Water Resources Research Act Program

Details for Project ID 2019CA027B

Determining the Effect of Pricing Structure on Urban Water Demand: A Long-Term Analysis of Major Water Utilities in California

Institute: California
Year Established: 2019 Start Date: 2019-06-01 End Date: 2020-05-31
Total Federal Funds: $15,000 Total Non-Federal Funds: $30,000

Principal Investigators: Mehdi Nemati

Project Summary: Public utilities in arid regions struggle to balance supply and demand of water resources both in the short-term and long-term. Utilities use a variety of tools to meet these conservation goals including price adjustments, water use restrictions, dissemination of information geared at reducing residential water waste, and rebate programs such as ‘cash for grass’ and efficient appliances. The implementation of new pricing structure aims to guide residents towards water savings and efficient water use, but there are questions over the effectiveness of these strategies to achieve conservation goals. Therefore, this project will determine the effectiveness of changes in the pricing structure from 1996-2017 in major California water utilities’ at reducing residential water demand. Three main objectives of this project are: 1. Create a comprehensive water utility level database of water consumption, prices, pricing structure, and water utility characteristics in California; 2. Utilize this database to evaluate the credibility and sensitivity for estimates of the price elasticity of urban water demand under different sets of demand assumptions; and 3. Continue to disseminate research-based information to improve landscape water use conservation and augment current materials with price-structure findings. The proposed empirical strategy uses panel data models and synthetic control method (SCM) from spatial and temporal variability in pricing structure at the water utility level to identify pricing structure effect on the elasticity of water demand. Results will be disseminated through peer-reviewed publications, articles for the popular press and the public, and presentations at scientific conferences as well as local workshops and events.