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Municipal Water Supply and Sewage Treatment: Costs, Prices and Distortions

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  • Steven Renzetti

Abstract

Municipal water supply and sewage treatment utilities in Ontario, Canada, are studied in order to establish their costs of supply and evaluate their pricing practices. Prices charged to residential and commercial customers are found to be only one-third and one-sixth of the estimated marginal cost for water supply and sewage treatment, respectively. For example, the average price to residential customers is $0.32m[superscript 3], while the estimated marginal cost is $0.87/m[superscript 3]. The estimated cost parameters are combined with estimated residential and nonresidential demands functions in order to calculate approximate welfare losses that arise from overconsumption.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 32 (1999)
Issue (Month): 3 (May)
Pages: 688-704

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Handle: RePEc:cje:issued:v:32:y:1999:i:3:p:688-704

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References

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  1. Fraas, Arthur G. & Munley, Vincent G., 1984. "Municipal wastewater treatment cost," Journal of Environmental Economics and Management, Elsevier, vol. 11(1), pages 28-38, March.
  2. Kim, H Youn, 1987. "Economies of Scale in Multi-product Firms: An Empirical Analysis," Economica, London School of Economics and Political Science, vol. 54(214), pages 185-206, May.
  3. Swallow, Stephen K. & Marin, Carlos M., 1988. "Long run price inflexibility and efficiency loss for municipal water supply," Journal of Environmental Economics and Management, Elsevier, vol. 15(2), pages 233-247, June.
  4. Lars Gårn Hansen, 1996. "Water and Energy Price Impacts on Residential Water Demand in Copenhagen," Land Economics, University of Wisconsin Press, vol. 72(1), pages 66-79.
  5. Boisvert, Richard N. & Schmit, Todd M., 1997. "Tradeoff Between Economies Of Size In Treatment And Diseconomies Of Distribution For Rural Water Systems," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 26(2), October.
  6. Renzetti, Steven, 1992. "Evaluating the welfare effects of reforming municipal water prices," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 147-163, March.
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Citations

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Cited by:
  1. Philippe Marin, 2009. "Public-Private Partnerships for Urban Water Utilities : A Review of Experiences in Developing Countries," World Bank Publications, The World Bank, number 2703.
  2. Andrés Chambouleyron, 2004. "Optimal Water Metering and Pricing," Water Resources Management, Springer, vol. 18(4), pages 305-319, August.
  3. Tsegai, Daniel W. & Linz, Teresa & Kloos, Julia, 2009. "Economic analysis of water supply cost structure in the Middle Olifants sub-basin of South Africa," Discussion Papers 49926, University of Bonn, Center for Development Research (ZEF).
  4. Kristof De Witte & Rui C. Marcques, 2008. "Big and beautiful? On non-parametrically measuring scale economies in non-convex technologies," Center for Economic Studies - Discussion papers ces0822, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  5. Satya Mohapatra & Anne Mitchell, 2009. "Groundwater Demand Management in the Great Lakes Basin—Directions for New Policies," Water Resources Management, Springer, vol. 23(3), pages 457-475, February.
  6. Carvalho, Pedro & Marques, Rui Cunha & Berg, Sanford, 2011. "A meta-regression analysis of benchmarking studies on water utilities market structure," MPRA Paper 32894, University Library of Munich, Germany.
  7. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
  8. Richard M. Bird, 2005. "Evaluating Public Expenditures: Does It Matter How They are Financed?," International Tax Program Papers 0506, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  9. Ferro, Gustavo & Lentini, Emilio & Mercadier, Augusto & Romero, Carlos A., 2010. "Retornos a escala en agua y saneamiento: estimaciones para América Latina
    [Returns to scale in water and sanitation: estimates for Latin Amercia]
    ," MPRA Paper 20324, University Library of Munich, Germany, revised Jan 2010.
  10. Steven Renzetti & Diane Dupont, 2009. "Measuring the Technical Efficiency of Municipal Water Suppliers: the Role of Environmental Factors," Working Papers 0901, Brock University, Department of Economics, revised Jan 2009.
  11. Lijin Zhong & Arthur Mol, 2010. "Water Price Reforms in China: Policy-Making and Implementation," Water Resources Management, Springer, vol. 24(2), pages 377-396, January.
  12. Torres, Marcelo & Morrison Paul, Catherine J., 2006. "Driving forces for consolidation or fragmentation of the US water utility industry: A cost function approach with endogenous output," Journal of Urban Economics, Elsevier, vol. 59(1), pages 104-120, January.
  13. Diane Dupont & Steven Renzetti, 2001. "The Role of Water in Manufacturing," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 18(4), pages 411-432, April.
  14. Nicholas Rivers & Steven Groves, 2013. "The Welfare Impact of Self-supplied Water Pricing in Canada: A Computable General Equilibrium Assessment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 55(3), pages 419-445, July.
  15. DIAKITE Daouda & SEMENOV Aggey & THOMAS Alban, 2006. "Social Pricing and Water Provision in Côte d'Ivoire," LERNA Working Papers 06.14.207, LERNA, University of Toulouse.
  16. Maria Corton, 2011. "Sector fragmentation and aggregation of service provision in the water industry," Journal of Productivity Analysis, Springer, vol. 35(2), pages 159-169, April.

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