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Optimal water tariffs and supply augmentation for cost-of-service regulated water utilities

Grafton, Quentin; Chu, Long; Kompas, Tom


We describe how a common method for regulating water utilities, cost-of-service regulation, can both in theory and practice result in the premature and economically inefficient water supply augmentation. Using a dynamic model calibrated to demand and supply conditions in Sydney, Australia we show how to optimally determine the time to supply augment using a ‘golden rule’ that minimises the average volumetric price paid by consumers. Our results show that, the greater the water scarcity and the...[Show more]

CollectionsANU Research Publications
Date published: 2015
Type: Journal article
Source: Utilities Policy
DOI: 10.1016/j.jup.2015.02.003


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