The Functions, Impacts and Effectiveness of Water Pricing: Evidence from the United States and Canada

Abstract

The paper analyses what is considered to be different 'prices' of water: those which depend on the services that are provided, on the revenues structures, and on the types of water markets to which the users may have access to. Conflicting roles of water pricing are also discussed, like the validity of the arguments based on economic efficiency; the generation of adequate revenues for operation, maintenance and expansion of the water system; and the 'equitable' treatment towards water users. Water pricing case studies in United States and Canada are presented.

Water Pricing Models: a survey

“…Studies on actual water pricing schemes are also available. For example, (Hewitt, 2000) describes the pricing methodology supported by the American Water Works Association (AWWA), (Garcia and Reynaud, 2004) describe the French water sector, (Howe, 2005) describes the water pricing institutions in the United States and in Canada and (Garrido, 2005) surveys the major case studies and practical applications of water pricing in Brazil. Other case studies for specific countries are often to find.…”

Is the water permit system a panacea or a bed of inefficiency? The case of South Africa

“…A market generated price ensures the economically efficient allocation of water, and the generation of adequate revenues for the operation and equitable treatment of water users (Howe, 2005). Under SA's NWA, farmers have to apply for licenses to use water subject to the condition that water must be put to beneficial use, unlike under the old riparian regime in which farmers had the right to water use, irrespective of what they did with it.…”

Water pricing in Ireland: a techno-economic and political assessment

“…It is generally agreed that two-part pricing structures are the way forward in modern water policy and are the most effective tools for achieving a compromise in pricing objectives, in spite of the disagreement about how the fixed and volumetric portions of a two-part charge should be approached [3][4][5]32,33]. The most important pricing objectives in Ireland's pricing policy should be cost recovery, efficiency and equity.…”

“…Howe [5] defines water price as "the market price that would affect a rational user's decisions concerning their pattern of water use, including quantities of water and water related investments", while Ayoo and Horbulyk [6] describe water pricing as "a means of influencing the processes by which water is provided and used, and as a means of cost recovery or revenue generation". Qdais and Nassay [7] define the objectives of water pricing very well as one or a combination of the following: 1) To allocate resources efficiently between sectors within the economy and within the sector itself; 2) To satisfy the consideration of equity or the ability to pay of consumers, especially the poor; 3) To raise revenues to meet financial requirements of providing the service; 4) To subsidise special areas to encourage development; and 5) To take into account political consideration for a special area or subsector of the population.…”