Wide variation in water rates to consumers across Estonia
While the price of water in Tallinn is still below €2 per cubic meter (before VAT), it is several times higher in many other areas.
According to the Competition Authority (Konkurentsiamet), which regulates water service prices, there is in general a rise in price in regions with a lower population density.
Water companies submit to the authority their pricing proposals along with justifications for the pricing, and the authority then decides whether the calculations meet requirements.
Still, comparing the approved prices across different regions reveals considerable differences.
The price to private consumers, which covers the supply of drinking water and the collection and removal of wastewater and sewage, stands at €2.083 per cubic meter in Tartu (Tartu Veevärk) for instance, compared with €1.84 per cubic meter with Tallinna Vesi (prices excluding VAT).
Tallinna Vesi, a private sector firm, serves not only the capital but also the dormitory town of Saue and its municipality, and parts of Saku municipality.
However, there is a difference between regions even with the same supplier.
Tallinna Vesi's customers in Maardu, a town just to the east of Tallinn, have to pay more than twice as much for drinking water, at €3.87 per cubic meter, for instance.
In the Kroodi neighborhood of Maardu, the water supplier is OÜ Kroodi Vesi, where the service costs even more: €4.6 per cubic meter, plus VAT.
Aleksandr Timofejev, Tallinna Vesi CEO, told ERR that the Maardu area is unique since, while Tallinna Vesi is the service provider, it does not own the assets there.
He said: "Maardu, as a separate pricing area, is significantly influenced by the investments made in the area, plus its population density."
The differences in water service prices across Estonia are according to Timofejev mainly influenced by the operating costs the water company experiences, and the investments made.
He noted that, on average, the cost of water services accounts for nearly 1 percent of household net income in Estonia, while in Tallinn and Saue, it stands at less than 0.5 percent
"The price of water services for private customers in Tallinn and Saue is the most affordable per regional comparisons," Timofejev said.
Among the costlier areas in Estonia is Haljala Soojus, which charges customers €4.64 per cubic meter of drinking water, plus an extra subscription fee of €7.30 and VAT.
Kehtna Vee charges €4.56 per cubic meter, and Matsalu Veevärk charges €4.67, plus VAT.
In looking at water prices in other regions, they reveal generally higher levels than in Tallinn and Tartu, but vary significantly by area
For example, Narva Vesi charges €2.15 per cubic meter for water, compared with €4.11charged by Kuressaare Veevärk (Saaremaa).
Water companies in Võru, Pärnu, Viljandi and Türi charged rates between thes figures, from €2.92 to €3.631 – again all prices exclusive of VAT.
In Tapa, the local company charged €2.57 per cubic meter; for some companies as noted the price varies within a given area.
Price based on costs of specific service provider
Külli Haab, head of regulatory services at the Competition Authority, said that the price of water services for each firm is determined by the specific provider's costs and investments.
She said: "Justified costs directly depend on the specific characteristics of the water company's operating zone: The depth of the groundwater layer where water is extracted from; whether the water needs to be treated for drinking; and what the wastewater treatment requirements might be."
The water service price is calculated by dividing the justified costs incurred by the water firm for providing the service, including investment costs, by the volume of services provided.
According to Haab, population density or the scale effect, significantly influences the formation of the absolute value of water service prices.
"When the population denisty in the water utility's service area is higher, the lower the price of the public water supply and sewerage (ÜVK) service will be. Conversely, the sparser the population, the higher the ÜVK service price – infrastructure costs are distributed between consumers," Haab outlined.
Haab also stressed the significance of the timing and scale of investments made into ÜVK assets.
If a water utility has been managing assets which have been in use for a lengthy period of time, the service price is generally lower compared wit a utility that has made large-scale updates to its assets in the more recent past.
"At the same time, significant new investments made by by a water utility into the quality and reliability of a service make this as a rule are generally higher," Haab added.
Tallinna Vesi not ruling out fee hike in near future
As with most other things, the cost of water services has also risen in recent years. Tallinna Vesi last hiked its prices on July 1 of this year.
Aleksandr Timofejev of Tallinna Vesi said that the price of water services largely depends largely on the operating costs of the water utility, with the price of electricity also playing a significant part.
He said: "Tallinna Vesi owns Estonia's largest water and sewerage infrastructure, which, in addition to daily maintenance, requires a continuous investment."
"Over the past four years, Tallinna Vesi has invested nearly €100 million in upgrading its infrastructure. These investments are required to ensure high-quality drinking water, the continuity of water services, and a clean Baltic Sea," he said.
As to whether the price of water services is likely to rise further in the near future, Timofejev ansered that price changes are certainly possible, depending on changes in production and input operating costs and the extensive investment needs of the water infrastructure.
"The formulation of water prices is also influenced by the new public water supply and sewage law, which came into effect in the summer of 2023."
"This legislation requires water utilities to harmonize the water service prices for private and business customers, within three years," the CEO of Tallinna Vesi added.
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Editor: Andrew Whyte