A Data-Driven Model to Evaluate the Medium-Term Effect of Contingent
Pricing Policies on Residential Water Demand
Abstract
The relative scarcity of water resources have encouraged cities to
create mechanisms to control water demand and avoid water stress. In the
decision-making process, water companies need to assess the price
influence on water demand predictions to design better policies. The aim
of this study is to assess the medium-term effectiveness of the
implementation of a contingent tariff and its consequences for water
demand elasticity to price. A novel model that requires only secondary
data is proposed, that can be useful for guiding the drought planning
process. The methodology consists in a framework that provides monthly
predictions of water demand at the household level, considering price,
seasonality, and previous water use. The results indicated that the
contingent tariff promoted a reduction of 11-15% in water demand, but
at a higher cost for low income households. Also, reduction in water
demand was found to be inelastic to price increase. Using google search
hits as a proxy for public interest, we found that water cost has a
higher influence on users decision to save water than drought awareness.