CENTER FOR URBAN POLICY AND THE ENVIRONMENT - NAWC

Indiana University + School of Public & Environmental AffairsCenter for Urban Policy & the EnvironmentII. The Value and Price of Water ServiceWater service is a highly essential, if not the most essential public utility service. Water isneeded for drinking purposes, but also for sanitation and fire protection needs. Water serviceembodies significant public health, environmental, and quality of life considerations. Water hasmany purposes, but it is the only utility product consumers actually ingest within their bodies.Customers demand, and regulators require, high standards for water service as measured throughvarious quality, reliability, and aesthetic indicators. Over the long run, the utility is obligated tomeet these standards at a reasonable cost.Water service in many respects is a tremendous bargain. For the price of a gallon ofbottled water at the supermarket, the typical U.S. water customers can turn on the tap and receive500 or more gallons of treated water! 8 Bottled water consumers may value the product for tasteand other aesthetic reasons. But bottled water offers no health or safety advantage, is notregulated for quality control, and is highly impractical for all but drinking and some foodpreparation purposes. Water also is a bargain in comparison to other consumer goods andservices. A favorite comparison among utilities is between water (considered very essential) andcable television (considered very discretionary). Some customers seem more willing to pay forcable television than for water service.Table 2Average Annual Consumer Expenditures, 1994Gasoline and motor oil $986Electricity 861Telephone 690Natural gas, fuel oil, other fuels 381Public transportation 381Alcoholic beverages 278Tobacco products and smoking supplies 259Water and other public services 257Nonalcoholic beverages 233Source: U.S. Department of Commerce, Consumer Expenditure Survey (1994). The survey measures actualexpenditures; some respondents may not have these services and some may not be billed for these services.8For a comprehensive survey of water rates, see Raftelis Environmental Consulting Group, 1996 NationalWater and Wastewater Rate Survey (Charlotte, NC: Raftelis Environmental Consulting Group, Inc., 1996).5