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Price- and Non-Price Water Demand Management Strategies for Water Utilities

Author

Listed:
  • Asci, Serhat
  • Borisova, Tatiana
  • Dukes, Michael D.

Abstract

Florida’s freshwater withdrawals for public water supply are the fourth largest in the U.S. (Kenny et al., 2009). Groundwater is the primary freshwater source, and given reductions in aquifer levels, water suppliers have been developing price- and non-price strategies to encourage residential water conservation. This study estimates price and income water demand elasticities for high water use residential properties in Central Florida, and compares the effectiveness of conservation pricing and irrigation controller installation in curbing residential water use. Our panel dataset includes monthly water use for 180 properties for January 2003 ̶ May 2009 (11,903 observations). Three stage least square (3SLS) technique is used to estimate average price and income elasticity, while property-level gross irrigation requirements account for weather effects on outdoor water use. Given alternative estimation techniques, the income elasticity is 0.07 and the price elasticity ranges from -0.11 to -0.13. Based on existing literature (Boyer et al., 2014), smart irrigation controller installation results in average 3.5 KGA/month water use reduction. The same water use reduction is achieved by 170% water price increase that is currently politically infeasible. However, moderate price increase can incentivize installation of irrigation controllers by reducing their payback periods.

Suggested Citation

  • Asci, Serhat & Borisova, Tatiana & Dukes, Michael D., 2015. "Price- and Non-Price Water Demand Management Strategies for Water Utilities," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196768, Southern Agricultural Economics Association.
  • Handle: RePEc:ags:saea15:196768
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    File URL: http://purl.umn.edu/196768
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    References listed on IDEAS

    as
    1. Asci, Serhat & Borisova, Tatiana, 2014. "The Effect of Price and Non-Price Conservation Programs on Residential Water Demand," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170687, Agricultural and Applied Economics Association.
    2. H. Allen Klaiber & V. Kerry Smith & Michael Kaminsky & Aaron Strong, 2014. "Measuring Price Elasticities for Residential Water Demand with Limited Information," Land Economics, University of Wisconsin Press, vol. 90(1), pages 100-113.
    3. Michael L. Nieswiadomy & David J. Molina, 1989. "Comparing Residential Water Demand Estimates under Decreasing and Increasing Block Rates Using Household Data," Land Economics, University of Wisconsin Press, vol. 65(3), pages 280-289.
    4. John A. Nordin, 1976. "A Proposed Modification of Taylor's Demand Analysis: Comment," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 719-721, Autumn.
    5. Lester D. Taylor, 1975. "The Demand for Electricity: A Survey," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 74-110, Spring.
    6. R. Bruce Billings & Donald E. Agthe, 1980. "Price Elasticities for Water: A Case of Increasing Block Rates," Land Economics, University of Wisconsin Press, vol. 56(1), pages 73-84.
    7. Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
    8. Michael L. Nieswiadomy & David J. Molina, 1991. "A Note on Price Perception in Water Demand Models," Land Economics, University of Wisconsin Press, vol. 67(3), pages 352-359.
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