Urban Water Pricing: Practical Perspectives and Customer Preferences

There is considerable variation between Australian jurisdictions in their approach to urban water and waste-water pricing. Regardless of the explicit commitments of signatories to the National Water Initiative to 'best practice pricing' in 2004, there are no obvious signs that a common and efficient pricing regime is emerging. This paper considers one of the dimensions of urban water tariffs: the split between 'volumetric' and 'access' charges. Given the practical difficulties of implementing a 'first-best' solution, the preferences of household consumers are explored using choice modelling. Results show that household consumers would prefer a tariff regime that embodies greater emphasis on volumetric charges. This approach would also be more attractive on economic grounds compared to current regimes, with their high access charges and fixed waste-water tariffs.