Floods and Water Service Disruptions: Eliciting Willingness-to-Pay for Public Utility Pricing and Infrastructure Decisions

Abstract

Devastating floods and ongoing droughts throughout the world highlight the infrastructure and management challenges facing water and wastewater utilities. While increasing variability in climate has been identified as the immediate culprit, the severity of events has been exacerbated by years of underinvestment in infrastructure improvements due to inadequate pricing of services. The American Water Works Association (2015) identifies a crucial step for decision-makers: identify clearly communities’ priorities with respect to water and wastewater management, both of which provide public or community-level goods and services. Using data from two separate choice experiments, collected in the same survey of Canadian households, the current paper estimates household willingness-to-pay (WTP) to reduce the likelihood of flood events and water service disruptions. Results from both choice experiments show a strong preference for policy scenarios that reduce these risks, although there is a substantial amount of heterogeneity. People living in the Prairie region, rural residents, and people living in areas with higher home values have a higher WTP. Although the results lend support to public infrastructure programs for addressing flood and water disruption risks, the degree to which these are preferred to private action is not clear.