Increasing access to water services: a cost-recoverable pricing model

Pricing policies can serve as a low-cost and effective tool for increasing access to water and sanitation services among poor households while allowing the provider to recover costs. An empirical model is applied to contingent-valuation survey data for water services in Cebu, Philippines. Pricing policies that utilizes a low one-time connection fee and differentiates tariffs based on wealth results in a 3 to 9-fold increase in water services access by poor households over the base pricing policy. The results provide evidence that price-discrimination techniques can be important tools toward achieving greater coverage and financial solvency of important services.