Efficiency and equity in two-part tariffs : the case of residential water rates
Title: Efficiency and equity in two-part tariffs : the case of residential water rates
Author: PORCHER, Simon M.
Citation: Applied economics, 2014, Vol. 46, No. 5, pp. 539-555
Series/Number: [Florence School of Regulation]
ISSN: 0003-6846; 1466-4283
As first noticed by Coase (1946), a standard result in utility regulation is that efficiency requires two-part tariffs with marginal prices set to marginal costs and fixed fees equal to each customer’ s share of fixed costs. Residential water customers in France face marginal prices for water that average about 8% more than marginal costs. Under price elasticity estimates that are consistent with previous results in the literature, efficiency costs represent around 8 million euros of welfare losses for 2008. Even though the impact is fairly small, current price schedules are an important pre-existing distortion which should be considered when evaluating current taxes aimed at addressing external costs. Moreover, efficiency gains from reformed tariffs could be used to fund water assistance programs focused on financially stressed households.
Published online: 19 November 2013
Files in this item
There are no files associated with this item.