Water crisis and companies: the tariff that doubled and 4 more consequences

A water crisis reaches a company long before the tap runs dry. In the 2014 and 2015 crisis in São Paulo, Sabesp, the state’s water utility, began charging a contingency tariff of 40% on top of the water tariff to those who consumed up to 20% above their own average and 100% to those who went beyond that, and the rule also applied to large customers with firm-demand contracts, mostly industries and businesses. More expensive water is only the first of five consequences.

In short:

• Dearer water: in 2015, Sabesp’s contingency tariff doubled the water tariff for those consuming more than 20% above their average.
• Less pressure in the network: pressure reduction and loss control accounted for 41% of the water saved in the Cantareira System, and those without storage feel it first.
• Own abstraction at risk: the law gives priority to human consumption, and Brazil’s water agency can temporarily change permit conditions in a declared scarcity.
• Dearer energy: in 2021, the water scarcity tariff flag raised the average tariff of regulated consumers by an estimated 6.78%.
• Rush for alternative sources: in 2014, 70% of Sabesp’s large contracted customers switched to another water source.

What does a water crisis change for a company?

It changes the price, the availability and the rules of water use, and then the price of energy. The 2014 and 2015 crisis in Greater São Paulo and the 2021 crisis in the Paraná basin left on record, in official documents, what happens to those who depend on water to operate:

Consequence	What happened	Who felt it most
Dearer water	Contingency tariff of 40% to 100% on the water tariff, from February 2015	Those consuming above their average for February 2013 to January 2014
Less water in the network	Pressure reduction in the pipes, stepped up from December 2014	Properties with no storage tank or a small one
Permits revised	Brazil’s water agency can temporarily change the conditions of permits on federal rivers	Industries and irrigators with their own abstraction
Dearer energy	Water scarcity tariff flag, from September 2021 to April 2022	Operations heavy on pumping, cooling and heating
Alternative sources in a hurry	Wells, water trucks and reuse water contracted in the middle of the crisis	Those with no plan and no backup source

The causes and timeline of both crises are in water crisis in Brazil: what caused 2014 and 2021. Here, the focus is what each one cost companies.

1. Why does water get more expensive?

First came the incentive, then the charge. In February 2014, Sabesp launched its Bonus Programme, with a discount on the bill for those who cut consumption against their own average: at first, a 30% discount for those who saved at least 20%, and, from late 2014, also 10% and 20% bands. A year later, as some customers stayed above their average, the utility created the contingency tariff, approved in January 2015 and charged from the February bills:

Monthly consumption against the average	Effect on the bill
10% to 15% below	10% discount (bonus)
15% to 20% below	20% discount (bonus)
20% or more below	30% discount (bonus)
Up to 20% above	40% more on the water tariff
More than 20% above	100% more on the water tariff

In March 2015, 72% of customers in the Metropolitan Region cut consumption by more than 10% and earned the bonus, and 11% paid the contingency tariff. For a company, the lesson is direct: in a crisis, the same consumption can cost double, and those who already consumed little have less room to cut, while those who wasted pay more for the waste.

2. Why does pressure drop and water run short at certain hours?

The measure that saved the most water in the 2014 crisis was not the bonus but pressure reduction. According to Sabesp, withdrawals from the Cantareira fell 56% between February 2014 and March 2015, and 41% of that saving came from pressure reduction and loss control, against 20% from the Bonus Programme. The utility calculated that rationing would have needed two days with water and four without just to match the reduction already achieved in 2014.

Lower pressure in the network means less water reaching high points and the ends of the network at certain times. So much so that Sabesp began handing out water tanks to low-income families. In a company, those with a small tank, or none, run out of water precisely at the operation’s peak hour. The question to answer before the crisis is: how many hours can the operation run on the tank alone?

3. Can a company’s own abstraction be restricted?

Much of industry does not depend on the utility. In the São Paulo Macrometropolis, industry accounted for 31% of the raw water abstracted and only 3% of the treated water produced by Sabesp, according to the utility’s report on the crisis, with data from the region’s water resources plan. In other words, most of the water industry uses there does not go through the utility: it comes from its own abstraction, authorised by a permit.

And a permit is no guarantee in scarcity. Law No. 9,433/1997 states that, in scarcity situations, priority goes to human consumption and watering animals. In 2021, when it declared a critical scarcity situation in the Paraná Hydrographic Region, Brazil’s National Water and Sanitation Agency (ANA) provided, in Article 2 of Resolution No. 77, that it could set transitional conditions for operating reservoirs, including temporarily changing the conditions of water use permits. Anyone abstracting from a river or a well needs a plan for the day the authorised volume shrinks.

4. Why does the electricity bill rise too?

When hydropower reservoirs drop, the country switches on thermal plants, which are more expensive. In 2021, the National Electric Energy Agency introduced the water scarcity tariff flag, scheduled to run from September 2021 to April 2022, with an estimated 6.78% increase in the average tariff for regulated consumers, according to the Ministry of Mines and Energy.

Water and energy go together inside a company: booster pumps, heaters, boilers and cooling towers use both. Cutting the use of hot and pumped water also cuts the energy spent on it, which counts double when both tariffs rise at the same time.

5. Where do you find water when the network cannot cope?

In the middle of a crisis, those who depend only on the utility need another source, and fast. Sabesp waived the minimum consumption in firm-demand contracts and encouraged large customers to look for other sources, and 70% of its contracted customers switched to an alternative source in 2014. In the same year, reuse water supplied by Greater São Paulo’s sewage treatment plants totalled 13.7 million cubic metres, with a new line for industries in the north of the city.

Those who already had reuse, rainwater harvesting or a permitted well got through the crisis with more slack. Those who had to contract everything in a hurry paid the price of buying in an emergency. The step by step for setting up reuse is in water reuse in industry.

ANA also pointed, in its 2021 resolution, to impacts on navigation, leisure and tourism in the Paraná basin. For those who depend on waterways, tourism or agricultural inputs, the crisis also arrives through the supply chain.

How do you build a water contingency plan?

In six steps, taken before the crisis. In the 2014 and 2015 crisis, Sabesp’s teams visited public bodies to advise on internal contingency measures: adapting storage tanks, finding and fixing internal leaks, alternative sources and rational use. The same roadmap works for any company:

1. Know your consumption. Measure by area and by hour, with sub-metering where it makes sense. Without a baseline, there is no target and no proof of reduction.
2. Calculate your autonomy. Divide the usable volume of the tanks by the operation’s hourly consumption. A 60 m³ tank in an operation that uses 5 m³ an hour gives 12 hours of autonomy.
3. Eliminate leaks. An invisible leak eats into reserves and into the average that sets bonuses and surcharges. See how to find them in invisible leaks.
4. Secure a backup source. Reuse, rainwater harvesting, a permitted well or a prior contract for supply by water truck.
5. Set priorities. List what stops first and what cannot stop: production, kitchen, toilets, air conditioning.
6. Monitor in real time. Tank levels, pump failures and abnormal consumption need to trigger an alert immediately, not on next month’s bill.

T&D’s TDRR covers step 6: it monitors tanks, cisterns, pumps and consumption hour by hour and alerts by app, SMS, email and WhatsApp when something leaves the normal pattern. Monitoring alone delivers an average 10% reduction in consumption, according to T&D’s data. To cut baseline consumption before the next drought, SEA 360º handles implementation, without building works, with a baseline under the IPMVP protocol, efficiency technology at points of use, electronic leak detection and repairs, followed by ongoing management. The ceiling observed in the full programme is a 70% reduction in consumption.

Frequently asked questions

What are the consequences of a water crisis for companies?

The main ones are five: dearer water, with contingency tariffs; lower pressure and water shortages at certain hours; restrictions on own abstraction through permit revisions; dearer energy, with the water scarcity tariff flag; and the rush for alternative sources in the middle of the crisis.

What was Sabesp’s contingency tariff?

A surcharge created in January 2015 for those who consumed above their average for February 2013 to January 2014: 40% on the water tariff for those exceeding the average by up to 20% and 100% for those exceeding it by more than 20%. It also applied to customers with firm-demand contracts, mostly industries and businesses.

Is a company with its own well protected from a water crisis?

Not entirely. In scarcity, the law gives priority to human consumption and watering animals, and the water authority can temporarily change permit conditions, as Brazil’s water agency provided in Resolution No. 77 of 2021 for the Paraná basin.

What is a water contingency plan?

It is the roadmap a company prepares before a crisis to keep operating with less water: measuring consumption, calculating tank autonomy, eliminating leaks, a backup source, use priorities and monitoring with real-time alerts.

Does a water crisis raise the electricity bill?

It does. With low reservoirs, the country switches on thermal plants, which are more expensive. In 2021, the water scarcity flag had an estimated 6.78% increase in the average tariff for regulated consumers, according to the Ministry of Mines and Energy.

Sources

• Sabesp. Crise Hídrica, Estratégia e Soluções da Sabesp para a Região Metropolitana de São Paulo (CHESS), April 2015, in Portuguese: Bonus Programme, contingency tariff, pressure reduction, firm demand, reuse water and raw water use in the Macrometropolis
• Exame, “Sabesp constata redução de consumo e amplia bônus”, 30/04/2014, in Portuguese: 30% discount for those who cut consumption by at least 20%
• ANA, Resolution No. 77 of 1 June 2021, in Portuguese: critical scarcity situation in the Paraná Hydrographic Region and temporary changes to permits
• Ministry of Mines and Energy, “CREG orders a Voluntary Demand Response Programme for captive consumers and the water scarcity tariff flag”, 31/08/2021, in Portuguese: water scarcity flag and estimated increase in the average tariff
• Law No. 9,433 of 8 January 1997, Article 1, in Portuguese: priority use of water in scarcity situations
• T&D TDRR and SEA 360º