Application of System Dynamics model in the determination of the unit cost of production of drinking water

Establishment of tariff structures and economic pricing regimes are contemporary issues in the water supply sector. The need to determine the economic price for water production has taken the centre stage in the face of dwindling world water resources. This paper reports the development of a System Dynamics (SD) model for the determination of the unit cost of domestic water production schemes in a developing economy. The dynamics and interconnectivities of the production factors of water production are considered. The model was applied to the University of Ibadan, Nigeria domestic water supply scheme for which extensive and historical data are available. The capability of SD Vensim software was used to examine some critical scenarios. The unit cost of production obtained using field data compares well with unit costs already established for some countries. The results of the scenarios investigation, confirm the model developed, can handle the various dynamics of water supply production and thus assist water utilities to determine appropriate tariffs to be charged on their consumers. Also, the unit rate of N107/m3 compare very well with the Lagos state water tariff of N100/m3.   Key words: domestic water supply, production factors, unit cost, scenario investigations.