Agriculture Reference
In-Depth Information
Average cost
A recent study from Cemagref (Gleyses, 2004) for the Department of Environment
dealing with water tariffs in the Charentes river basin provides an in-depth and up-to-date
overview. On the basis of a sample of 75 associations, the average price is estimated at
0.11
Tariffs (Table 4) are mainly binomial with a fixed part based either on the irrigated
acreage or the subscribed flow and with a variable part proportional to the water volume.
Flat tariffs are mainly based on the irrigated acreage.
om 0.09 to 0.12
Table 4. Water pricing for collective irrigation schemes in the Charente river basin
Size of association members
questioned
Water pricing structure
Fixed
(
Variable
(
Binomial ( Irrig. acreage, Vol.)
81
0.06
33
Binomial (Flow, Vol.)
38
0.06
8
Lump sum ( Irrig. acreage)
198
-
23
Monomial (Vol.)
-
0.10
11
Source
: Cemagref, 2004.
The most remarkable point is that despite the breakdown of water tariffs, the average
price is quite homogenous. This reinforces the previous hypothesis of setting water price
with the consideration of water value that is derived from the irrigation of the common
crop, maize, and this evens out the financial support for investment.
Marginal cost
Marginal costing for water supply derives from the Pareto's optimum. According to
this principle it ensures efficient water allocation and avoids economic distortions. If we
consider a large regional water service, a monopoly which balances its budget, it brings
us to the Ramsey-Boiteux water pricing method. This type of tariff is used by the
Regional development Company SCP - Société du canal de Provence - located in the
South-East of France. This tariff has been designed for long term marginal cost pricing
(Jean, 2001) as the hydraulic works have been built over several decades. The company
supplies raw water to a diversified panel of uses from irrigation to drinking and industrial
water (Table 5).
For the implementation of these water pricing principles, SCP defines what is called
the “development cost” as follows. It is the sum of:
cost related to building new infrastructure (dams, canals and main distribution works) to
satisfy an additional unit of water demand when works are beyond capacity, and
proportional cost including the value of water and operational costs (energy, wages ...).
Finally, the total cost depends on the discounting rate used for the investments and on
estimation of the date when demand will meet the available water resources. This means
that this approach is not only based on supply analysis but also takes into consideration
the demand side.
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