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.     

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.     

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.     

The pricing of water services in developing countries

This paper focuses on improving efficiency in the water and sewerage sectors through long-run marginal cost pricing, adjusted for financial needs, externalities, second best considerations, lifeline tariffs and cross subsidization within an integrated water resource planning (IWRP) framework. Supply efficiency suggests that for a given price structure, an optimal long-run investment plan and a corresponding level of supply quality should be determined which maximizes net social benefits. Supply efficiency also requires efficient operation of the water system, including optimization of losses.     

Water supply policies and issues in developing countries

The significant progress made during the UN International Water Decade is reviewed, eight years after its inception in 1981. Major issues remain, especially in rural areas. The advantages of an integrated water resource planning framework (IWRP) are explained, including the use of this process to develop a flexible strategy for the water and sewerage sector to meet national policy objectives. Economic efficiency in supply implies optimal service quality and least cost planning, while efficient pricing policy requires the implementation of long-run marginal cost based tariffs. Better sector organization, management, accountability, options for decentralization and innovative financing methods are also discussed.     

A LINEAR ANALYSIS OF AN URBAN WATER SUPPLY SYSTEM1

The use of linear programming as a planning tool for determining the optimal long-range development of an urban water supply system was explored. A stochastic trace of water demand was synthesized and used as an input to the model. This permitted evaluating the feasibility of imposing demand restrictions as an effective cost reduction mechanism. The City of Lincoln, Nebraska, was used as the urban model. The fundamental problem was to allocate limited water supplies from several sources to an urban load center to minimize costs and comply with system constraints. The study period covered twenty years, and findings indicate the planning direction for stage development during this period. Sensitivity analyses were performed on cost coefficients and demands. Thirteen sources were included in the initial computations. Conclusions were that linear programming and generated demand traces are useful tools for both short- and long-term urban water supply planning. Lowering peak demands results in long-range development of fewer sources of supply and more economic and efficient use of the supplies developed.     

POLICY DROUGIT: THE CASE OF SOUTH FLORIDA1

ABSTRACT: In this paper, we review recent experience with drought in south Florida, and report some results of a study of the likely agricultural economic impacts of drought. Our conclusions can be summarized as follows. (1) Whether a period of low rainfall becomes a “drought” in south Florida is determined largely by institutional factors. (2) The impacts of a drought event are dependent on the rules the Water Management District uses to manage the event. If the rules involve effective reductions in irrigation supply, the financial impacts may be large, but are sensitive to the way in which cutbacks are imposed. (3) Current drought management regulations do not appear to minimize the short-run cost of drought. (4) Current policies which seek to minimize the short-run cost of drought are inconsistent with dynamically-optimal policies.     

THE COST OF PEAK CAPACITY WATER1

ABSTRACT: Calgary, the fastest growing city in Canada, is about to expand its urban water supply facilities in order to meet peak summer demands. Most of Calgary's residential water is sold by flat rate. The effect of this pricing policy on peak and average demands is discussed. The true marginal cost of peak capacity from the new expansion is calculated. The effect of a proposed metering program on capacity expansion requirements is computed. It is concluded that metering should preceed the next capacity expansion.     

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.     

AN IMPLICIT APPROACH TO PRICING AGRICULTURAL WATER TRANSFERS TO URBAN USES1

ABSTRACT: The increased agricultural efficiency of the American farmer has been a substantial impetus to this nation's rapid urbanization. In many western regions where total water supplies are limited, urbanization has required the transfer of heretofore agricultural water rights to the urban use. A major problem in such transfers has been the value or price of the water. A management level model of a typical urban water system was developed to optimize water supply, distribution, and wastewater treatment alternatives. The values of agricultural transfers were determined as the cost advantages of increasing allowable reuse levels of urban effluents which imply the use of a downstream right. This procedure is justified by the economic theory of alternative cost. Results for a test application to the Denver, Colorado area indicate values on the order of $1,000 per acre-foot of transferable water depending on effluent water quality restrictions and operational policies.     

WATER SUPPLY COSTS FOR SMALL PRIVATE UTILITIES1

ABSTRACT: This paper examines the cost of water supply for small and mid-sized private water utilities. An econometric approach was employed in which data on utility costs and characteristics were used to estimate a total water supply cost function from which average and marginal costs were derived. The results suggest that although average and marginal costs decline with output, the rate of decline rapidly approaches zero, and unit costs therefore appear to remain relatively constant over a wide range of output. Implications of the results for pricing policy are examined.     

REGIONAL WATER SUPPLY PLANNING STUDY FOR NORTHEASTERN ILLINOIS1

ABSTRACT: The development of a regional water supply system for the six-county area of Northeastern Illinois is presented in this paper, including: 1) the establishment of regional water supply technical planning policies; 2) the development and utilization of a regional water supply computer model to identify the principal and secondary sources of water supply for each entity in the study area, based on an apparent cost-effective source analysis; and 3) utilization of the study results to develop for the year 2010 a suggested preliminary regional water supply system. Using the findings from task 2 above, a proposed plan for overall Lake Michigan water use through the year 2010 was also developed. The effects of the proposed regional water supply system on future water levels in the deep aquifer were also discussed.     

A decision model for selecting sustainable drinking water supply and greywater reuse systems for developing communities with a case study in Cimahi, Indonesia

Capacity Factor Analysis is a decision support system for selection of appropriate technologies for municipal sanitation services in developing communities. Developing communities are those that lack the capability to provide adequate access to one or more essential services, such as water and sanitation, to their residents. This research developed two elements of Capacity Factor Analysis: a capacity factor based classification for technologies using requirements analysis, and a matching policy for choosing technology options. First, requirements analysis is used to develop a ranking for drinking water supply and greywater reuse technologies. Second, using the Capacity Factor Analysis approach, a matching policy is developed to guide decision makers in selecting the appropriate drinking water supply or greywater reuse technology option for their community. Finally, a scenario-based informal hypothesis test is developed to assist in qualitative model validation through case study. Capacity Factor Analysis is then applied in Cimahi Indonesia as a form of validation. The completed Capacity Factor Analysis model will allow developing communities to select drinking water supply and greywater reuse systems that are safe, affordable, able to be built and managed by the community using local resources, and are amenable to expansion as the community's management capacity increases.     

AN APPLICATION OF MATHEMATICAL PROGRAMMING TO WATER RESOURCES PLANNING: AN ECONOMIC VIEW1

ABSTRACT: Individuals involved in state water resource planning generally have avoided any development of a comprehensive public water planning investment model that would set the stage for quantitative recommendations of a “what ought to be” tone for future water strategies. Three New Hampshire towns were selected to illustrate the usefulness of a mixed integer multiperiod programming model that utilizes hydrologic and economic data for identifying the discounted least cost of water supply, distribution, and scheduling. Comparisons are made regarding the feasibility of a regional water system approach versus independent “town by town” water supplies that presently prevail. To analyze the sensitivity of optimal water planning solutions to projected water demands, variations in these demands are made.     

The evolution of community water governance in Uchira, Tanzania: The implications for equality of access, sustainability and effectiveness

Community participation, ownership and cost sharing are key components of Tanzania's water policy, in common with the broad international consensus on water governance. However these policy goals are difficult to achieve, beset with paradoxes and their benefits may be overstated, both in terms of efficiency of resource management and equality of outcomes. This article draws on longitudinal ethnographic research of a village water supply in Tanzania to explore two issues: the contested nature of community ownership and the complex evolution of a ‘community‐owned’ institution. The evidence from the Uchira Water Users Association leads us to question some of the simplistic assumptions made concerning the capacity of local communities to manage service delivery and to balance equity and sustainability principles. The limitations of ‘bottom‐up’ and demand led approaches need to be recognised without discrediting their potential for challenging inequalities. The article concludes with a consideration of some of the tensions in community‐driven development, which raises some important questions about the role of the State and external agencies in setting and enforcing equity criteria in community‐managed initiatives.     

WATER SUPPLY,TREATMENT, DISTRUBTION,AND REUSE OPTIMIZATION IN ARID URBAN AREAS1

ABSTRACT: A Management level model has been formulated in which a system analysis format is employed to answer some of the basic questions regarding urban water management strategies The model incorporates a multilevel optimization scheme to coordinate urban water supply, distribution, and wastewater management. A test of the model's utility is made in an application to the water management problems of the Denver, Colorado metropolitan area. Denver has utilized both agricultural transfers and transmountain diversions to supplement the natural stream resources of the South Platte River. Although plans are being made to increase the capacity of these sources, increasingly stringent standards on the area's effluents are enhancing the feasibility of reclaiming and recycling a portion of the wastewater. The urban model used in this study indicates the decision points at which respective strategies are introduced. However, by formulating the model from a planner's viewpoint, the most important results gained from the analysis are the costs of various institutional constraints which may restrict the decision maker's ability to implement optimal policies.     

Recent advances in econometric estimation of materials substitution

Interest in substituting reproducible inputs such as capital and labour for non-renewable materials is principally motivated by two factors — the short-run concern about supply disruptions on the part of producing countries and the long-run concern about the exhaustion of depletable natural resources. In this paper, techniques for estimating elasticities of substitution between inputs (ie between different materials or between material aggregates and other input aggregates) from production and cost functions are discussed, and the recent literature that makes use of these techniques is reviewed.     

VALUE OF WATER IN IRRIGATED CROP PRODUCTION USING DERIVED DEMAND FUNCTIONS: A CASE STUDY OF SOUTH SASKATCHEWAN RIVER IRRIGATION DISTRICT1

ABSTRACT: Water abundance has led most North American societies to use water freely without priorizing its use. As water scarcity becomes reality in the southern part of Saskatchewan, planners and managers of water require information about the value of water in irrigation, as well as in alternative uses. In this study, the value of water to the producer in irrigation is developed both for the short and long run. The basis of this imputation is a derived demand function for water using linear programming. Water demand was bound to be inelastic at lower prices, and highly elastic at higher prices. The short-run value of water varied between $0.44 and $127.82 (1986 dollars) per acre-foot for different levels of product prices. However, the long-run value was estimated between zero and $1.59 per acre-foot of water.     

Community‐based water supplies in Cikarang,Indonesia: are they sustainable?

Community‐based water supply (CBWS) is an example of how a community manages common pool resources (CPR). This results in an alternative approach to solve water supply problems in developing countries by enhancing community participation in managing water supply. This research evaluates the sustainability of five CBWS projects in Cikarang, Indonesia by using Ostrom's design principles, with additional sustainability factors found in the Sustainable Development Goal (SDG) on drinking water and groundwater sustainability. Quinn et al. (2007) criteria were used in the analysis, and the results show that the management of four CBWS institutions were absent and one CBWS institution was weak. With regards to the SDG's drinking water target, the CBWS institutions were unable to comply with safe water standards, and in terms of groundwater sustainability, efforts to monitor and sustain groundwater tables were absent. Results from this research suggest that more focus must be placed on water quality and groundwater sustainability for CBWS projects.     

Management strategies for rural water development

Non-sustainability of programmes and projects has become an overriding concern for the water supply and sanitation sector. Poor programme conceptualization, unimaginative planning, use of inappropriate technologies and rigid management approaches have contributed to high rates of programme failure. Five major water supply programmes undertaken during the UN Water Decade in the Western Sudan were analysed for their management approaches, appropriateness and sustainability. Results prompt the conclusion that sustainable projects need to adopt an adaptive and flexible management approach and to employ a conceptual framework which emphasizes community management, the empowerment of women, selection of appropriate low cost technologies, built in operation and maintenance strategies, cost recovery and institutional support to government.