Prepaid water service
Following the devastating impacts of extreme fuel price increase, two relatively small water utilities successfully implemented a pre-payment approach to increase revenues and recover service continuity. Al-Baydha LC adopted a policy of in-advance revenue collection from major customers, whereas Matnah LC implemented a pre-paid water service policy for all its customers. Customers pay in advance for the water service for a specific period of time to cashiers in different collection centres in the city. The customer accounts unit keeps the network operators informed about the updated water supply schedule. This practice increased revenues, minimised commercial losses, enabled the utilities to cover O&M cost and ensured service continuity
Description of the problem
Some water utilities were forced to reduce or fully stop service delivery due to technical and financial repercussions of the war. Matnah water utility interrupted its services completely in 2017. Al-Baydha LC faced a severe financial crisis including the accumulation of debts. An additional problem was the severe shortage of spare parts which affected the operation and maintenance of the system. The end result was that the water utilities lost their financial balance and did not have enough cash flow to provide their service.
Description of the good practice
To overcome this difficult situation the two relatively small water utilities needed a mechanism that would provide them with financial liquidity to resume their service. Both of these therefore adopted a policy of pre-paid water supply services. Al-Bydha LC asked their major customers for an advanced payment and at the end of each month the real cost of the water and wastewater services are deducted from the collected amount.
Matnah water utility also uses a prepayment mechanism which it applies to all customers. They initiated the process by ensuring that every customer has a water meter. They developed several awareness campaigns and ensured that customers can obtain information on the pre-paid mechanism through contacting the utility cashiers, operators or through the utility emergency office.
Customers go to the cashier at the nearest collection centre to pay the cost of a specific volume of water according to their needs or what they can afford for a specific period of time (weekly, monthly, or a larger period). Meter readers weekly register meter readings which are submitted to the customer accounts unit in the water utility. This unit compares water consumption with the paid amount according to collection vouchers and notifies customers with a low balance requesting them to renew their purchase. Customers with low-income can pay for short periods of time while high-income customers can pay for longer periods. The service is disconnected for customers without credit until the customer renews payment and then the operator re-opens the valve to the customer house and the service is resumed.
Impact and sustainability of the good practice
This practice ensures that the utility has a cash flow from the pre-payments which it allows to provide the service and to ensure the continuity of service provision. In the case of Matnah water utility, the impact is even more important as it turned out that despite the reduction of water production caused by the technical and energy problems, the volume of water that was sold increased significantly. Water losses in the network decreased, as the commercial (non-physical) losses became very low or almost non-existent. The utility was also able to revise the water tariff differentiating between domestic and commercial use and to introduce the new tariff smoothly, which contributed to increasing its revenues.
Although the utility still has a debt accumulated from before 2018, the prepayment mechanism and the increased revenues enabled the utility to cope with the high fuel and electricity prices, meeting the cost of O&M and spare parts and paying employee salaries. Moreover, the utility disbursed part of its long outstanding debts indicating that the approach is quite sustainable. In addition, the practice enhanced the public image of the utility and strengthened the relationship with its customers.
Required resources
The practice requires a policy decision to adopt pre-payment methods. The implementation of the approach requires a clear communication strategy including raising awareness of the customers on the situation of the utility and the need to obtain financial resources to be able to provide water and sanitation services under difficult circumstances. It is also necessary to have sufficient customer service points, reliable water meters, valves that can be used to close the water flow to non-paying customers, a good customer registration and administration system and sufficient meter readers to be able to provide the service.
