EFFECTS OF TARIFF STRUCTURES ON WATER DEMAND IN WESTERN REGION OF KENYA

Abstract

Access to safe, reliable, and affordable water and sanitation services is both a basic human right and a critical driver of socio-economic development. In Kenya, the 2010 Constitution and the Water Act (2016) devolved service delivery to county governments, while the Water Services Regulatory Board (WASREB) retained the mandate of setting national tariff guidelines. Despite these reforms, achieving a balance between cost recovery, equity, and demand management remains elusive. The challenge is particularly evident in Western Kenya—Bungoma, Busia, Kakamega, and Vihiga counties—where water utilities face ageing infrastructure, intermittent supply, low sanitation coverage, and widespread poverty. In such contexts, tariff structures function not only as revenue mechanisms but also as tools for influencing consumer behaviour, promoting conservation, and guiding investment. This study investigates the effects of different tariff structures on water and sanitation demand in Western Kenya, applying price elasticity and consumer choice theory. Using secondary data (2016–2023) from county water providers, WASREB reports, and the Kenya National Bureau of Statistics, the study employed a quantitative causal comparative and correlational design. Statistical analysis involved multiple regression and Pearson correlation, with controls for household income, rainfall variability, urban–rural location, and population density. Tariff models analyzed included Volumetric Pricing (uniform per cubic metre), Increasing Block Tariffs (IBT), and Flat-Rate Tariffs.Findings show that Volumetric Pricing exhibited the strongest negative price elasticity (-0.51, p = 0.01, R² = 0.47), demonstrating its effectiveness in promoting conservation and efficient use. IBT showed moderate but statistically insignificant elasticity (-0.44, p = 0.26), largely due to block thresholds being set too high for low- and middle-income households, thus failing to curb high consumption. Flat-Rate Tariffs displayed negligible elasticity (-0.07, p = 0.68), confirming their ineffectiveness in demand management. Sanitation demand, though partly bundled into water bills, was influenced more by infrastructure access, affordability perceptions, and cultural norms than by tariff structures. Policy implications suggest that consumption-based tariffs, particularly volumetric pricing, can simultaneously enhance resource sustainability and cost recovery if supported by complementary measures. These include expanding metering coverage, reducing non-revenue water, introducing targeted subsidies for low-income groups, and adopting tariff indexation to adjust gradually for inflation. The study recommends phased tariff reforms aligned with WASREB’s pro-poor guidelines, integrated into County Integrated Development Plans, and consistent with Kenya’s SDG 6 commitments on universal access to water and sanitation by 2030.Although strengthened by a multi-county dataset and robust econometric analysis, the study is limited by reliance on secondary data and the omission of informal water markets, which remain significant in peri-urban and rural areas. Future research should employ spatial econometric models to capture geographical disparities and examine the interaction between tariff policies, climate resilience, and household coping strategies.