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Seasonal Pricing of Residential Water in the Capital Regional District of British Columbia: A Proposal

Congress: 2008
Author(s): Yichuan Wang
Address: 64C Fifth Avenue Ottawa, ON K1S 2M6 CANADA Cell phone: 778-997-3619 Email: yichuan@interchange.ubc.ca yich_wang@yahoo.com

Keyword(s): seasonal pricing, residential water demand management, peak load pricing, economic instrument
AbstractIntroduction Water consumption in the Capital Regional District (CRD) of British Columbia, Canada is highly seasonal, peaking in the summer. Objective I investigate whether seasonal pricing can offer policy improvements. Methods This paper presents the empirical results of regression analysis using primary and secondary data that I collected and original econometric modeling. I use data compiled from various sources to analyze residential water demand in four jurisdictions in the CRD: Victoria-Esquimalt, Saanich, Oak Bay, and the Saanich Peninsula. I analyze monthly water demand from 1999 to 2005 using OLS regression and I fit the data to three models. I focus on seasonal variability in residentsí price elasticity of demand for water. Results I find estimation results that indicate residential water consumption in the summer is more responsive to price than is residential consumption in the winter. I obtain an estimated peak price elasticity of demand of -1.07 and an estimated off-peak price elasticity of demand of -0.68. Conclusion The findings are interesting in 1) revealing a more responsive price-elasticity in the summer than in the winter, and 2) suggesting that pricing can be a policy improvement to water restrictions. These results support the potential effectiveness of seasonal pricing policies in curbing excessive residential water demand in the peak summer period. The findings also lend support to the need for peak load pricing as a forward-thinking policy in the context of growing seasonal mismatch of water demand and supply that would be exacerbated by climate change.
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