Analysis of tariff adjustment for clean water usage

Abstract

This study aims to assess the water supply company’s tariff modification under various circumstances. To evaluate the financial situation if no tariff modifications were made, the study first conducted an examination of the existing financial data. A tariff adjustment scenario is also run through an investment feasibility test and until it reaches the full cost recovery (FCR). A variety of scenarios for tariff adjustment were run, each one with a different percentage increase in tariffs and a different time period for the increase in tariffs. These scenarios were based on the findings of the analysis done on the water demand and the adjustment of water usage tariffs at PDAM Tirta Musi Palembang. This hypothetical situation demonstrated how higher tariffs will affect the company’s ability to increase revenue. To sum up, this study has offered a framework about tariff adjustment under various alternatives, and examples of successful and unsuccessful pricing strategies in the local water company.