03 October 2011

More on US water tariff structures

GS sent the following comments in response to this post:
Not sure if you are still looking for data on the proportions of utilities using different rate structures, but I came across this EPA document [PDF] that states:

Three rate surveys give us some insight into existing industry practices regarding conservation pricing. The Raftelis Environmental Consulting Group’s 2000 Water and Wastewater Rate Survey depicts 29 percent of surveyed communities using increasing block rates (where cost per thousand gallons increases at various increments of usage). The American Water Works Association’s 1998 survey of the residential rate structures of 827 utilities shows approximately 22 percent employing increasing block rates and 2 percent employing seasonal rates.

The largest sample set (over 1,200 systems) comes from EPA’s Community Water System Survey 2000 found at http://www.epa.gov/safewater/cwssvr.html. This survey shows only 9.2 percent of systems employing increasing block rates. To be precise, all these surveys pertain to water rates and not wastewater rates. However, most residential wastewater is not metered but is instead billed in proportion to water coming into residences (drinking water) or by some other formula.
FYI, the EPA has a LOT of information on water, but I turned to Rob Froetscher (a recent graduate of U Virgina), who has been playing with EPA data for some time, for some context. Here's what he said:
Those are some interesting numbers. 29% versus 22% versus 9.2% certainly suggests that at least two of the surveys have some bias.

Interestingly, Raftelis (whom the document references as having done their own survey in 2000) also did all the American Water Works Association surveys that I have (2006 and 2008). That makes me wonder if they also did the 1998 AWWA survey that the document references.

I know there is selection bias on the AWWA survey (and probably the Raftelis) too. They tend to underrepresent small systems because those systems don't have the resources to respond to their surveys. Additionally, because they publish the full names of their systems and ask detailed financial information I would assume that unprofitable systems would be largely underrepresented.

The EPA goes to some lengths to make sure they have a representative sample of systems on the CWSS, including sending personnel out to small systems in order to help them respond. Additionally the CWSS is "anonymous" (unless you manage to get the key matching it to SDWIS) so that probably reduces selection bias.

In short, yes, I would worry about selection bias especially on the Raftelis and AWWA surveys. I would say that the EPA's number (9.2%) is likely the closest. I bet the number from the 2006 CWSS is even closer.
As further background on this topic, I quote the first email Rob wrote to me:
The EPA's 2006 Community Watersystem Survey has information on pricing mechanisms. Their PDF report can be downloaded from their website or you can get their Stata data (which I had to FOIA them for) over at my site, waterthought.org, on the "Knowledge" page [ZIP file].

If you get the PDF I think you'll want to look at table 71.

If you download the data I think what you'll want will be in the stata file called cwss.dta. The question that asks about pricing mechanisms is question 22.
Now the craziest thing of all is that Rob had to file an FOIA to get water pricing data. It's not because such data are a national security risk; it's because EPA prioritizes its workload based on "pull" demands from people filing FOIAs. Talk about transaction costs!

* Rob is also looking for a job researching water economics/policy issues (email him)

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