Price- and Non-Price Water Demand Management Strategies for Water Utilities

Florida’s freshwater withdrawals for public water supply are the fourth largest in the U.S. (Kenny et al., 2009). Groundwater is the primary freshwater source, and given reductions in aquifer levels, water suppliers have been developing price- and non-price strategies to encourage residential water conservation. This study estimates price and income water demand elasticities for high water use residential properties in Central Florida, and compares the effectiveness of conservation pricing and irrigation controller installation in curbing residential water use. Our panel dataset includes monthly water use for 180 properties for January 2003 ̶ May 2009 (11,903 observations). Three stage least square (3SLS) technique is used to estimate average price and income elasticity, while property-level gross irrigation requirements account for weather effects on outdoor water use. Given alternative estimation techniques, the income elasticity is 0.07 and the price elasticity ranges from -0.11 to -0.13. Based on existing literature (Boyer et al., 2014), smart irrigation controller installation results in average 3.5 KGA/month water use reduction. The same water use reduction is achieved by 170% water price increase that is currently politically infeasible. However, moderate price increase can incentivize installation of irrigation controllers by reducing their payback periods.

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 Record created 2017-04-01, last modified 2017-08-28

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