Is it time for a water tariff innovation? The case for dynamic tariffs

Abstract

The primary premise is that the current pricing system might be inflexible to appropriately balance short-term water demand with available supply and that it is inconducive to the changing global and national developments impacting long-term water resources. In economic theory, the price of a good or service shows the benefit consumers derive from said good and the cost of providing the good, i.e. the value of consuming and producing the good respectively. Inefficient pricing systems can result in the poor allocation of the resource, i.e. allocative inefficiency, where the pricing system does not provide the good to where it is needed the most. It can also result in under-pricing and over-consumption if the price does not effectively reflect the economic value placed on a good or service.

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