Advanced Search
MyIDEAS: Login to save this article or follow this journal

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

Contents:

Author Info

  • DARWIN C. HALL
Registered author(s):

    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

    If you experience problems downloading a file, check if you have the proper application to view it first. 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 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.

    Bibliographic 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

    as in new window
    Handle: RePEc:bla:coecpo:v:27:y:2009:i:4:p:539-554

    Contact details of provider:
    Postal: 18830 Brookhurst Street, Suite 304, Fountain Valley, CA 92708 USA
    Phone: 714-965-8800
    Fax: 714-965-8829
    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

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bla:coecpo:v:27:y:2009:i:4:p:539-554. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.