Water and Electricity Charges

Mr Seah Kian Peng asked the Minister for the Environment and Water Resources (a) when was the last time the price of water was increased for households and how this compares with the frequency and quantum of the rise in electricity tariffs; (b) what are the governing principles used in determining the rates for water and electricity; (c) whether the price of water is currently set on the basis of price recovery; and (d) what is the long-term marginal cost of water.

Dr Vivian Balakrishnan: The price of potable water in Singapore is pegged to the Long Run Marginal Cost (LRMC) of producing desalinated water and NEWater. Desalination and recycling are the main source of the next available drop of water given our shortage of land. Consequently, the water tariff and Water Conservation Tax reflect the true scarcity value of water.

The price of water has remained unchanged since 2000. Although labour and equipment costs have risen during these 15 years, PUB has been able to keep the LRMC relatively stable because of improvements in membrane technology and productivity. We should bear in mind that desalination and recycling water are energy intensive processes. Hence, the key variable for the future is the price of energy. Nonetheless, given the current state of technology and energy prices, there is no need for an adjustment at this point.