How Droughts Shape Water Rates Affordability, Revenue Stability, and Water Use in Urban Utilities

Abstract Submission: Water utilities face the challenge of providing reliable and affordable water services while maintaining financial stability through water bill collection. Setting water rates is a complex task that involves balancing competing needs, including water affordability for the community while discouraging excessive water use, and ensuring revenue stability for the utility. Droughts are a significant financial stress on water utilities because they increase utility costs of supplying water and reduce revenue from water use restrictions.
With climate change increasing drought frequency and intensity, current utility financial models are starting to underperform and reveal unintended consequences for instance by disproportionally overburdening low-income groups. This research first develops metrics to evaluate the tradeoff between water affordability, revenue stability, and the control of excessive water use in several urban utilities across the US, as dependent on the intersection of utility water rates with a community’s income distribution and water use behavior. Additionally, we analyze how past rate changes have affected these tradeoffs over time, particularly in response to drought conditions, and project how future drought scenarios may further shift these dynamics.

Learning Objectives/Expected Outcome (Optional) :