AWWA JAW6507

Marginal cost pricing and seasonal pricing are two economic theories applicable to water rate structures. The rationale for each concept is presented. There are obstacles that can impede actual use of these concepts in water service, including problems with incremental cost calculation, peak price elasticity, excess revenue, distribution of income, and efficiency. Other specific application problems covered are needle and shifting peaks, public acceptance, loss of customers, metering, and calculation of distribution costs, customer costs, and fire protection costs. Nevertheless, such problems should not prevent the consideration of innovative rate-making structures. Includes 7 references.