Water rates. You’ve probably never given them much thought, but the truth is that they affect you and your business more than you think.
The water sector is a massive part of the UK economy and represents 2 percent of Britain’s GDP. It may surprise you that it provides over 300,000 jobs demonstrating how vital it is to our daily lives.
The water industry has changed significantly over the last few years as more people have realized the importance of having access to clean water and how much it costs to produce that clean water.
But what happens when water rates increase? How does it affect the economy? Want to learn more read further below.
The Water Supply Chain
The water supply chain is a complex and interdependent system of organizations, activities, processes, and people.
The supply chain begins with groundwater extraction from a well or borehole. Then process it at a treatment site before being pumped into your premises through main pipes or tanks.
It’s then stored in cisterns until needed. These cisterns are usually located under buildings or sometimes within themselves, such as in shops and offices.
The water utility provides the raw material the whole supply chain needs – water. Water companies are responsible for providing customers with high-quality drinking water at affordable prices.
Water companies must manage costs carefully to keep their prices down while maintaining product quality.
They are legally obliged to provide high-quality water at an affordable price, but they don’t have to sell it at cost.
They make their profits by charging customers more than they pay for the water itself, which is why you’ll often find that your bill goes up when there’s been a change in rateable value – this is the price your local council sets for properties based on their size and location.
In the UK, you pay for it in two ways: through your council tax and via business rates. The latter is a tax on commercial properties based on their rental value.
So what does this mean for you as a business owner? Well, the cost of your supply will vary depending on the size and location of your premises.
How Do They Set Business Water Rates
Businesses pay for water in different ways, including volumetric and fixed charges. They base volumetric charges on use and fixed costs on a flat rate.
The price of both charges depends on the type of business and its location.
The cost also varies depending on other factors, such as whether the company uses groundwater or surface water, has its treatment facilities, or uses those provided by a public utility provider.
Businesses typically negotiate the price they pay for their water with their local utility provider (LP) or private water company (PWC).
In some cases, however, this negotiation process can be time-consuming and difficult because some companies may be unwilling to negotiate terms.
In contrast, others may have limited bargaining power due to their size or lack of leverage when negotiating prices with LPs/PWCs.
To help businesses avoid these problems and make negotiations more efficient, many states require utilities to set their rates according to a formula designed to ensure fair pricing across all customers regardless of size or location.
Local authorities usually determine the cost of water, and they set the price based on some factors. These include:
- The location of your business
- Your business sector (e.g., industrial, commercial or domestic)
For example, if you run a factory that uses large quantities, you’ll be charged more than if you run a small shop selling ice cream cones.
If your business is in an area with little rainfall, they will charge you more than one with plenty of rain.
Fluctuations in Business Water Rates
The rates in the UK are not static. Instead, they fluctuate based on several factors, which can significantly impact your business bill.
1. Water Use
The most significant factor that affects how much you pay for your business water is how much you use. If you use more, then you will have to pay more.
This is because the cost of supplying and treating water has increased over time, so companies must reduce their consumption as much as possible.
2. Water Supply
This is another factor that affects the cost of your business water rates.
The cost of supplying and treating water varies depending on where you live and if there are any supply disruptions.
If there are interruptions due to high demand or leaks, then this could lead to higher costs of supplying it until these issues are resolved.
In addition, there may also be an increase in demand due to population growth or climate change affecting local areas, such as floods or droughts affecting certain regions at different times of year (e.g., winter).
3. Business Taxes
In addition to paying for the cost of supplying and treating it, businesses also need to pay tax on their usage, varying from £0.5 per cubic meter to £5 per cubic meter.
Businesses that use more will need to pay a higher bill, which they may pass on to the customer through increased prices for goods or services.
4. Treatment Costs Water Treatment
This is an expensive process, so companies will need to charge more for their products.
They can do this either by increasing the price of the goods themselves. Or by passing on the cost of water treatment to consumers through higher prices on bills.
5. Infrastructure Costs
Companies must also pay for their infrastructure, including pipes and other systems that bring water from treatment plants to businesses.
Some companies may pass this cost on to customers in their pricing; however, many will try to absorb these expenses themselves.
Water rates have a significant impact on the economy. The cost of water has a direct effect on the cost of doing business, which affects both businesses and consumers alike.
Several factors can affect how much a company charges for its product – from new regulations affecting its production processes to changing consumer habits which affect demand for its products or services.
Companies must thoroughly understand their operations to manage and reduce water consumption.
It also means that policymakers have to be more active in creating better regulations for our water utilities so that we can squeeze more efficiency out of our present system.