California Institute for Water Resources
California Institute for Water Resources
California Institute for Water Resources
University of California
California Institute for Water Resources

Determining the effect of pricing structure on urban water demand

Summary:

Public utilities in arid regions struggle to balance supply and demand of water resources both in the short-term and long-term. Utilities use a variety of tools to meet these conservation goals, including new pricing structures aims to guide residents towards water savings and efficient water use. However, there are questions over the effectiveness of that approach to achieve conservation goals. This project will determine the effectiveness of changes in the pricing structure changes for major California water utilities.

Investigator:

Mehdi Nemati, Twitter: @mnematie
Assistant Cooperative Extension Specialist in Water Resource Economics and Policy, School of Public Policy
UC Riverside

Project description:

Determining the impact of pricing structure on residential water demand in California is an important aspect of water conservation. California’s expected population increase from 39 million to 60 million by 2050, coupled with impacts of climate change, heighten the need for continued water conservation in urban landscapes.

In addition, since 2005, nearly one-half of California’s growth has occurred in inland Southern California and the Central Valley due to lower housing costs. Both areas require larger amounts of water than coastal areas due to warmer climates and larger landscaped areas. Public utilities in arid regions struggle to balance supply and demand of water resources both in the short-term and long-term.

Utilities use a variety of tools to meet these conservation goals including price adjustments, outdoor water use restrictions, providing educational materials geared at reducing water waste through efficient irrigation practices and planting drought-resistant plants, and rebate programs such as ‘cash for grass’ and installing efficient appliances.

Changing the pricing structure is one potential demand side management approach that can be used to encourage water conservation. Although there is limited academic evidence available as to whether this approach cost-effectively reduces water consumption, initial research suggests significant potential.

This project aims to collect price and pricing structure data from the major water utilities in California and evaluate residential customers’ demand response to different pricing structures. Furthermore, this project aims to increase urban water conservation by implementing guidelines for efficient irrigation water management in urban settings, given the current pricing structures.

Home irrigation set to timer. Photo by Alan Levine.
Home irrigation set to timer. Photo by Alan Levine.

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