Adjusting to a Tiered Pricing Structure

Published: Wednesday, October 28, 2009 5:35 PM PDT

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Over the long run tiered pricing with increasing prices encourages conservation by:

(a) altering water use behavior
(b) changing indoor appliances (e.g., low-flush toilets)
(c) changing outdoor technologies (e.g., drip irrigation), and
(d) switching to outdoor landscaping that requires less water.

What many households fear is that they have little knowledge about the factors that influence their water use and that as such they might be pushed into a tier where their water bills explode. The way to avoid this is to put in a pricing system with a fairly large number of tiers so that price increases gradually with the amount of water consumed.

Note that this is the opposite of what some proposed pricing structures do that have very large almost draconian price jumps for the last block of water. It is important to phase in the new rate structure over the course of several months so that households can get feedback on their water usage.

During this phase-in period it is important to give households information about their water usage. Some of this can be done by redesigning water bills to make them more user friendly.

There is also research that shows that giving households information about how much water households with similar characteristics are using can serve a valuable function. Methods exist that could give households high frequency feedback on their water usage via email or automated phone calls, including issuing warnings when water consumption was close to passing specific levels.

These smart meter methods are currently being implemented by electric utilities including San Diego Gas & Electric but they are generally viewed as not cost-effective with respect to water; in large part because the cost of water does not spike on hot days like electricity does.

-- RICHARD CARSON

1 Comments so far on this story...

While expensive water tracking is nice, people are capable of learning without it if given incentives and penalties. You underestimate the power of getting $1,000+ warning bills for a few months as people are asked to change. Major changes happened in my neighborhood with modest changes to pricing. Lawns are being removed or reduced. Daily watering and water running down streets were common and are now rare. The first step to reducing water use is for public agencies to get serious about it. The cost to learn and change can be expensive, and that is where agencies are going to be thoughtful in how to manage the transition. If rules don't seem fair, people are going to be angry! Historically, policy encouraged waste, such as poor choices of landscape--who cared how much water it required? Commercial buildings, parkways and parking areas don't need all that grass!

Posted by janet | reply to this comment
October 28, 2009 8:18 pm

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