CONSERVATIONAL WATER PRICING FOR INCREASED WATER SUPPLY BENEFITS1

ABSTRACT: A study was undertaken to see if benefits from water supply could be increased by utilizing price-usage information in reservoir design studies. Three pricing policies were examined. The first policy assumed no price-use relationship, and quantity demanded was based on existing community usage with a low water rate. The price of water was set to recover system costs. A price-use relationship was assumed in the second policy and the water rate was constant. The price of water was determined from the associated system which provided maximum expected net benefits. The third policy assumed the price-use relationship and the price charged for water during each billing period was a non-linear function of storage which increased as the amount of water in storage at the beginning of the period decreased. It was found that the use of the conservation pricing policies substantially reduced storage requirements while providing demonstrable net benefits to the community and a large average supply. The conservation pricing policies substantially lowered the average price paid for water. The effect of uncertainty in consumer response to changes in price was studied by using a probabilistic price-use relationship. This uncertainty did not significantly reduce the effectiveness of the conservation policy. It was concluded that demand management by the use of a proper pricing policy could significantly increase net water supply benefits to a community.     

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.     

PRICING IRRIGATION WATER IN DEVELOPING COUNTRIES1

ABSTRACT Alternative combinations of water pricing and regulations are possible in allocating irrigation water. The best combination will depend on the value of water, ability to control deliveries, desire to subsidize agriculture, ownership traditions, crops grown, return flows, drainage problems, staff training, ability to collect fees, the number of farmers involved, etc. Marginal cost pricing is just one possible alternative and it is more a way of thinking about prices rather than a set system. The possibilities for achieving an equitable and efficient distribution of water are improved if some form of marginal cost pricing is included in the system of water charges.     

EFFICIENCY IN THE USE OF WATER FOR IRRIGATION: THE ROLE OF PRICES AND REGULATIONS

Efficiency in the use of water for irrigation is normally defined in a physical sense - engineering and agronomic; and it is often assumed that higher efficiency is desirable. However, in an economic sense, there is an optimum range in the level of physical efficiency. Normally it can be said that as water prices increase, it becomes more rational to increase physical efficiency by selecting and adopting improved methods of controlling, measuring and applying water, and to design systems of pricing and regulations that will promote optimal allocation and efficient use. However, the value of water is often extremely low, in which case there may be little economic incentive to improve physical efficiency unless forced by physical factors that affect production and productivity such as soil characteristics, waterlogging or nutrient leaching.
The combination of regulations and prices that are used to allocate irrigation water reflect the conflicting goals of redistribution of income in favor of agriculture and needs to encourage efficient use of water. Regulations and pricing systems also depend on the value of water, the dependability of supplies, systems of delivery and the extent to which flows can be regulated.
Using examples and case studies, this paper discusses physical and economic efficiencies and their interrelationships. It emphasizes the role of pricing and regulations and provides general guidelines.     

Water resource pricing: Policy options

This paper critically examines pricing policy options for water resources and attempts to derive an operationally feasible and socially desirable pricing structure for this important resource. Marginal cost pricing options are studied under different economic and resource conditions, such as inflation, constrained water resources and price distortions in an economy. Options such as pricing of water at its ‘real’ resource value, ‘social’ pricing, and pricing to reflect intangible benefits are also examined.     

WATER CONSERVATION IN CASABLANCA,MOROCCO1

ABSTRACT: This study examines water consumption characteristics in Casablanca and analyzes approaches for sustainable water demand management. Research procedures involve the development and estimation of water demand models for the residential/commercial, industrial, and institutional sectors; forecasts of water demand to 2010; and simulation of the effects of a complex of water conservation methods on the forecasted demands. The results indicate that residential/commercial water demand is weakly responsive to price changes (elasticity =?0.448) while institutional water demand is slightly more responsive (elasticity =?0.648). The conservation approaches used in the simulations included public education, plumbing code revisions to require use of water conservation devices, leak detection and repair, pricing policy, metering, and pressure reduction. The results indicate that considerable saving in water use can be attained through a comprehensive water demand management program.     

THE IMPACT OF POLICY VARIABLES ON RESIDENTIAL WATER DEMAND AND RELATED INVESTMENT REQUIREMENTS1

Increasing 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.     

EFFECTIVE WATER PRICING1

ABSTRACT: When the goal of water pricing is elevated from mere cost recovery to deriving the greatest value from scarce water and associated nonwater resources, conventional rate regimes are found to be deficient. To address the challenge of creating rates that are both efficient and budget-balancing, several theoretical and practical aspects of rate-making are considered. Purposeful selection of rate parameters for a specific billing system is demonstrated to serve efficiency and cost recovery objectives. Attention to non-accounting opportunity costs is an important system element, but these costs are often not fully borne by the utility or its customers. In situations where this issue is serious, state or federal pricing policy may be necessary.     

PRICE BEHAVIOR IN THE WATER MARKET OF NORTHEASTERN COLORADO1

ABSTRACT Past prices of Colorado-Big Thompson water shares were analyzed using an asset pricing model which incorporated the growth rate in real returns to irrigation water and the value of potential urban water uses. A real growth rate in the returns to irrigation water was estimated at 5.3 percent. Nevertheless, market values for water shares have exceeded capitalized agricultural values since 1969. Historically, urban use potential was heavily discounted, but the implicit discount rate fell rapidly in the last decade. The expectation that water shares will eventually be sold to municipal or industrial consumers now appears to be reflected fully in water prices.     

RURAL RESIDENTIAL WATER DEMAND: AN ECONOMETRIC AND SIMULATION ANALYSIS1

ABSTRACT: This study proposes that demand management through pricing policies can be used in conjunction with supply management to solve water supply problems. Economic principles are shown to apply to rural residential water use. A demand function for water was developed based on cross-sectional water use data collected in Kentucky. Price was found to be a significant determinant of the quantity of water demanded. A constant price elasticity of -0.92 was found. The demand function was used in a simulation analysis to determine reservoir capacity needed to supply water needs of a rural community. The simulation revealed that price can significantly affect required reservoir storage.     

A GAME THEORY APPROACH TO DECIDING WHO WILL SUPPLY INSTREAM FLOW WATER1

ABSTRACT: The resource management problem for the Middle Platte ecosystem is the insufficient water available to meet both instream ecological demands and out‐of‐stream economic needs. This problem of multiple interest groups competing for a limited resource is compounded by sharp disagreement in the scientific community over endangered species' needs for instream flows. In this study, game theory was used to address one dimension of this resource management problem. A sequential auction with repeated bidding was used to determine how much instream flow water each of three states — Colorado, Nebraska, and Wyoming — will provide and at what price. The results suggest that the use of auction mechanisms can improve the prospects for reaching a multi‐state agreement on who will supply instream flow water, if the auction is structured to discourage misrepresentation of costs and if political compensation is allowed.     

EVALUATING INTERDEPENDENT WATERSHED CONSERVATION AND GROUND WATER MANAGEMENT REFORMS1

Abstract: Conserving the watershed can help to preserve ground water recharge. Preventing overuse of available water through pricing reforms can also substantially increase the value of an aquifer. Inasmuch as users are accustomed to low prices, efficiency pricing may be politically infeasible, and watershed conservation may be considered as an alternative. We estimate and compare welfare gains from pricing reform and watershed conservation for a water management district in Oahu that obtains its water supply from the Pearl Harbor aquifer. We find that pricing reform is welfare superior to watershed conservation unless the latter is able to prevent very large recharge losses. Watershed conservation that yields net gains in combination with pricing reform may cause net losses without the pricing reform. If adoption of watershed conservation delays the implementation of pricing reform, the benefits of the latter are significantly reduced.     

A MONTHLY TIME SERIES MODEL OF MUNICIPAL WATER DEMAND1

A multivariate time series model is formulated to study monthly variations in municipal water demand. The left hand side variable in the multivariate regression model is municipal water demand (gallons per connection per day) and the right hand side contains (explanatory) variables which include price (constant dollars), average temperature, total precipitation, and percentage of daylight hours. The application of the regression model to Salt Lake City Water Department data produced a high multiple correlation coefficient and F-statistic. The regression coefficients for the right hand side variables all have the appropriate sign. In an ex post forecast, the model accurately predicts monthly variations in municipal water demand. The proposed monthly multivariate model is not only found useful for forecasting water demand, but also useful for predicting and studying the impact of nonstructural management decisions such as the effect of price changes, peak load pricing methods, and other water conservation programs.     

VALUING IRRIGATION WATER IN PUNJAB PROVINCE,PAKISTAN: A LINEAR PROGRAMMING APPROACH1

ABSTRACT: Linear programming models of a representative farm in a district of Pakistan's Punjab Province are formulated for the purpose of estimating the value of irrigation water. The models provide for choices among several irrigation levels for each potential crop. Solutions of the model for several water supply situations provide the basis for approximating the total, average, and marginal values of irrigation water. Prices for important crops in Pakistan are controlled at levels below their levels elsewhere in the world, so models are specified for both financial (domestic price) and economic (world price) scenarios. The value of water to society (its economic value) is high relative to the costs of some generally available water-augmenting investments, while financial values, which measure water management and allocation incentives faced by farmers, are less than the corresponding economic values. At current water supply levels, incremental returns to added water estimated from the economic model would justify investments in water-saving or water-augmenting technologies, while such a decision would be barely attractive assuming financial prices. While present government commodity price policies may serve to protect low-income and non-farm members of the population, they also inhibit farmer investments to increase the productivity of scarce irrigation water.     

WATER RESOURCES AND HUMAN HEALTH: THE VIEWPOINT OF MEDICAL GEOGRAPHY1

ABSTRACT: Medical geography studies both areal patterns of human health and disease and the environmental and cultural factors that contribute to such conditions. In such studies water resources are of major importance, not only because they are essential for life and their scenic beauty is of inspirational value, but also because they are involved, directly or indirectly, in more than 80 percent of all disease. The direct involvements result from various disease causing agents sometimes found in surface or ground water organic ones such as bacteria, worms, etc., which are known as pathogens, and inorganic ones such as trace elements and synthetic toxic chemicals. Surface waters may have indirect effects also, for they may serve as habitats or breeding places for organisms that do not themselves cause human disease but that serve as vectors or hosts for such pathogens. This paper will discuss these various roles of water resources in both endemic and epidemic disease occurrences and ways in which various human activities domestic, economic, recreational, or religious — increase or reduce our exposure to such diseases.     

Developing of a pricing model for Turkish lignite used in thermal plants

The objective of this paper is to develop a general pricing model for Turkish Lignite, which is mainly sold to thermal plants. This model will contribute to the development of coal mining within the scope of privatization efforts of the Turkish energy market. The paper consists of two stages. First, data of 10 thermal plants have been evaluated by using hedonic pricing analysis to determine influential price parameters. The results of hedonic regression analysis indicate the effect and importance of calorific value and electricity price on lignite prices. Second, a general coal-pricing model has been developed by taking into account the results of hedonic analysis. Comparison of the coal prices estimated by the developed pricing model and the coal prices obtained from thermal plants indicates an acceptable relation.     

DEVELOPING AND ASSESSING A MODEL OF RESIDENTIAL WATER CONSERVATION1

ABSTRACT: Relevant literature was reviewed from which a model of residential water conservation was developed. Four residential conservation program interventions were posited: 1) public education, 2) pricing variables, 3) water use restrictions, and 4) building code requirements. Four exogenous variables affecting residential water use were also posited: 1) temperature, 2) rainfall, 3) household income, and 4) household size. The impacts of these eight variables on residential per capita daily use were assessed by cross sectional and time series analysis. Study results generally supported the porposed model, with less consistent support obtained for pricing variables and conservation beliefs. The paper concludes with the hypothesis that an inclining block rate structure coupled with an informational program designed to inform consumers of their consumption under each block will have a synergistic impact.     

Fuzzy pricing for urban water resources: model construction and application

A rational water price system plays a crucial role in the optimal allocation of water resources. In this paper, a fuzzy pricing model for urban water resources is presented, which consists of a multi-criteria fuzzy evaluation model and a water resources price (WRP) computation model. Various factors affecting WRP are comprehensively evaluated with multiple levels and objectives in the multi-criteria fuzzy evaluation model, while the price vectors of water resources are constructed in the WRP computation model according to the definition of the bearing water price index, and then WRP is calculated. With the incorporation of an operator's knowledge, it considers iterative weights and subjective preference of operators for weight-assessment. The weights determined are more rational and the evaluation results are more realistic. Particularly, dual water supply is considered in the study. Different prices being fixed for water resources with different qualities conforms to the law of water resources value (WRV) itself. A high-quality groundwater price computation model is also proposed to provide optimal water allocation and to meet higher living standards. The developed model is applied in Jinan for evaluating its validity. The method presented in this paper offers some new directions in the research of WRP.     

DEMAND SIDE MANAGEMENT OF WATER IN ONTARIO MUNICIPALITIES: STATUS,PROGRESS, AND OPPORTUNITIES1

ABSTRACT: Demand side management is being used increasingly by Ontario municipalities as a way to improve the efficiency of water use, defer the costs associated with constructing new water treatment works, and minimize the environmental impacts associated with supplying water. A comprehensive survey of 153 Ontario municipalities was completed in mid‐1998. These ranged in size from small rural townships (with populations as low as 500 people) to the province's largest urban center, Metropolitan Toronto, with a population of approximately 2.5 million people. The questionnaire measured the use of six broad types of demand side measures, including water pricing and metering; municipal by‐laws (ordinances) that promote water conservation; operational and maintenance measures to reduce water losses and consumption; water‐saving plumbing fixtures and devices; public participation programs that encourage water conservation; and other measures, such as water audits. Additionally, the survey collected data on implementation barriers and opportunities. Since the last comprehensive Ontario survey, conducted in 1987 by Kreutzwiser and Fea‐gan (1989), there has been an increase in the use of basic tools such as metering and pricing, plumbing fixtures, and public participation programs. Additionally, new initiatives, such as water audits and computerized monitoring equipment, are being used. However, in many areas opportunities exist to make better use of demand side measures. Unfortunately, municipal capacity to do so often is constrained by (among other factors) limited finances, lack of political will, and public resistance. Demonstration of real cost savings to consumers, and the development of specific goals and objectives for demand side management programs, are two important steps needed to overcome these challenges.     

WATER AUCTIONS AS AN ALLOCATION MECHANISM IN VICTORIA,AUSTRALIA1

ABSTRACT: During recent years many countries have moved to rationalize the management of state owned or state controlled resources. In Victoria, Australia, water, in particular, has received a great deal of attention. Subsidies to construct, operate, and rehabilitate irrigation facilities have been reduced, and there have been numerous consolidations of small water supply authorities to achieve economies of scale. In addition, Victoria has taken the unusual step of using auctions to allocate new irrigation water entitlements. The six water auctions that took place during 1988 and early 1989 were perceived as an efficient and equitable mechanism to allocate limited water supplies to their highest value use. While the agricultural areas where the different auctions occurred were similar, there was substantial variation in the prices paid, which reflects varying demands for additional irrigation water. This paper will discuss the following topics: the auction process used and the results of the auctions, the efficiency of the auction procedures, and the factors influencing the demand for additional irrigation water in the different auctions. In addition, the implications of using auctions to allocate water supplies for future water management in Victoria will be discussed.