Acceptance Analysis of PDAM Sleman’s Water Tariff, Based on Revenue and Willingness to Pay Projection

Abstract

In Sleman, the Regional Water Company (PDAM) provides clean water to the community and charges a tariff for each cubic meter of water sold to customers. According to the Minister of Home Affairs Regulation No. 71 of 2016 states, PDAM tariffs requiring an annual review in November. The most recent tariff was set by PDAM Sleman in 2016, therefore, a recalculation is required. In addition, there is a need to analyze the tariff acceptance from the service provider, and service recipient’s point of view. In this study, the calculation tariff method utilized a formula based on the Minister of Home Affairs Regulation No. 71 of 2016. Meanwhile, the acceptance analysis from profit point of view conducted by calculating the projection of water sales revenue, profit to earning assets ratio, and customer willingness to pay (WTP). Furthermore, revenue projections were obtained by multiplying tariffs with the water sold volume, while the WTP projection is obtained using the inflation method, based on the PDAM Sleman customers’ wTP, from the 2007’s research. PDAM Sleman tariffs based on calculations resulted in low tariffs of IDR3727.48, basic tariffs of IDR4659.36, and full rate of IDR9460.17. Based on the WTP analysis, the tariffs are feasible from the service recipient’s (PDAM customers) point of view, because this is affordable by customers, for the average water consumption. However, from the service provider’s (PDAM Sleman) point of view, the tariffs are not feasible a 0.31% profit ratio is much lower, compared to the 10% profit ratio. Therefore, tariff adjustments are required to increase profits. These strategies include determining tariffs based on consumption blocks alone, without breaking down based on customer group categories and adjusting the second and third consumption blocks’ rate.