Principal Investigator: Yoko Parmelee (The University Of Georgia)
Principal Investigator: Jackie Sellers (University of Georgia)
Principal Investigator: Ronald M. North (University of Georgia)
Principal Investigator: Hubert A. Pless (The University Of Georgia)
Sponsor: GWRI
Start Date: 1986-06-01; Completion Date: 1986-06-01;
Keywords: financing, pricing, user charges, cost sharing, financial feasibility, economic cost, water rates, repayment, demand, benefit cost analysis, cost allocation, water rights, tariff, market value, water policy.
Description:
As appropriated Federal funds for water resources projects, programs, and services decline the funding needs must be made up by state and local governments and/or by the private sector businesses and consumers. As the responsibility for infrastructure moves to the private sector it is essential for economic efficiency and financial feasibility to price water services at their full cost or at a price that reflects their value to consumers and users in a manner that covers at least the full cost. For all of the flow services produced by water (supply, waste treatment, hydropower), a two part tariff is recommended to reflect a capacity charge and a commodity charge. Tariffs should be set to reflect the high fixed cost of service and to reflect user willingness to pay for essential services. The excess revenue may be used to provide for welfare transfer to low income users or to provide for water related common goods type services such as flood control or environmental enhancement.
The researchers review demand theory and present a case study for price/income elasticities of demand for Georgia municipal systems to illustrate price and income effects on revenues. Similar theoretical constructs are presented for two market pricing solutions and for discriminatory pricing within a market for flow type commodities, both systems intended to generate revenue more closely aligned to market value of the services provided. A second case study is used to show how updated alternative cost pricing will lead to increases of 4-10 times in the revenue received from hydropower generation (capacity and energy). Although some repayments are long term contracts, there are opportunities to renegotiate contracts for better terms to Federal agencies producing and marketing hydropower. Specific details are given for the Southeast Power Administration (SEPA).