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The impact of pricing structure change on residential water consumption: A long-term analysis of water utilities in California

Juhee Lee, Mehdi Nemati, Maura Allaire, Ariel Dinar | February 10th, 2024

California’s demand-side urban water management policies, such as shifting water pricing structures from non-conservation to conservation-based rates, have received much attention in terms of meeting the state’s short- and long-term water conservation policies. This paper quantifies the effect of pricing structure changes on residential water consumption using a survey dataset of 189 major California water utilities from 1994 to 2019. Results of our study demonstrate that residential per capita per day water consumption was reduced by an average of 2.6% when water agencies switched from non-conservation-based to conservation-based pricing structures. We also found evidence that the longer a utility maintained a non-conservation-based rate structure before switching to conservation-based pricing, the larger the water consumption reduction in that utility’s service area. In addition, utilities that reverted to non-conservation rates after having longer-term conservation pricing structures experienced smaller increases compared to having long-term non-conservation ones in water use in their service areas. This suggests evidence of a crowding-in effect for transitions from conservation-based to non-conservation-based pricing structures.


economic analysis, urban water conservation