International Journal of Economics and Financial Research ISSN(e): 2411-9407, ISSN(p): 2413-8533 Vol. 7, Issue. 3, pp: 132-142, 2021 URL: https://arpgweb.com/journal/journal/5 DOI: https://doi.org/10.32861/ijefr.73.132.142 Academic Research Publishing Group 132 Original Research Open Access Implications of Water Tariff Structures on Water Demand in Santa Cruz Island (Galapagos Archipelago) Maria F. Reyes Environmental Engineering and Water Technology Department, IHE Delft (Institute for Water Education), Netherlands Email: mf.reyesperez@gmail.com Article History Received: 2 July, 2021 Revised: 25 August, 2021 Accepted: 13 September, 2021 Published: 18 September, 2021 Copyright © 2021 ARPG & Author This work is licensed under the Creative Commons Attribution International CC BY: Creative Commons Attribution License 4.0 Abstract The island of Santa Cruz, located in the Galápagos Archipelago has experienced a significant increase in tourism with consequent growth of the local population over the past two decades. The rapid increase in the number of hotels and restaurants raised pressure on the water demand needed to satisfy the customers' needs. The municipality of Santa Cruz has not been capable of coping with current expansion rates in order to provide good quality water services. Financial constraints, limited personnel, and tariff structures are the main reasons that restrict the capacity of the Department of Potable Water and Sanitation (DPWS) to manage the water supply system. There are two main settlements on the island are Puerto Ayora and its suburb, Bellavista, with a total population of approximately 14,500 and independent water supply systems. Puerto Ayora has a fixed-priced tariff per month, for categories established by the municipality. On the other hand, Bellavista has a metered system, with fixed consumer costs Yet, approximately 32% of water meters are faulty. Consequently, water demand in these two settlements varies significantly, which is likely influenced by the difference in tariff structures. This manuscript assesses the difference in tariffs between the two settlements. Furthermore, the impacts on revenues due to faulty meters (Bellavista) and fixed tariffs (Puerto Ayora) are quantified. In addition, several scenarios have been developed and analyzed in order to examine the benefits. Finally, the information regarding overdue bills and willingness to pay by the different categories of users has been examined. Results show that the revenues from water supply vary extensively between the two settlements. Due to the fixed tariffs in Puerto Ayora, the estimated cost per cubic meter of water varies depending on the specific category and estimated quantities of water used. In the case of Bellavista, water meters should be managed better and have regular maintenance. The high percentage of faulty meters gives an extra deficit to the municipality. Keywords: Water tariff; Water demand: Water supply; Galápagos Islands; Tropical islands. 1. Introduction The exponential growth of local population and consequent tourist visitors (Bailey and Buckley, 2005) over the last two decades on the Galápagos Islands has caused several impacts. One of the most significant ones is the dramatic increase on water demand, especially on the island of Santa Cruz, which holds 60% of the total population of the archipelago (INEC, 2010). Even though the municipal water supply system came into operation in the 1980's with the objective of providing of proper water supply, it has failed to optimally serve local population in terms on quantity and quality. The municipal water supply system has not been able to cope with current expansion rates in Santa Cruz island. The main issues with this water supply system is that it is unreliable and intermittent. Moreover, the supplied water is not apt for human consumption due to high chloride levels (Banerjee et al., 2010) from brackish water sources and high levels of feacal coliforms (Boland and Whittington, 1998), due to the proximity of septic tanks to water sources. In addition, the shortage of water has obliged the local population to seek for alternative sources like bottled-desalinated water for drinking purposes, buying of brackish-water from trucks and rainwater harvesting. Due to the intermittency of the service, local population has also resourced to different types of storages in form of elevated tanks and/or cisterns. The municipality of Santa Cruz is in charge of the two separate water supply networks for each of the main urban settlements on the island: Puerto Ayora and Bellavista. The water tariff structures vary significantly among the settlements, for instance, Puerto Ayora has a fixed-tariff per month due to the absence of water meters installed on individual premises, while Bellavista has a consumption-based tariff based on water meter readings. Financial constraints, limited personnel, under-pricing of water, among other reasons, have restricted the capacity of the Department of Potable Water and Sanitation (DPWS) to ameliorate the water supply service. Moreover, the current