State Water Resources Research Institute Program


Project ID: 2007HI183B
Title: Efficient Water Management and Block Pricing for Integrated Aquifers: Lessons from Southern Oahu
Project Type: Research
Start Date: 3/01/2007
End Date: 2/28/2008
Congressional District: 1
Focus Categories: Economics, Management and Planning, Hydrology
Keywords: (integrated) water system management, demand management, efficiency pricing, dynamic optimization, consumer welfare, block pricing, marginal user cost
Principal Investigator: Roumasset, James A.
Federal Funds: $ 8,906
Non-Federal Matching Funds: $ 49,598
Abstract: We propose to use an intertemporal and spatial optimization process to derive an efficient pricing scheme for the integrated water system of Southern Oahu, accounting for above-ground and subsurface transfers. Welfare gains from this scheme will be analyzed and compared to those associated with the new pricing scheme initiated by the Honolulu Board of Water Supply, effective October 2006. An additional pricing mechanism will be explored utilizing variations in the block structure and the welfare gains associated with this scheme investigated. Inframarginal consumption blocks are utilized to make the recommended schemes politically feasible (win-win) by ensuring consumer welfare does not decrease for any consumption group. Recommended demand management schemes will extend the useful life of the Southern Oahu aquifers, delaying dependence on a backstop resource, such as desalination, and induce conservation through pricing mechanisms accounting for marginal user cost.

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