BEECHER - NAWC

Water ComparedIndustries ComparedTrends in PricesBy most accounts, water continues to be a "bargain" relative to other utility services. Evenwhen water, wastewater, and other public services (namely, refuse collection) are combined,the annual bill is less than what households pay,' on average, for natural gas, electricity, andtelephone services. 12 However, these gaps may close as the prices for some utility servicesdecline and the price of water rises. As costs rise and demand remains flat, rate increases inthe water sector are likely.One implication is that the affordability of water and wastewater services will emerge as animportant issue. Utility bills are regressive (taking a larger share of the lower-incomefamily's budget). Utility usage increases with consumer income levels, as does the ability topay. However, because water for basic needs is generally price-inelastic, rate increases willlead to higher utility bills. The ability-to-pay problem for low-income households is distinctfrom the general willingness-to-pay problem, which is partly a function of engrained customerperceptions that water expenditures should not be as high as other utility or householdexpenditures. Indeed, the water industry often contends will the perception that water is anentitlement that should be "free." 13Annual HouseholdExpenditures for Utilities:Family of Four (1995)Other householdexpenditures93.6%Water and otherpublic services($344)0.8%Electricity($1 '120)2.6%Natural gas andfuel oil ($432)1.0%Telephone ($839)2.0%12These data, however, include zero values for households that do not pay directly for water service.13To some extent, public ownership and government subsidies have promoted the idea of water service as a"public" or "worthy" good.NAWC 35 September 1998