California’s severe drought and statewide conservation mandate provided an opportunity to analyze the effects of pricing strategies as a tool to curb water use. In 2015, the State Water Resources Control Board was charged with implementing a reduction of 25 percent on the state’s local water supply agencies. One of the strategies the Board suggested to local agencies was to look at ways rate structures could provide a financial incentive, also known as a price signal, to customers to conserve water.
Did water agencies with higher price signals achieve greater water savings than others? In some cases, yes. But not always.
A team from the Environmental Finance Center at the University of North Carolina at Chapel Hill analyzed data on hundreds of California water agencies’ water pricing, residential water use, and production data from the mandatory conservation period from June 2015 to May 2016, resulting in three key takeaways for one major conclusion: no single pricing strategy works for every agency in reducing water use. Continue reading