Transferable Rate Entitlements: the Overlooked Opportunity in Municipal Water Pricing

Abstract

Entitlements to marketable water rate options (coupons) have been shown capable of addressing the issue of equity in water pricing, thus allowing efficient marginal cost pricing. This article proposes a "behind the scenes" variation that eliminates learning or transaction costs on the part of the consumer. The article proceeds to explore possibilities to adjust water rates so as to enhance revenues along with efficiency while using the companion instrument of transferable rate entitlements to address equity concerns. This combination opens up possibilities for privatization or deregulation of municipal water utilities.