Is water priced to encourage conservation?

There have been some quite spectacular reductions in Melbourne’s water consumption in recent years. The latest invoice from my water company proclaims that total water consumed by customers has fallen 36% since 1997.

Most of this gain is undoubtedly due to water restrictions and jaw boning. Pricing doesn’t seem to have been a big influence, even though most economists would suggest that it is one of the most efficient ways to moderate demand.

I just got my water bill for the last three months. Average daily use by my household is 495 litres, or 124 litres per person. That’s not bad compared to the Government’s daily target of 155 litres per person (although admittedly it’s been a pretty wet winter).

What surprises me however is the relatively low profile given to pricing as a mechanism for dampening demand (pun intended). My Consumption Charges only amount to 24.4% of my total bill. The other key items are Parks Charges, Drainage Charges, Service Charges and Sewage Charges. Read the rest of this entry »