Equity in Domestic Water Rates Design

Abstract

Water rates seek at once to fund the service, to distribute the cost among users and to allocate water based on demand. Therefore, rates design is frequently subject to normative criteria such as full cost recovery, efficiency, equity and simplicity. This paper, proposes a method of ensuring the operational effectiveness of the equity criterion. Specifically, the objective is to resolve the problem of equity caused by pricing systems involving stepwise increments in the cost of aggregate household consumption. The problem is that it is more costly to meet basic individual water needs, the larger the household concerned. This paper analyses the water rates applied in the city of Zaragoza (Spain) and proposes a new rates design based on the normative criteria referred to above, which is applicable to any city and, therefore, may be of general interest.

Urban Water Tariffs in Spain: What Needs to Be Done?

“…The use of a variable fee can increase the households' efforts at water conservation by way of water saving behaviors and financial investments in water [62]. However, increasing block tariffs can have serious equity effects on households [30]. Promoting efficient use of water resources requires greater rationality in the water tariff structure [63]; however, the absence of a national regulatory body makes this difficult.…”

Perceptions of Water Pricing during a Drought: A Case Study from South Australia

“…Similarly, an analysis of water pricing in Sao Paulo, Brazil showed that increasing-block pricing favored low income households, while a flat price favored higher income earners [26]. Others argue against increasing-block pricing based on inequity [27] and evidence to suggest that it is only marginally effective in reducing water consumption [28,29]. Although variable, linear-or increasing-block pricing is widely used in OECD countries [27].…”

“…Others argue against increasing-block pricing based on inequity [27] and evidence to suggest that it is only marginally effective in reducing water consumption [28,29]. Although variable, linear-or increasing-block pricing is widely used in OECD countries [27]. This implies that increases in water pricing are predominantly driven by a need to lower water use rather than cost recovery.…”

“…Numerous studies [32][33][34][35][36] have shown a correlation between high water use and a greater number of water-using outlets and the presence of swimming pools and spas, large gardens [37], lot size, and the sophistication of the garden-watering system [22][23][24][25][26][27][28][29][30][31][32][33][34][35][36][37]. In a study by Willis et al internal household water use was predicted by income group, type of housing, types of appliances used and the number of household occupants [38].…”

“…In a study by Willis et al internal household water use was predicted by income group, type of housing, types of appliances used and the number of household occupants [38]. Barberán and Arbués [27] recommend including a per capita component in block water pricing to counter the disadvantages faced by households with a greater number of occupants, but admit that it would be difficult to administer. While wealthier households (with larger houses and gardens) may have more water-using amenities (such as spas, swimming pools and a greater number of bathrooms) that are correlated with higher water use, it may be argued that they are also most able to afford water saving technologies such as sub-surface irrigation systems, garden mulch, rainwater tanks, and the ability to replace washing and dishwashing machines with water-efficient models [32][33][34][35][36][37][38][39], once again confounding our ideas of what is the most equitable policy approach.…”