Shanghai plans to increase water fees in the second half of this year to pay for water infrastructure construction.

The new prices are also expected to encourage water conservation and reduce sewage discharge.

Before the price rises come into effect a public hearing will be organized for water officials to explain the plan and try to win support from consumer representatives. The preliminary plan calls for an average increase of around 1 yuan (US$12 cents) per cubic meter, probably the biggest rise in recent years. Both residents and businesses will be affected, sources said.

The date of the hearing is not yet known.

The expected rate change is part of the city's efforts to reform its water pricing system, which will introduce volumetric pricing for residential users.

Volumetric pricing is a tiered pricing system used in Tokyo and 12 Chinese cities including Nanjing and Shenzhen. It charges heavy users of water higher fees than light users, encouraging conservation.

According to the city government's plan, the new pricing system will impose three different rates on a family's annual consumption -- below 180 cubic meters, between 180 and 300 cubic meters and above 300.

Around 80 percent of homes use less than 180 cubic meters a month, according to the Shanghai Water Authority.

For heavy industrial users, such as beverage firms, car-wash companies and sauna houses, the water price could be doubled, sources said.

Several tap-water companies contacted by Shanghai Daily yesterday confirmed that they had been informed of the price rise. However, they said they did not think their businesses would benefit a lot from the price increase.

An official from the Shanghai Waterworks Shibei Co, the biggest water supplier in downtown by user number, believed that most of the money raised in the price hike would go towards financing construction of the city's third water source -- Qingcaosha area at the mouth of the Yangtze River - rather than cover the increasing cost of tap-water treatment.

Li Huizhong, a Fudan University professor, said the volumetric water rate reflects a transition from regulation of supply to regulation of demand by the government on some rare resources, during a seminar about a month ago organized by the city's pricing authority, the Shanghai Development and Reform Commission.

(Shanghai Daily June 23, 2006)