INCOME AND PRICE ELASTICITIES OF DEMAND FOR WATER IN DEVELOPING COUNTRIES1

ABSTRACT: The income and proce elasticity of demand for domestic water is estimated for Penang Island, Malaysia. A cross-sectional analysis of a random sample of 1400 households indicated an income-elasticity of zero for low-income families (per capita income less than US$300) and an elasticity of 0.2-0.4 for higher-income families. A time-series analysis of a subsample of individuals of varying income levels suggests a short-run price elasticity of -0.1 to -0.2. The implications of these results for demand forecasting are discussed.     

A MODEL FOR PREDICTING LAKE SEDIMENT OXYGEN DEMAND FOLLOWING HYPOLIMNTETIC AERATION1

ABSTRACT: Hypolimnetic aeration is a widely used technique for lake restoration and fisheries enhancement. However, system design still depends on application of “safety factors” to observed oxygen demand rates, in large part because actual oxygen demand may be greater after aeration than before. Laboratory incubations of sediment show that sediment oxygen demand (SOD) rates follow mixed order kinetics, with an initial period of zero order reaction, followed by first order kinetics. The transition from zero to first order kinetics may correspond to the transition from laminar to turbulent flow. This suggests that SOD reaction kinetics are governed by thickness of the diffusive sublayer adjacent to the sediments. Therefore, zero and first order reaction regions correspond with oxygen diffusion limitation and substrate limitation, respectively. Such a mechanism would account for the induced oxygen demand observed following hypolimnetic aeration and would reconcile differences in SOD reaction orders noted in the literature. This paper describes development of equations based on laboratory SOD incubations for predicting induced oxygen demand following hypolimnetic aeration.     

A DESCRIPTIVE MODEL FOR ANALYZING PROPOSED COST SHARING RATE CHANGES1

ABSTRACT: This article offers a procedure for identifying the primary effects of financing and cost sharing rates on four basic levels: program, technical, incidence, and comprehensive impacts. A process is developed for identifying these effects based upon two alternative approaches. One method would follow the effects of rate changes through the four levels of impact, another would look in depth at the consequences of rate changes on a particular impact. For this study the information and suggested changes found in the Section 80(c) Study were used to illustrate possible impacts. The process suggested herein could be used in anticipating impacts of any major policy change.     

FEASIBILITY OF SEASONAL WATER PRICING CONSIDERING METERING COSTS1

ABSTRACT: Efficiency implications of seasonal pricing, uniform pricing, and optimal seasonal pricing with metering costs are analyzed qualitatively using classical optimization technique. The first two schemes are special cases of the last pricing scheme. A nonlinear-integer programming model is formulated for a case study application to Salt Lake City to examine the feasibility of seasonal pricing. The analysis indicates that uniform pricing is preferable unless metering costs are substantially lower than present levels.     

EFFECT OF PRICE ON THE RESIDENTIAL DEMAND FOR WATER WITHIN AN AGENCY1

ABSTRACT: This paper develops a model that can be used to forecast the residential elasticity of demand for water within a district. Long-term water conservation programs and revenue and cost decisions hinge crucially on a determination of this elasticity. This study then pools cross-sectional (census) and time series data to generate elasticity forecasts for the Oakland urban area.     

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.     

DEMAND PROJECTIONS CONSIDERING CONSERVATION1

ABSTRACT: Prediction of future water demands depends on the degree to which conservation effects can be anticipated. A model developed for the Corps of Engineers shows that choosing a numerical conservation target to be achieved is more meaningful and yields more predictable results than price or price elasticity manipulations. The method developed and then applied to the Kaneohe Bay region of Oahu considers the following determinants of demand: geographic distribution of the users, indoor and outdoor requirements, time - by year and month of the year, precipitation, historical unit usage rates, gross and irrigable acreage of land uses, price for water, elasticity of demand with respect to price, source of the water supply (local private supplies vs. agency supplies), and the percentage conservation savings anticipated in each future period in indoor and outdoor uses of water in each of 40 possible land uses. While developed for use in Hawaii, the model is applicable generally.     

POLICY IMPACTS ON AGRICULTURAL IRRIGATION ELECTRICITY DEMAND IN THE COLUMBIA BASIN1

ABSTRACT: Accurately estimating the price elasticity of demand for irrigation electricity is important to major electricity suppliers such as the Bonneville Power Administration (BPA) of the Pacific Northwest. The BPA has a revenue maximization objective, and the elasticity of demand is central to its rate setting process. Several studies have attempted to estimate demand for irrigation electricity, but none has explicitly included federal agricultural policy and program variables. Tins paper discusses how agricultural programs may influence farmers irrigation decisions and thus their demand for irrigation electricity. It suggests that existing programs serve to make farmers more responsive to electricity rate increases than would otherwise be the case. Thus, studies that fail to include them may underestimate the responsiveness of farmers to electricity rate increases.     

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.     

THE EFFECTWENESS OF PRICING AS A STAND-ALONE WATER CONSERVATION PROGRAM1

ABSTRACT: Economic theory clearly indicates that the use of increasing rate structures will reduce the demand for water and produce monetary incentives for consumers to conserve. One problem with estimating the effectiveness of using rate structures as a conservation program is that they are usually accompanied by other conservation efforts. Thus, it is difficult to determine the effectiveness of any one conservation component. This paper examines the effectiveness of increasing rate structures in a situation where no other conservation program was introduced. The paper uses customer data from the Spalding County (Georgia) Water Authority where an increasing rate structure replaced a descending rate structure in January 1991. Since the imposition of the increasing rate structure, the number of customers has increased 21 percent while total water demand has gone up only 15 percent and per customer water use has declined 5 percent. The daily water use per connection has declined from 243 gallons in 1990 to 231 in 1993, and monthly use has gone from 7,381 gallons to 7,028 per connection over the same period. Statistical tests indicate that water consumption during the two periods was significantly different while weather factors were not.     

RESIDENTIAL WATER DEMAND: A POOLED,TIME SERIES,CROSS SECTION STUDY OF MALMÖ, SWEDEN1

Shortcoming associated with past water demand studies are evaluated. To overcome these shortcomings, pooled, time series, cross section data from -6, Sweden, are used in an ordinary Least squares analysis to estimate the demand for residential water. Elasticities for five variables, including price and income, are estimated. An approach for the conduct of future water demand studies is suggested.     

EFFECTS OF RATE STRUCTURE KNOWLEDGE ON HOUSEHOLD WATER USE1

ABSTRACT: Socioeconomic determinants of individual household water use were estimated using regressions of these characteristics with actual household water use for winter and summer. Results were disaggregated between those consumers who were aware of an increasing block rate price structure and those who were not. Most of the informed group members believed that this price structure did result in significant reductions in water use. Nevertheless, overall water use was greater for the informed group. The determinants of water use were found to differ between informed and uninformed users as well as between winter and summer. The uninformed users were influenced by a larger set of variables in each season than the informed group. In winter, the informed group members with swimming pools and/or arid landscaping used less water than their uninformed counterparts. Summer water use increased with length of tenancy in home for the uninformed group but not for informed, while increasing with ownership for informed consumers.     

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.     

ESTIMATING THE DEMAND FOR IRRIGATION WATER IN THE CENTRAL VALLEY OF CALIFORNIA1

ABSTRACT: This paper computes estimates of the demand for surface irrigation water directly from disaggregated profit functions for fields in the San Joaquin Valley of California. It finds that treating delivered surface water and pumped ground water as separate, imperfectly substitutable inputs to production matters a great deal. We find substantial ranges of inelastic demand for delivered water, and thresholds across which demand then becomes highly elastic. The results imply that moves toward freer water markets could lead to large quantities reallocated from agriculture to urban uses in the Western U.S., but would require large price increases and would induce extensive ground water mining and major changes in cropping patterns. While these results are dependent on our particular model and simplifying assumptions, evidence exists that they may be robust.     

PEAK PERIOD DESIGN STANDARDS FOR SMALL WESTERN U.S. WATER SUPPLY SYSTEMS1

ABSTRACT: In order to determine design capacities for various components of municipal and rural domestic water supply systems, engineers must estimate water requirements for an entire year (water rights), for the peak season (reservoir storage), for the peak day (pump or treatment plant size), and for peak hour (pipeline sizes). Historically, per capita water use rates have varied greatly between systems, particularly in semiarid regions where outdoor demands are large. The resulting uncertainty in design capacity estimates can cause either inadequate capacities or premature investment. In order to minimize that uncertainty multiple regression and frequency analyses were made of the various water demand parameters mentioned above for 14 systems in Utah and Colorado. Specifically, demand functions are reported for average month, peak month, and peak day. Peak hour demands were also studied but are reported in a different paper. The independent variables which were significant for monthly and daily demands were price of water and an outdoor use index which includes the effect of variation in landscaped area and accounts for use of supplementary ditch or pressure irrigation systems. The demand functions were developed with data from systems varying in size from very small low density rural systems to Salt Lake City's water system. The correlation coefficients (R²) vary from 0.80 to 0.95.     

DESK TOP METHODOLOGY FOR MODELING BIOCHEMICAL OXYGEN DEMAND IN STREAMS1

: The modeling of dissolved oxygen in streams is a widely used technique, upon which a great deal of money has been spent. This paper concludes that the standard methods of DO modeling by computer are unnecessarily complex, and that for some purposes, they can be replaced without loss of accuracy by desk top BOD models. Taking as an example, a set of data used in DO modeling, it is shown (a) that the data are grossly inconsistent, (b) that simultaneous gathering of data introduces errors in streams of long travel time, (c) that much more data as to pollutant concentrations should have been obtained, and (d) that 24-hour DO data could have been dispensed with.     

ACHIEVING URBAN WATER CONSERVATION1

ABSTRACT: Increasing costs and competition for water have resulted in pressure to manage urban water demand through conservation programs. Metering, pricing, devices, restrictions, building code changes, and horticultural practices have all been effective in reducing average residential water use. Some conservation means are specifically aimed at reducing peak demands but these usually reduce average usage as well. Combined programs of conservation can be expected to reduce urban demand by as much as 25–30 percent over the long term. Restrictions can reduce water usage on the short term even further. The success of conservation programs is as dependent on the effectiveness of public education and information dissemination as on the conservation practices themselves.     

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.