Policy Note: A Universal Equity–Efficiency Model for Pricing Water

Abstract

Drawing on theoretical, practical, and normative rationales, the analysis presented here calls for revisiting the prevailing water service paradigm, and the values and frames it reflects. As is increasingly apparent, current pricing policies may not be sufficiently responsive, pragmatic, or durable, particularly in reconciling competing objectives often cast as the equity–efficiency conundrum. Water is a social good that confers both private and public benefits. The proposed universal (all-inclusive) pricing model envisions five concurrent elements: recognize public functionality in cost allocation (scope economies), calibrate a minimum bill to property assessment (capacity value), provide an essential-use allowance for all households (public health), design cost-based rates for variable water usage (resource management), and prohibit disconnection and deploy service limiters instead (water security). The model advances meaningful structural progress toward social equity while comporting with generally accepted principles to fairly allocate costs and send economic price signals where they make sense.