Measuring Welfare Losses from Urban Water Supply Disruptions
Author(s) -
Steven Buck,
Maximilian Auffhammer,
Stephen F. Hamilton,
David L. Sunding
Publication year - 2016
Publication title -
journal of the association of environmental and resource economists
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.367
H-Index - 22
eISSN - 2333-5963
pISSN - 2333-5955
DOI - 10.1086/687761
Subject(s) - welfare , economic shortage , agricultural economics , willingness to pay , economics , non revenue water , deadweight loss , sample (material) , water supply , acre , estimation , natural resource economics , business , water conservation , environmental science , water resources , microeconomics , environmental engineering , agricultural science , management , ecology , linguistics , philosophy , chemistry , chromatography , government (linguistics) , market economy , biology
The paper evaluates welfare losses from urban water supply disruptions for a sample of 53 urban water utilities in California collectively providing service to over 20 million customers. The analysis accounts for the fact that most water utilities engage in a form of average cost pricing where volumetric rates are used to finance fixed expenses. We estimate utility-specific price elasticities for use in the welfare analysis, which are derived from a demand estimation based on a panel data set of 37 California water utilities. Welfare losses for an annual disruption range from an average of $1,458 per acre-foot of shortage for a 10% supply disruption to an average of $3,426 per acre-foot of shortage for a 30% supply disruption. The results indicate a household-level willingness to pay to avoid an annual disruption of approximately $60–$600 depending on the shortage size and location.
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