Abstract
ABSTRACTIncreasing population and urbanization necessitate very large investments in municipal water supply. These investments could be more efficiently deployed if the impact of policy variables such as marginal pricing, metering, by‐laws on lawn watering and plumbing fixtures, and higher summer charges were known. The paper in particular advocates the replacement of the present declining block rate by an increasing block rate. In order to know the impact of policy variables, a multiple regression model is built; the fitted model is tested against some data not included in calibrating the model. Next the impact of selected policy variables on the target variable (residential water demand during summer) is worked out for a new urban community of 200,000 people. The investment requirements may decrease appreciably as a result of a price increase when marginal (or commodity) charges are low but the impact of price changes when commodity charges are already high is less evident and non‐price policy variables may be more effective in maintaining high quality water and also satisfying the constraint of limited budgets for municipal services.
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