Modelling of Water Supply Costs

Water supply tariffs' setting is a labour intensive regulatory procedure; currently number of informative and procedural shortages and problems exist. The aim of the current research is improvement of methodology for determination of the substantiated costs for provision of water services. A working hypothesis was advanced to modernize the methodology: the specific costs (€/m3) required for the provision of water services in a specific region is a variable multi-parameter function of key performance indicators. There is preferred a benchmark modelling procedure, which is based on the factual cases (declared indicators of water utilities) and synthesis of the general regularity. The model is developed using two independent modelling procedures. The correlation of the synthesized model with declared specific costs of Latvian water utilities is strong (0.88). The correlation between the respective modelled indications exceeds 0.95; hence, the trustworthiness in the results is high. The prospect is the determination of the price ceilings and then an operative tariff setting, thus significantly improving the methodology.