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Erschienen in:
Understanding and Managing Urban Water in Transition Kapitel lesen Erstes Kapitel lesen

2015 | OriginalPaper | Buchkapitel

19. Volumetric Water Pricing, Social Surplus and Supply Augmentation

verfasst von : Quentin Grafton, Long Chu, Tom Kompas, Michael Ward

Erschienen in: Understanding and Managing Urban Water in Transition

Verlag: Springer Netherlands

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Abstract

We evaluate the welfare losses of undertaking water supply augmentation in Sydney, Australia with a fixed, regulated water price given weather variability. Stochastic dynamic programming is used to determine dynamically efficient water prices and to estimate the losses in social surplus from premature water supply augmentation. Results show that premature water supply augmentation under the base case reduces the net present value (NPV) of the welfare of households by more than $A 3 billion, or some $A 1,900 NPV per household. While the findings are specific to Sydney, our modeling is of general interest because it could be employed to avoid costly and premature supply augmentation elsewhere.

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Vorheriges Kapitel Managing Water Variability Issues
Nächstes Kapitel Governance and Regulation of the Urban Water Sector: Quoi de Neuf?
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Fußnoten
1
Hirshleifer et al. (1960, p. 41) correctly noted more than 50 years ago that “…consumers served under identical cost conditions should be charged equal prices and the commodity should be supplied and priced in such a way that the price for each class of service should equal the marginal cost of serving that class.”
 
2
In 2008, the net real revenue requirement was approximately A$ 690 million dollars ($1.65/kL–<Footnote ID=”Fn2”><Para ID=”Par9”>In 2008, the net real revenue requirement was approximately A$ 690 million dollars ($1.65/kL–$0.30/kL) *1.4 billion liters/day*365 days <Emphasis aid:cstyle=”Italic” Type=”Italic”>without</Emphasis> the desalination plant. This amount is allowed to grow at 1 % per year in real terms or at a rate equal to the assumed population increase of Sydney over the programming horizon.</Para></Footnote>.30/kL) *1.4 billion liters/day*365 days without the desalination plant. This amount is allowed to grow at 1 % per year in real terms or at a rate equal to the assumed population increase of Sydney over the programming horizon.
 
3
In the case of zero cross-price elasticities the price (access fee or volumetric charge) is raised more for the good that has the lower price elasticity of demand (Baumol and Bradford 1970). Where cross-price elasticities exist these should be subtracted from the own-price elasticities to account for the effect of one good’s price on its demand net of the effect of the price change on the other good. Two possible services for which this might apply in the case of water consumption would be energy and water services where a rise in the water price may influence electricity consumption via the effect on the use some appliances (such as washing machines).
 
4
The announcement to build the desalination plant was made on 18 July 2007.
 
5
For instance, based on historical inflow data from 1997 to 2007, 35 % of inflows occur in just 5 % of the months. In the month immediately preceding the announcement to build the desalination plant, water storages in the Sydney catchment increased from 37 % to 57 % of full capacity.
 
6
Taking the estimate of the net present value loss terms of $A 3,201 million (medium-term weather realization, a 250 ML/day plant, 5 % discount rate and a 100 operational plant life) and dividing by the number of occupied residential dwellings in Sydney of 1.7 million in 2011, the net present value of the welfare loss is $A 1,883 per household.
 
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Metadaten
Titel
Volumetric Water Pricing, Social Surplus and Supply Augmentation
verfasst von
Quentin Grafton
Long Chu
Tom Kompas
Michael Ward
Copyright-Jahr
2015
Verlag
Springer Netherlands
Buch
Understanding and Managing Urban Water in Transition

Print ISBN: 978-94-017-9800-6

Electronic ISBN: 978-94-017-9801-3

Copyright-Jahr: 2015

DOI
https://doi.org/10.1007/978-94-017-9801-3_19