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Matching customers’ preferences for tariff reform with managers’ appetite for change: The case of volumetric-only tariffs in Australia

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  • Khosroshahi, Saeideh
  • Crase, Lin
  • Cooper, Bethany
  • Burton, Michael

Abstract

At the height of the Millennium Drought in Australia, there was unprecedented interest in the role of demand-side management in the urban water sector. Conservation tariffs, where water users pay significantly less by reducing consumption, were mooted in some policy circles, although they were never seriously trialled. The easing of the drought was also accompanied by a new era of economic regulation, where monopoly water suppliers are increasingly encouraged to deliver services valued by customers. This trend has been embraced in Victoria, where the Essential Services Commission effectively rewards water businesses that match their services against customer expectations. This article explores whether customers and business managers hold similar priorities for water services by using a Best-Worst Scaling experiment. The experiment includes a conservation tariff, and findings suggest that customers enjoy relatively higher utility from these tariffs, sustainability, water restrictions and small-scale projects compared to the services emphasised by managers. The study exposes the general difficulty of water businesses matching their customers’ preferences, especially if there is heterogeneity in preferences and given businesses must simultaneously deliver on many other fronts.

Suggested Citation

  • Khosroshahi, Saeideh & Crase, Lin & Cooper, Bethany & Burton, Michael, 2020. "Matching customers’ preferences for tariff reform with managers’ appetite for change: The case of volumetric-only tariffs in Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(02), January.
    • Handle: RePEc:ags:aareaj:342956
    DOI: 10.22004/ag.econ.342956
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    References listed on IDEAS

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    1. Bethany Cooper & Michael Burton & Lin Crase, 2018. "Valuing improvements in urban water security: evidence of heterogeneity derived from a latent class model for eastern Australia," Applied Economics, Taylor & Francis Journals, vol. 50(31), pages 3364-3375, July.
    2. Erdem, Seda & Rigby, Dan & Wossink, Ada, 2012. "Using best–worst scaling to explore perceptions of relative responsibility for ensuring food safety," Food Policy, Elsevier, vol. 37(6), pages 661-670.
    3. Bethany Cooper & Lin Crase & Darryl Maybery, 2017. "Pushing the Governance Boundaries: Making Transparent the Role of Water Utilities in Managing Urban Waterways," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(8), pages 2429-2446, June.
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