This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Politically Feasible, Revenue Sufficient, And Economically Efficient Municipal Water Rates

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
DARWIN C. HALL
Abstract

"Water rates are designed to meet multiple objectives, typically resulting in trade-offs among the objectives of economic efficiency, revenue sufficiency, and related revenue stability. Standard theory of natural monopoly is extended here to explain why long-run marginal cost (LMC) can be greater than both average cost and short-run marginal cost (SMC) for municipal water utilities. The distinctions between "benign monopoly rates" and "marginal cost rate design" favor LMC over SMC as the basis for economically efficient rate design. Taking into account conservation investments by consumers, SMC rates are economically inefficient, except during temporary shortages. The City of Los Angeles adopted economically efficient, revenue sufficient, and revenue-stable water rates at the end of a prolonged drought. After the drought ended, Los Angeles (LA) modified the rate design, making the design politically feasible during normal rainfall years. Unique features in the LA rate design determine the allocation of consumer surplus among ratepayers, making the rate design politically feasible by sharing efficiency gains among customer classes. Revenue sufficiency and stability features in the rate design minimize adverse job effects on water utility management, reducing the frequency of rate hearings with an increasing block design." ("JEL" L51, L95, Q25, Q51) Copyright (c) 2009 Western Economic Association International.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1465-7287.2009.00164.x
File Format: text/html
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 27 (2009)
Issue (Month): 4 (October)
Pages: 539-554
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:coecpo:v:27:y:2009:i:4:p:539-554

Contact details of provider:
Postal: 7400 Center Avenue, Suite 109, Huntington Beach, CA 92647 USA
Phone: 714-898-3222
Fax: 714-891-6715
Email:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1074-3529
More information through EDIRC

Order Information:
Web: http://www.blackwellpublishing.com/subs.asp?ref=1074-3529

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Statistics
Access and download statistics

Did you know? There are NEP reports in over 80 fields that deliver new research to your email.

This page was last updated on 2009-12-18.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.