One thing that I did not make clear (I was confused too!) is this:
- Water bills should charge fixed costs (e.g., connection charge) on a PER METER basis.
- They should charge variable costs (e.g., water use) on a PER CAPITA basis. That means that the width of the lifeline water service block will depend on the number of people, e.g., 75 gallons/capita/day for two people leads to a lifeline block that is 150gal/day "wide." Subsequent blocks can also reflect the number of people, but the price of each block will be the same for ALL households.
- "Excess" revenue that would result if prices in top tiers were high enough should be rebated PER CAPITA.
Bottom Line: Suitably-structured water rates provide the right incentives. Most water rate structures are not suitable, and that's why we have water "shortages." Raise prices!