Urban Water Pricing

Abstract

water crisis looming in some Australian cities. In Sydney it is currently feared that without significant rainfall the city will run out of water within a few years. In the short term water restrictions have been implemented. Public attention has focussed mainly on technological solutions to the shortage. In Sydney there is debate over whether the water network should be expanded using either recycling or desalination plants. Similar issues are arising in other cities. The use of efficient pricing to ration available water resources, however, has received little attention. In contrast a number of water authorities have championed the use of increasing block tariff (IBT) as a means of conserving water. This paper considers the merits of these pricing reforms.