Water Pricing Policies Research Articles

The Effects of Pricing Policies on the Economics of Water Storage

Oceanside, Calif., learned that water pricing policies can have an important and perhaps surprising effect in determining the need for and cost effectiveness of a reservoir project.

AN OPTIMIZATION MODEL FOR EFFICIENT MANAGEMENT OF URBAN WATER RESOURCES1

ABSTRACT: A mathematical programming model is proposed to determine economically efficient urban water resource allocation and pricing policy by maximizing the sum of the consumer and producer surplus. The optimization of this nonlinear problem is accomplished by the use of linear programming algorithm. The feasibility of using recycled water for municipal purposes is examined in a planning context. The impact of higher water quality discharge standards on pricing and allocation of water is analyzed and the attractiveness of water reuse option is demonstrated.

SEWER AND WATER PRICING AND INVESTMENT POLICIES TO IMPLEMENT URBAN GROWTH POLICY1

ABSTRACT. The article proposes the use of certain water and sewer extension pricing and investment policies. Such policies would complement an urban growth policy designed to guide the location and timing of growth in urbanizing areas. Proposed pricing policies are based upon marginal cost principles. The types of pricing policies discussed include benefit assessments, connection fees, and user charges. Proposed investment policies deal with the division of financing responsiblities between the public and private sectors. Discussion of each proposal explains the economic influence of the proposed policies upon key decision makers in the land development process. The application of proposed pricing and investment policies in the case study communities is mixed. In Knoxville, Tennessee, where pricing and investment policies reflect the proposed policies, no urban growth policy exists. In Lexington, Kentucky, mixed pricing and investment policies do not complement what is a relatively good urban growth policy. In Greensboro, North Carolina, reasonably effective pricing and investment policies complement other policies which provide some guidance to the urban growth pattern. It is hoped that the article will increase the recognition of utility pricing and investment policies as one means of implementing urban growth policy.

FLEXIBLE PRICING IN WATER SUPPLY PLANNING–FOR FLEXIBLE ENGINEERS1

ABSTRACT. Preliminary results from a digital simulation model designed to test time‐varying water pricing policies are presented. Stochastic inflows feeding a water supply reservoir are assumed for a hypothetical community with defined demand functions. Prices are allowed to vary as a function of reservoir level, generally rising as reservoir levels fall. Increasing, decreasing and constant rates are tested. It is concluded that varying the price to reflect the increased value of scarce supplies can greatly reduce the risk of water supply shortages. It is also concluded that varying incremental (conservational) pricing policies not only reduces the risk of shortages, but also lowers the average price to the community while rewarding the low consumption user with lower average rates.

THE EFFECT OF PRICE ON LONG RUN WATER SUPPLY BENEFITS AND COSTS1

ABSTRACT The long‐term effects of presently used and alternatively proposed water pricing policies were studied using some tools of operations research and economics. A discrete deterministic dynamic programming model was structured and operated to determine the optimal water supply capacity expansion paths for a hypothetical residential community with a given water pricing policy. The objective of the model was the maximization of future discounted consumers'surpluses plus producer's revenues net of the long‐run cost of supply. State variables were the size of system capacity in MGD and stage variables were the times of feasible capacity increase in years. Demand curves, population sizes, and growth rates for various economic sectors of the community were assumed known, as well as short‐run production and capital construction costs. Several policies, including constant unit rates, decreasing or increasing block rates and summer differential rates were tested. It was concluded that price plays a major role in the short‐run allocation and long‐run planning and conservation of water supplies. Conservational pricing policies were advocated as means of lowering the long‐run cost of water, using the water price‐demand function as a planning tool. Further research in these areas was recommended.

The California Water Project: Is Public Decision Making Becoming More Efficient?

It is argued that the use of an incorrect discount rate, the application of procedures that overestimate net benefits, and the failure to charge a scarcity price for water are inappropriate arguments against the value of the California State Water Project. However, the existence of alternative public investment opportunities and technological progress in desalination are two factors to which the State may have given inadequate attention. As a consequence, although the State's water pricing policy encourages more efficient resource allocation than that of the federal government, there are plausible grounds for believing that further improvement is possible.

Price Policy and Land Value Taxation For Urban Water Supplies*

WITHIN THE NEXT TEN TO TWENTY-FIVE YEARS urban water supply will become the focus of many important and controversial problems. These emerging policy issues are likely to develop on three fronts: technology, economics, and political decision-making. All of this will represent a rather sharp contrast with the present status of urban water policy which has been relatively neglected by economists, public officials, and city planners. In the past there were few pressing questions of technology, economics, or of political judgment to warrant more than cursory attention to municipal water supply compared to other functional questions on the urban policy agenda. If I am correct, this rather calm and placid appearance will soon be subject to some rather radical changes. Before going further I should emphasize that urban water supply, in itself, is not likely to become the most important urban problem. Even though urban water problems will become much more important than they have been in the past, the scale of investment needed to satisfy growing urban demands will continue to be dwarfed by the funds devoted to urban transport construction and to urban renewal. Furthermore, the ever-present problems of urban land-use planning will always be more complex than those of urban water planning. However, when questions of urban water supply are viewed in a larger context, as they should be, it is evident that the decisions made in regard to water supply can condition the direction and the pattern of city growth. There are many close ties between planning for future city growth and the provision of new water facilities. Water investment, water taxation, and water pricing policies, for example, may exhibit a strong decentralization bias and thus influence the demands for land and for transportation facilities at city perimeters and thereby offset, at least in

Milliman on Urban Water Price and Tax Policy*

Milliman on Urban Water Price and Tax Policy*