage.

One specific example where PUB is working closely with large water users to implement recycling is with the Singapore Refining Company (SRC). PUB is working with SRC to implement an Effluent Treatment Recycling Plant to produce NEWater-grade water for non-potable uses. When completed by 2016, it will help the company reduce its NEWater use by 2,500 cubic metres, an Olympic-sized pool, per day. On a wider scale, PUB plans to work with companies on Jurong Island to meet their cooling demand with seawater, instead of freshwater supply.

For the domestic sector, PUB has mandated water efficiency labelling and minimum standards to help consumers select more water-efficient fittings and appliances. PUB also carries out extensive outreach and educational programmes to encourage households to use water judiciously, as well as studies on households' water usage patterns, to identify opportunities to improve water efficiency.

For instance, PUB participated in an initiative led by Singapore Power (SP) Services to redesign the utility bill to help consumers understand their utility usage. From this month onwards, all domestic customers will be able to see how their utility consumption compares against the national average, as well as the average consumption of households of similar housing types. We hope that this additional comparison feature, together with our other water conservation initiatives, will help consumers to be more mindful of how they use water in their daily lives. As it may take some time for water consumption behaviour to change, PUB will continue to monitor and assess the effect of the bill comparison feature.

Finally, on water pricing. Water has to be priced appropriately to manage water demand and to ensure sustainability in water supply. In Singapore, we price water based on the long run marginal cost (LRMC) of the next available drop of water. Mr Seah Kian Peng has asked if this price reflects its full cost.

Currently, the total price of water reflects LRMC, and comprises the water tariff, used water charges, as well as a Water Conservation Tax (WCT). The total water price recovers the costs of production and conveyance of potable water to meet demand, the treatment of used water and the maintenance of the used water network. The development cost of infrastructure to collect used water, that is, sewers, is funded by Government grants as sewers are regarded as a public good. The WCT is imposed as a percentage of the total water consumption to reinforce the message that water is precious from the very first drop. We believe that the total water price must reflect costs as closely as possible and have pegged it to the cost of producing the next drop of potable water, which is likely to be more from desalination and NEWater.

Mr Yong has suggested tiering the WCT. Currently, a higher WCT is already levied on households that consume more water. While households that consume less than 40 cubic metres of water pay a water tariff of $1.17 per cubic metre, and a WCT at 30% of the water tariff, households that consume more than 40 cubic metres of water per month pay a higher tariff and a higher WCT, at 45% of tariff. This differentiated WCT rate, as well as the differentiated water tariff, serves to discourage excessive water consumption. Mr Yong’s suggestion is to further tier the WCT based on the average household consumption for each housing type. This would mean having to apply different thresholds for different housing types and changing the thresholds whenever the national average consumption for a housing type changes. Such a complex structure could be confusing to consumers and is more challenging to implement, compared to the current WCT structure.

But both Members' questions have highlighted pertinent issues regarding the pricing of water, such as the sustainability of our water supply in future, as well as the need to manage demand. It has to be noted that the price of water has remained unchanged for 16 years, since 2000. PUB has been able to keep the price relatively stable all these years because of improvements in membrane technology and productivity. Most of the incremental improvements have already been reaped and what remains are longer-term breakthrough technologies which may take many more years to be proven operationally and become deployable. At the same time, wages, asset renewal and energy prices have risen over time and will continue to exert upward pressure on water costs.

In addition, the challenges posed by climate change and increasing urbanisation have necessitated additional costly infrastructure to enhance our water supply resilience. In the last five years, PUB has completed or launched an unprecedented number of major projects, including two reservoirs, two NEWater factories, four desalination plants and Phase Two of the Deep Tunnel Sewerage System with a centralised Water Reclamation Plant. Hence, while PUB will continue to explore new technology to lower costs of production, especially for desalination and recycling, these technology-induced cost efficiencies may not be able to "outweigh" the increase in other cost drivers like capital, maintenance and manpower expenses. We will need to continually review the price of water to ensure that our water system remains financially sustainable and reflects the scarcity value of water accurately. With the support of all stakeholders doing our part to use water wisely, we can look forward to SG100, confident that our taps will always flow.