Glossary

Term

Definition

Ability to pay

A measure of whether individuals or communities are able to pay for services, given levels of unemployment, other indicators of poverty, and social capital. Also see Willingness to pay.

Cost of Operations

Generally, the costs of daily operations. Includes employment costs, cost of materials, power costs, and any costs of hired or contracted services.

Capital Costs

Those costs necessary to ensure that the system's assets (e.g., an aquifer, hand pump, distribution mains, pumping stations, etc.) achieve continued quality and continuity of service in the present and the future, represented as the costs of replacing those assets in a given year (for above-ground, or short-term assets), and using other accounting provisions (including historic cost and depreciation methods) for longer-term assets, such as aquifers or dams.

Cost of Servicing Capital

The minimal return that providers of capital (governments, IFIs, other donors and lenders) require for a water project or programme in order to feasibly provide funding, given the level of risk.

Cross Subsidy

A mechanism whereby one category of consumers subsidizes another category of users - can be either industrial to residential; wealthy to poor - within a network. Cross subsidies can also be used to connect new users by charging a surplus to existing customers.

Decentralization

An institutional and financial arrangement where power is distributed from a central authority to regional and local authorities.

Demand-responsive approach

A development process whereby communities are valued as consumers, and have an opportunity to express demand for systems and services, and determine specific components (technical, institutional, financial) for these.

Depreciation

The reduction of the value of a capital good (asset) due, for instance, to use over time or technological obsolescence), expressed as part of financial cost recovery.

Direct Subsidy

Subsidy process where a government directly pays a portion of poorer consumers' water bills.

Economic cost recovery

An economic cost recovery perspective considers the financial costs of supplying water in addition to the opportunity and environmental costs to society of ensuring the supply and the broader water resources environment that might not be accounted for as part of cash flow.

Environmental costs

Costs related with the impact on the environment of providing a water supply. For instance if pollution of the water source has an impact in public health or in the ecosystem.

Financial cost recovery

Considers the financial costs of a system or service in an isolated fashion, such as operations and management (O&M) costs, capital costs, investing for future growth and rehabilitation, and perhaps some level of profit.

Opportunity Cost

The value of a good (or service, investment, or policy) that is forgone by choosing an alternative action. For instance the fact that by using water for some purposes may deprive other users of water. The same applies to the time saved by women collecting water which can be used for productive or other uses.

Marginal Cost

The extra total cost of providing an additional unit of water

Social Capital

A measurement of the norms and networks that enable collective action within communities

Willingness to pay

An expression of demand for a service. Some methods are used to determine willingness to pay: (1) Actual payment habit studies; (2) Initial contribution to investment; (3) Actual behaviour studies.