Water Budgets and Rate Structures

Water budgets-volumetric allotments of water to customers based on customer-specific characteristics and conservative resource standards-are an innovative means of improving water use efficiency. Once thought to be impractical because of technological constraints, water budgets linked with an increasing block rate structure have been implemented successfully in more than 20 utilities. As utilities develop advanced customer information systems and geographical information systems, these rate structures are expected to be applied more broadly. Water budget rate structures are attractive to water agencies searching for stable revenue generation, improved customer acceptance, increased water use efficiency, augmented affordability of nondiscretionary customer water consumption, and improved drought response.


The objectives of this study were to examine water budgets and their potential value to North American water utilities and the varying applications of the water budget concept that have been adapted to different conditions. Key research issues included different practical approaches to water budget rate structures, the benefits and challenges of these approaches, the potential uses of water budgets during drought, and important steps in the water budget implementation process. An extensive literature review was conducted using bibliographic and web-based searches. The researchers conducted numerous structured interviews with water agencies that have already implemented water budgets and water agencies interested in the concept, but not yet using water budgets. This research focused on the technical ability and readiness of the agency as well as the potential barriers to implementation. Agencies also provided annual reports, consumption data, information on customer classes, and information on customer billing systems. Case studies on implemented water budget programs were developed by the research team and reviewed by agency personnel to ensure accuracy. Case studies were chosen to be illustrative of the successes and challenges involved in implementing a water budget rate structure.