Efficient Pricing and Financing of Urban Water: The Role of Development Charges

摘要

Conventional methods of evaluating and designing urban water prices are deficient in several important respects. Urban water is underpriced substantially, due to undercosting which in turn results from failure to adjust accounting data for inflation; to recognize imputed costs, such as interest on equity capital; and to fully provide for rising real costs of source supply. Further, water users often cross-subsidize one another due to uniform postage stamp pricing. This report uses data covering twelve Western U.S. urban water utilities to describe this undercosting and underpricing; describes a first-best pricing paradigm based on real marginal cost; outlines a role and basis for calculating, development charges; and simulates their effects with a discrete non-stochastic simulation model.