Increasing block-rate water budgets are an innovative type of escalating tiered price structure in which the consumption block sizes are based on household characteristics, environmental conditions, and a judgment by the water utility with regard to what constitutes “efficient” water use given those characteristics and conditions.
In these water budgets, prices are set relatively low for the most essential uses of water but then increase with usage. The price structure more accurately reflects the cost of supplying water and thus sends a more appropriate price signal to customers regarding water scarcity. It also helps water utilities to maintain fiscal balance despite uncertain fluctuations in supply and demand conditions.
But do block-rate water budgets encourage customers to conserve water?
Yes, according to Kenneth Baerenklau, an associate professor of environmental economics policy at the University of California, Riverside who performed the first study to estimate the conservation potential of water budget rate structures.
“Increasing block-rate water budgets appear to be a highly effective price-based conservation tool that does not require significantly increasing the average price paid for water,” he says. “Our research helps to clarify one of the main benefits — water conservation — at a time when the state is coping with an extreme drought and expecting a drier and more variable climate in the future.”
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