The Ironic Economics and Equity of Water Budget Rates (PDF)
- Author(s): Beecher, Janice A.
- Publications: Journal - American Water Works Association
- Issue Date: February 2012
- Volume / Number: 104, Number 2
- Page(s): E73-E81
- DOI: http://dx.doi.org/10.5942/jawwa.2012.104.0021
- Product Number: JAW_0075359
Non-Member Price: $0
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Water budget rates are gaining attention in the water sector.
Although clearly well-intended, the water budget approach raises
several serious theoretical and practical issues familiar to applied
regulatory economics. In essence, water budget rates exemplify
"social rate-making," i.e., a system of pricing that departs from
traditional economic standards in the interest of serving social
goals - in this case, water conservation. The inherent problem
with this particular rate structure, however, is not its good
intentions but its disconcerting implications. The troubling irony
of water budget rates, however, appears to be lost in the discussion.
A simple illustration reveals the mathematical reality of the rate
structure based on one water district's rendition and online bill calculation
tool. In addition, several implementation issues are
raised. As long as their choices do not burden others, communities
are free to implement water rate structures they deem appropriate
to their values and goals. As posited here, however, the water
sector would benefit from applying less ironic and more iconic
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