28 August 2013

When to submeter a multi-unit building?

BF asks:
I've noticed that there are still many multi-unit residential buildings that have a single water meter, and residents are typically charged a flat fee by the landlord (who then pays the bill, whatever it is). Do you know of any research that looks at the potential value of requiring meters at the individual (household) level? I guess this would be similar to comparing a fixed fee system vs any of the block rate / marginal price systems.

Obviously, all the research on price elasticity assumes individual metering exists and matters, so I was surprised to see that many residential buildings have only one meter, and perhaps the value of individual meters is still an open question for building owners?
I've discussed sub-metering within a building before, but I've come to believe that
  • Individual unit meters don't matter as much when water is too abundant to ration. They may be popular if people want payment in proportion to use rather than payment for access to water services
  • The cost of meters may exceed the benefit of reduced water use
  • People are not very price sensitive (i.e., low elasticity) when it comes to indoor water use, so pricing may not have much impact. Combine that fact with increasing block rates that are inefficient and unfair, and you may get a worse outcome than sticking with uniform prices and a master meter
  • Submeters need not be the utility's problem. It can install a single master meter and send a bill to the building (a common practice), which then finds a way to allocate the bill. Allocation in proportion to headcount, number of rooms, rent, etc. can make sense. Building occupants may decide to install cheaper meters (not built to withstand tampering, etc.) if they want to bill for use
I'm not finished with my metering paper, so I'll recommend Berraque's paper opposing multi-unit meters [pdf]

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