Conservation-Based Rate Structure

Conservation-based rate structures are an option for water utility companies to provide an economic incentive for their customers to conserve resources. While especially beneficial during times of drought, instilling such a structure can help water conservation be a continuous practice amongst end-users. 

What are Conservation-Based Rate Structures?

Conservation-based rate structures involve increasing end-users unit prices based on increased consumption. There are two types of conservation-based rate structures:

  1. Inverted or increasing structures – customers who use higher volumes pay more per unit of water
  2. Seasonal or off-peak structures – increasing rates per unit of water during the peak demand season

Some benefits of implementing such a rate structure include:

  • Reducing water consumption without net negative impacts on utility revenues 
  • Rewarding customers for making cost-effective changes in water appliances and behavior through greater savings 
  • Targets inefficiency in discretionary water uses such as landscape irrigation. 

If you decide to implement a water conservation-based rate structure, it’s important to also implement outreach efforts. Informing end-users on items such as volumes of water needed for daily activities, specific actions needed to reach conservation goals, how rates work, and how to interpret bills can help increase participation and reductions in water consumptions. 

Conservation-Based Rate Structure Resources

The City of Los Angeles Shows How Water Conservation and Efficient Water Rates Produce Affordable and Sustainable Use
Los Angeles Department of Water and Power
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Designing Water Rate Structures for Conservation & Revenue Stability
Environmental Finance Center and Sierra Club Lonestar Chapter
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Texas Water and Wastewater Rates Dashboard
Environmental Finance Center at the University of North Carolina, Chapel Hill
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