Singapore to raise water price by 18% by April 2025 as costs climb
PUB says electricity, construction and other expenses have grown ‘substantially’ since last hike in 2017
SINGAPORE will raise the price of water by 18.2 per cent, or S$0.50 per cubic metre (cu m), in the next two years to keep up with “substantially” higher costs of production and supply, national water agency PUB announced on Wednesday (Sep 27).
With the development, Deputy Prime Minister and Finance Minister Lawrence Wong on Thursday will announce additional cost of living support to provide more relief for Singaporean households, the Ministry of Finance said.
The hike of S$0.50 per cu m for potable water will be introduced in two phases. Its rate will increase by S$0.20 to S$2.94 per cu m from the current S$2.74 on Apr 1, 2024, and the final S$0.30 increase will kick in on Apr 1, 2025.
For households that consume high amounts of water, the price of domestic water above 40 cu m used in a month will increase by S$0.25 from the current S$3.69 to S$3.94 per cu m on Apr 1, 2024; then by a further S$0.45 to S$4.39 per cu m on Apr 1, 2025, for a total increase of S$0.70.
The price of NEWater – the high-grade recycled water that is mainly used for industrial and cooling purposes at wafer fabrication plants, industrial estates and commercial buildings – will rise by 7.3 per cent, or S$0.17 per cu m, to S$2.50 per cu m from S$2.33 over the two-year period as well. This includes an intermediate hike of S$0.08 to S$2.41 per cu m on Apr 1, 2024.
PUB said monthly water bills will increase by less than S$25 for three in four businesses and by less than S$10 for three in four households. One cu m is the water needed for about 50 five-minute showers, and the average household here consumes about 15 cu m of water each month. Only some 4 per cent of households here use more than 40 cu m of water a month, and they are mainly those living in larger homes with greater landscaping or maintenance needs.
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While the projected impact on businesses as a whole might not seem like much, Ang Yuit, deputy president of the Association of Small and Medium Enterprises, told The Business Times (BT) SMEs will be unequally affected – those with water costs as a significant part of their input costs will be harder hit.
Furthermore, the changes to water price can be “very impactful” when compounded with other cost increases, he added. “Many were hoping that supply chain costs would have stabilised, leaving only manpower-related costs to deal with, but this cost would affect those businesses that are already impacted by weakening demand in sectors like segments in the manufacturing sector,” he said.
Singapore Manufacturing Federation (SMF) president Lennon Tan indeed voiced that manufacturers in the semiconductor, electronics, chemicals and petrochemicals, pharmaceutical and biotechnology, and food and beverage spaces will be significantly impacted, and said the price hike is a “cause for concern”.
“If water prices continue to increase at a hastened pace, it would imply continually adjusting to rising base costs, which may add to cost pressures and impact profit margins,” Tan said.
SMF will thus be looking to engage with various government agencies to explore avenues to support members impacted by the rising costs, in hopes that they may consider rolling out grants to support the implementation of water-saving technologies and other viable solutions, he added.
PUB said external cost pressures have mounted “substantially” since the last hike in 2017, contributing to a sharp change in its operating position from S$10 million net income in the 2020 financial year to a net loss of S$109 million in FY2021.
Chiefly, average electricity market tariffs have increased by about 37 per cent, adding to energy costs as Singapore increasingly taps energy-intensive sources such as NEWater and desalinated water to meet growing demand. Water-scarce Singapore relies on NEWater and desalination to address water security and sustainability amid climate change, which is expected to put greater strain on the weather-dependent local catchment and imported water.
Construction costs have also gone up 35 per cent across the industry, PUB said. The agency said it is exposed to the higher end of cost increases on this front due to the “specialised works” it must undertake, namely tunnelling and pipeline projects through highly urbanised areas.
Costs associated with the chemicals needed for water and used water treatment have also climbed 33 per cent due to inflationary pressures and supply chain disruptions, while maintenance costs have grown 18 per cent due to higher manpower costs for contracted services.
PUB further explained that it needs to maintain its current level of investments, having channelled more than S$3 billion in the past five years towards key long-term investments in water infrastructure. This is because it foresees a bigger chunk of the water supply mix having to come from more weather-resilient sources in the future, given its projection that water demand will almost double by 2065 in tandem with economic and population growth.
Deferring the coming price increase would “only mean higher, more significant hikes in the near future”, as the total cost of producing and supplying water exceeds today’s water price, PUB said.
The shortfall can’t be funded by tapping more of taxpayers’ contributions as “we are taking away funds which could have been used on other social needs”, it separately told BT.
And while the government does borrow to fund large long-term infrastructure projects, having raised S$800 million in its inaugural green bond issuance in August 2022 to fund sustainable water infrastructure projects, PUB stressed that there is a limit to how much it can borrow.
Further pointing out that borrowing costs and interest rates are also not low, it said: “At some point, water users, both today and in the future, would have to pay for these borrowing costs that finance the development of the water system.
“As a responsible public utility, PUB has to pay close attention to its financial health and practise sound financial management, including the right-pricing of water and seeking out appropriate funding methods.”
Additional annual revenue from the full price increase from April 2025 will roughly cover a third of PUB’s annual investment amount, the agency divulged.
When asked how it arrived at this round’s quantum of increase, PUB said the cost components to operate, maintain and invest in the water system are assessed in totality, as there are other factors apart from the key cost drivers of energy, construction, maintenance and chemicals.
On whether Singaporeans can expect more frequent water price increases, PUB said it reviews the price of water regularly to ensure the “right pricing” of water, while reiterating that future revisions will be guided by both annual operating costs, as well as long-term investments in water infrastructure.
Moving forward, PUB said it expects operating costs to “remain elevated”. In addition, long-term infrastructure plans are reviewed periodically, in line with updates to national projections for population and economic growth, as well as land use changes.
Singapore is not the only country raising its water price to cope with rising costs. The recent results of the Global Water Intelligence’s water tariff survey indicated that inflation has brought about the biggest jump in global water tariffs in over eight years – the July 2022 to July 2023 period recorded an 8.2 per cent average increase.
There were double-digit increases across the Middle East, Eastern Europe and Latin America. The highest regional increase came from Southern Asia, where huge price hikes across Pakistan drove the average regional hike to almost 40 per cent – much higher than the rate of inflation.
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