Christine E. Boyle, PhD is a Post-doctoral Fellow at the Environmental Finance Center. Dr. Boyle investigates new models for sustainable local water and energy provision.
Why are utilities exploring alternative business models?
Water and wastewater utilities in Georgia, and most of the country, generally use rate structures that tie revenues to the volume of water sold. With the increasing pressure to conserve water, utility revenues are declining. For most utilities the reality of reduced water demand presents a significant financial challenge: rising infrastructure costs must be recovered from a sinking sales base. Simply raising rates will not necessarily solve the problem. To the extent that demand for water is elastic, increases in water rates can actually drive water use down further. Additionally, the public may perceive an increase in rates as “punishment” for reducing their water use.
To further explore strategies for utilities to minimize revenue vulnerability due to declining water sales, the Environmental Finance Center worked with Clayton County Water Authority to see what modifications to their water business model could better address this “conservation conundrum.”