Conservation-based rate structures are pricing strategies used by water utilities to promote efficient water use among consumers. By adjusting water costs based on usage levels, these structures create financial incentives for customers to conserve water. While particularly effective during drought, implementing these pricing models year-round supports more sustainable water resource management and conservation.
Types of Conservation-Based Rate Structures
- Increasing Block Rates: Under this structure, the unit price of water increases as consumption rises. For example, a household might pay a lower rate for the first 5,000 gallons used, with the rate per gallon increasing for subsequent usage tiers. This approach rewards customers who use less water and imposes higher costs on those with higher consumption, encouraging overall reduction in water use.
- Seasonal Rates: This structure involves adjusting water prices based on seasonal demand variations. Higher rates are charged during peak usage periods, such as summer months, when water demand for activities like irrigation is higher. This strategy aims to reduce excessive water use during times when resources are most limited.
- Water Budget-Based Rates:
Customers are allocated a specific “water budget” based on factors like household size and landscape area. Usage within this budget is charged at a lower rate, while excess consumption results in higher rates. This personalized approach encourages users to stay within their efficient usage limits.
Benefits of Implementing These Pricing Structures
- Encouraging Efficient Use: By linking water costs directly to consumption levels, customers are financially motivated to adopt water-saving practices.
- Revenue Stability for Utilities: Properly designed rate structures can balance conservation goals with the utility’s need for stable revenue, even as overall water use declines.
- Environmental Sustainability: Reduced water consumption helps preserve local aquifers and groundwater resources. This is important for preserving habitat for the endangered Barton Springs and Austin Blind salamanders, maintaining flow at Barton Springs Pool, and protecting the drinking water for over 93,000 people within our territory.
Relevant Resources and Examples
For a comprehensive understanding and further guidance on designing and implementing conservation-based rate structures, consider the following resources:
- Designing Water Rate Structures for Conservation & Revenue Stability: This document provides in-depth guidance on creating rate structures that balance conservation efforts with the financial needs of water utilities.
- Water Rates: Conservation and Revenue Stability: This resource explores how conservation pricing can be structured to provide clear price signals to customers, encouraging efficient water use while maintaining utility revenue stability.
- The City of Los Angeles Shows How Water Conservation and Efficient Water Rates Produce Affordable and Sustainable Use: The Los Angeles Department of Water and Power (LADWP) implemented conservation pricing, efficient plumbing standards, and long-term conservation programs starting in 1992. This paper explores the economic impacts these efforts had over the course of over two decades on water infrastructure, cost savings, and end-user bills.
- City of Austin Water Conservation Plan: The Water Rates portion of this document discusses Austin Water’s five-tiered inclining block rate structure for single-family residential customers and how it has successfully led to a significant decrease in water consumption at the highest tiers.
- Austin Water Rate Adjustment Factsheet: This informational flyer serves as an example of how to effectively communicate rate adjustments. It highlights how Austin Water presented and shared this information with the public in 2025.
- New Braunfel Utilities Water Rate and Structure Explanation: New Braunfels Utilities’ rate design uses a tiered structure along with seasonal rates to encourage water conservation while ensuring essential usage remains affordable. Higher usage tiers are priced progressively to discourage excessive consumption and support infrastructure investment.
Implementing conservation-based rate structures requires careful consideration of local conditions, customer demographics, and utility financial requirements. By thoughtfully designing these structures, utilities can effectively promote water conservation and ensure sustainable management of water resources.
If you’d like to discuss this further with our team, please reach out to Erin Swanson, Regulatory Compliance Manager, at eswanson@bseacd.org or Jacob Newton, Regulatory Compliance Coordinator, at jnewton@bseacd.org.
