Development of linear programming models of water price compliant to the regulation of Ministry of Home Affairs, Indonesia

The water tariff and price in Medan, North Sumatera was last reviewed in 2017. The tariff, which is the structure mechanism for determining the water price, must be reviewed once every five years as stipulated in the Regulation of the Ministry of Home Affairs, Indonesia, No. 23, 2006. Currently, the water tariff and price based on the that regulation without any secondary affirmation. Futhermore, the inaccurate water tariff and price that currently being implemented may lead to suboptimal revenue and profit thus affected the business financially. In Medan, the Perusahaan Daerah Air Minum (PDAM) Tirtanadi, is the water operator responsibles for treatment, supplies and distributes the clean and treated water thus it has obligation to charge the customers the price based on the stipulated water regulation. Therefore, the aim of this research is to develop a comprehensive linear programming (LP) model for optimizing the water pricing in Medan within the regulatory framework of the Ministry of Home Affairs, Indonesia. This study is motivated by the pressing need to address the complex interplay between economic efficiency and social equity in water resource management. With Medan's diverse geographical and socio-economic landscape, achieving a balanced water pricing model that meets regulatory compliance while ensuring equitable access, economic viability, and sustainable resource use represents a significant challenge. The research employs a robust LP approach to model water pricing strategies, incorporating various constraints such as production cost, social cost, subsidy, revenue and profit that complied to the water regulatory guidelines. By analysing different water pricing based on customers group and block, this study aims to identify optimal water pricing byrecognising the current error in tariff structure and ensure the potential of new water price in Medan. Key contributions of this research include the development of a novel LP framework that integrates environmental, economic, and social considerations into water pricing decisions. The study also provides empirical insights into the effectiveness of different water pricing mechanisms, offering valuable policy recommendations for water resource management in Medan and similar contexts. Through a rigorous analysis of water pricing strategies, this research contributes to the broader field of water resource management by advancing understanding of how LP can be effectively applied to resolve complex decision-making problems in the context of regulatory compliance and sustainable development goals. This research not only addresses a critical gap in the literature on water pricing and management but also offers practical tools for policymakers, water utilities, and stakeholders involved in the governance of water resources. By proposing a scalable and adaptable LP model, the study underscores the potential for analytical approaches to inform and improve water pricing policies, ultimately contributing to the sustainable management of vital water resources in Medan.