An Analysis of the Effect of Price on Residential Water Demand in Brown County, WisconsinAngela M. Pierce
Water scarcity is become a growing issue throughout the world. Even the water-rich Great Lakes basin is not immune to arising water scarcity concerns. In many areas around the world, water supply shortages can be attributed to the failure to price water befittingly near its true value. Water in the United States and elsewhere is underpriced, causing it to be undervalued. The value of water is wrongly based only on the cost to supply it, such as the infrastructure, pumping, and treatment. As seen with many scarce resources, undervaluing natural resources, such as water, promotes overuse and discourages conservation.
With growing worldwide water supply concerns, many communities are looking for opportunities to decrease water usage to minimize the need for additional water sources and expanded facilities. Water pricing is one tool among many that can encourage water conservation and promote efficient use, particularly for residential usage. Basic economics predicts that customers would use less water if the costs were greater. However, economists do not agree about the effectiveness of water pricing at reducing demand.
Using water usage amounts and annual water costs in Brown County, Wisconsin, an analysis was undertaken to assess how effectively water pricing reduced residential water demand. Additionally, a number of demographic factors were evaluated over two decades to assess their influence on water demand in Brown County.
It was concluded through this research that when water prices are relatively low, as is the case in Brown County, rate increases have minimal effect on water demand. In addition to price, it was found that the factors that most significantly predict water demand includes lot size, house value, percentage of household occupants, and percentage of older homes.
Although the response to a price increase was minimal, water pricing can still effectively encouraging efficient use of water. Ultimately, water pricing would be most effective at promoting wise water use if the resulting revenues were directed towards a comprehensive water efficiency program with an emphasis on public outreach and education.