Water rate to manage residential water demand with seasonality: peak-load pricing and increasing block rates approach

Abstract

A strong seasonal demand for water occurs in many tourist areas, which might exacerbate the water shortage problems. Water pricing is a key instrument for water use management; therefore, the objective of this work was to design a variable water rate to examine the seasonal water demand in water-scarce regions. The proposed water rate combines the peak-load pricing (PLP) and increasing block rate (IBR) strategies. PLP results in full cost recovery of urban water services; however, IBRs penalise excessive water consumption. Moreover, the proposed water rate structure allocates the costs among users depending on their consumption. Subsequently, an empirical application was developed for a Spanish tourist town illustrating the usefulness of the water rate proposed. In conclusion, the combination of the PLP and IBR approaches is a useful water-pricing strategy for increasing the sustainability of the urban water supply under the conditions of seasonal water demand and water shortage.