Abstract |
The effect of time-varying water prices on the long-run risk of water shortages is studied. A digital simulation model for a hypothetical residential community with a stochastic water supply forms the basis for the study. Prices are allowed to vary as a function of reservoir level, generally rising as reservoir levels fall, although decreasing and constant rates are also tested. These tests suggest that the currently popular declining block rate used by most water utilities is not only poor from a community benefit and social equity standpoint, but is also the poorest from the standpoint of risk of shortages. Varying the price of water in order to reflect its relative value has the greatest effect on reducing the risks of shortages. The model's results are valid for any community with a downward sloping water demand curve. (Author Modified Abstract) |