Article

Social and Nonlinear Tariffs on Drinking Water: cui bono? Empirical Evidence from a Natural Experiment in France

Authors:
To read the full-text of this research, you can request a copy directly from the author.

Abstract

This empirical study discusses both the incentive and redistributive effects of nonlinear tariffs on the drinking water of developed countries. Using an original panel database based on a natural experience with drinking water in France, we econometrically explore the impact of tariffs changes on consumption (linear versus nonlinear). We demonstrate that this measure reduces global consumption. However, small consumers ( > 75 m3) benefit from the new tariff program and increase their consumption, whereas the consumption of the others ( > 75 m3) decreases. Public policy implications of such tariffs on drinking water may lead to a discussion on the design of these tariffs and the quality of the information given on water consumption.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the author.

... Grafton et al. [2011] ont montré que la tarification progressive affectait négativement la consommation. Une étude précédemment conduite à partir de l'expérience menée dans la ville de Dunkerque (Mayol [2017]) a montré que l'introduction d'un tarif progressif produisait un choc de demande négatif pour l'ensemble des consommateurs. Cette conclusion rejoint d'autres résultats, comme ceux présentés par Binet, Carlevaro et Paul [2016] sur la demande d'eau potable à La Réunion avec des tarifs progressifs, et surtout ceux de Barraqué [2016], qui analyse l'impact d'un tarif progressif dans une ville française moyenne. ...
... 10. Voir Mayol [2017]. Nous n'intégrons pas les consommateurs de type CMU dans le modèle car cet élément complexifierait davantage le modèle. ...
... Dans le domaine de l'eau potable, les élasticités des consommateurs semblent hétérogènes puisqu'ils ne réagissent pas tous de la même manière aux changements de prix. Dans notre étude précédente (Mayol [2017]), nous avons pu mettre en évidence que selon la taille du foyer ou le volume de consommation, les ménages ne réagissaient pas de la même manière au changement du mode de tarification. Cela laisserait supposer que, par hypothèse, les élasticités des différents types de consommateurs pourraient être différentes. ...
Article
L’approche des tarifs de l’eau potable en France a changé depuis 2010, puisque les collectivités peuvent recourir à des tarifs progressifs croissants par blocs. Ces tarifs, bien qu’initialement conçus comme des solutions de second rang aux pertes sèches du monopole, se révèlent complexes à mettre en œuvre pour satisfaire d’autres objectifs. La réaction sous-optimale des consommateurs au signal-prix et les problématiques de redistribution questionnent l’efficacité du mécanisme. Cette contribution analyse théoriquement les propriétés d’un tarif progressif, puis évalue empiriquement la réaction des consommateurs au signal-prix à partir d’une expérience naturelle menée à Dunkerque. Les résultats indiquent une bonne réaction au prix marginal des consommateurs situés dans les tranches extrêmes, tout en questionnant l’équité d’un mécanisme fortement distorsif.
... Autrement dit, le tarif de Dunkerque crée une distorsion importante au détriment des gros consommateurs pour récupérer les pertes réalisées sur la tranche 1. De plus, ces distorsions tarifaires conduisent à une augmentation des recettes globale avec le nouveau tarif, au détriment principalement des gros consommateurs qui supportent une grande partie du coût de la mesure. Plus largement, l'équité de ce dispositif est discutable en s'inscrivant dans la continuité des critiques de Crampes and Lozachmeur [2014] et Mayol [2017] sur cette question. ...
... Une étude, précédemment conduite à partir de l'expérience menée dans la ville de Dunkerque (Mayol [2017]), a montré que l'introduction d'un tarif progressif produisait un choc de demande négatif pour l'ensemble des consommateurs. ...
... • La consommation moyenne a baissé d'environ 2,46% en 2 ans, ce qui confirme les résultats obtenus dans Mayol [2017] et notre calcul d'élasticité-prix de -0.2 qui ont observé un effet négatif de la mesure sur la demande. ...
Thesis
Full-text available
La présente thèse propose une étude théorique et empirique des déterminants de la tarification des services publics et de leurs conditions d’efficacité. La prise en compte des enjeux environnementaux et sociaux, le déploiement des réseaux intelligents et la contrainte forte de maîtrise des coûts ont conduit à la mise en œuvre de nouvelles pratiques en matière tarifaire et organisationnelle dans les services publics. Cette thèse propose trois essais consacrés à l’impact de ces nouvelles pratiques dans l’eau potable en France. Dans un premier temps, nous analysons le passage d’un tarif affine à un tarif progressif sur le comportement des consommateurs d’eau potable, à partir d’une expérience naturelle menée à Dunkerque. Un premier résultat indique que la demande a baissé avec ce nouveau tarif, tout en créant des distorsions. Un deuxième résultat indique que la réaction des consommateurs au signal-prix a été ambivalente. Ces travaux suggèrent de repenser le design tarifaire et l’accompagnement des consommateurs dans leurs choix pour limiter les biais cognitifs. Dans un deuxième temps, nous analysons comment l’organisation politique locale (en France, le niveau de la commune, du syndicat de communes ou de l’intercommunalité) et le mode de gestion (public ou privé) peuvent influencer la performance du service public. L’incidence de ces configurations organisationnelles sur les coûts n’a jamais été étudiée simultanément par la littérature. Nous proposons un modèle théorique, validé par une étude empirique à partir d’un panel des services d’eau français, qui met en évidence l’impact de ces différentes configurations organisationnelles sur le prix.
... In Belgium, the price elasticity for the lowest-income quintile was estimated as −0.76, as compared to −0.25 for the highestincome quintile [18]. Mayol (2017) showed that by observing the different types of consumers, some consumers were more sensitive to windfall effects caused by a lower tariff, but that most consumers were incentivized to reduce their consumption [19]. showed that households in single-family units are more reactive to changes in water price than households in multi-family units, all being equal [20]. ...
... In Belgium, the price elasticity for the lowest-income quintile was estimated as −0.76, as compared to −0.25 for the highestincome quintile [18]. Mayol (2017) showed that by observing the different types of consumers, some consumers were more sensitive to windfall effects caused by a lower tariff, but that most consumers were incentivized to reduce their consumption [19]. showed that households in single-family units are more reactive to changes in water price than households in multi-family units, all being equal [20]. ...
Article
Full-text available
Many papers estimate the price elasticity of water demand. However, heterogeneity and temporal variation of price elasticity of residential water use are still unclear. We analyze these issues by applying the latent class analysis and t-test using disaggregated data of approximately 30,000 households recorded over five years: Two years before and three years after a tariff revision. As a result, the households are divided into three (heterogeneous) groups: About 5% of them responded to the price change sensitively, 40–60% slightly, and 35–55% not at all. Households with high water use prior to the revision had higher price elasticity. In addition, the price elasticity in the first and third years after the revision was the same.
... The accommodation type is considered in the 'house' variable or the 'apartment' variable in a collective dwelling (the variable is equal to 1 if the accommodation is a house). As studies in the drinkable water sector have shown (Mayol 2017), we expect the type of housing to affect price sensitivity ...
... The 'Paris' variable designates the share of individuals living in Paris (if the participant lives in Paris, the variable is equal to 1). The number of people in the household (Fig. 2) is an important factor in the price elasticity of consumers, whether it for water or electricity (Mayol 2017;Mayol and Porcher 2019). We introduce the 'Scoreratio' variable to test the participant's level of cognitive ability, referring to the standard Cognitive Reflection Tests of Frederick (2005). ...
Article
Full-text available
Electricity and water tariffs are undergoing significant changes due to smart metering, retail competition, and regulatory changes. Consumers now have to choose between different tariffs which are getting more and more complex. Theoretically, these new tariffs aim to use more cost-reflective pricing to incentivise consumers to adopt the right behaviours. However, empirical evidence from real pricing shows that consumers are confused by the complexity. Based on a lab experiment, this paper investigates how electricity and water consumers adopt more or less complicated tariffs and adapt their behaviours accordingly. We show that subjects prefer simple tariffs over complex ones. However, when they receive adequate information about tariffs and appropriate behaviours, they choose more complex tariffs. These results argue in favour of self-selection of tariff forms, in order to account for consumers’ different abilities to respond to the price signal. Lastly, we discuss the appropriateness of using a price mechanism to incentivise consumers.
... In order to do a good job in the research on the major issues of price work in the new era and the new normal, take international experience as reference [3][4][5][6][7], clarify the current water supply costs in the water supply industry of water conservancy projects and the implementation of water supply prices and other management problems and causes, seek further measures and methods to solve the problems, and clarify water prices The direction and goal of the reform have become an important way and inevitable situation to realize the rational and efficient allocation of water resources and alleviate the contradiction between water supply and demand. ...
Chapter
Full-text available
Focusing on China’s current water price issues, such as “difficulty in pricing, adjustment, charging, and effectiveness” and the others, the current water conservancy project water supply system has been sorted out in terms of water price formation mechanism, water price composition, influencing factors, price system structure, and pricing technology. Quantitative analysis has been carried out on the problems with prices. At the same time, based on the experience and lessons of similar policies and system reforms at home and abroad, the study puts forward the long-term mechanism of water fee collection and subsidy and the implementation of safeguard measures and recommendations for the water supply price system of water conservancy projects.
... Family composition (taking into consideration the number of family members and the age of each member) is the critical factor that influences household water consumption [21]. Family scale (the number of family members) was found to be the most decisive factor for household water consumption [22]. The method of residential water consumption based on IUMAT (Integrated Urban Metabolism Analysis Tool) modeling shows that, every extra family member is linked to a 95 L/day increase in water consumption [23]. ...
Article
Full-text available
A progressive price scheme (PPS) has been implemented in Shanghai since 2013 in consideration of residents’ ability to pay, and charges are based on the actual water consumption of the residents, in an effort to balance the rational allocation of water resources and the goal of saving water between rich and poor families. In the current work, the effect of the PPS for water use was evaluated based on the water use of 6661 households from 14 communities in Shanghai. It was found that the PPS did not reduce household water consumption when comparing the water consumption per household both before and after the implementation of the PPS policy. To investigate the weakness of the PPS, a principal component analysis (PCA) and a hierarchical cluster analysis (HCA) were conducted to access the relationships between mean household water use and community factors such as housing price, management fees, and the number of parking sites. Moreover, a significant inverted U-shaped curve between housing price and water use was found, which demonstrates that rental households shared by several tenants were the main consumers of residential water, and they were not sensitive to the water price improvement in the PPS due to sharing water prices. Therefore, a proposal was made in this work to increase the proportion of water fee expenditure in the total household income and to use 3% as the benchmark for water affordability. Our results provided a new picture of residential water use in big cities and a method for saving and balancing urban water resources.
Article
Full-text available
Williamson’s 1976 study of natural-monopoly franchise bidding launched extensive debate concerning the degree to which transaction-cost problems afflict government franchising. We propose that municipalities vary in ability to discipline franchisees, and that this heterogeneous ability affects franchise renewal patterns and the quasi-rents that franchisees extract. We study provision of municipal water services in France, a setting characterized by both direct public provision and franchised private providers. We find that small municipalities pay a significant price premium for franchisee-provided water when compared with publicly provided water; in contrast, large municipalities do not pay a premium on average. Further, large municipalities are less likely to renew an incumbent franchisee that charges an “excessive” price, while small municipalities’ renewal patterns are not influenced by franchisees’ excessive pricing. We interpret the results as evidence that although large municipalities can discipline franchisees and thus prevent extraction of quasi-rents, small municipalities are less able to do so due to weaker outside options. (JEL: H0, H7, K00, L33)
Article
Full-text available
Price instruments are well-known policy handles to influence effectively residential water demand. Prices used to be set by water authorities in such a way that the principle of cost coverage was respected; they acted as prominent instruments in residential water policies in the past decades. More recently, however, price instruments are increasingly used to meet simultaneously financial, environmental, and social goals. This paper addresses four conditions for an appropriate tariff system for residential water use which are often found in the recent literature on the economics of water use. The paper analyzes the importance of background factors (e.g., low water availability) of these four principles as well as the extent to which actual tariff systems are employed in five mutually contrasting cities (Amsterdam, Athens, London, Seville, and Tel Aviv). Meta-analytic techniques, in particular, rough set analysis stemming from artificial intelligence, are applied to identify the common underlying relations between background factors and success of achieving multiple goals in these five urban case studies. The paper concludes with policy recommendations.
Article
Full-text available
We use an original database of 5000 French local public authorities to explore the impact of organizational choice and performance as measured by consumer prices. In quantifying the impact of the choice of public-private partnerships (PPPs) on performance, we consider the related issue of the determinants of organizational choice. We estimate a switching regressions model to account for the endogeneity of organizational choice, and find that in our sample, (i) the choice by local public authorities to engage in a PPP is not random, and (ii) conditional on the choice of a PPP, consumer prices are significantly higher on average. Copyright Springer 2006
Article
To assess the potential for urban demand side management (DSM) policies as a water resource management tool, we analyze the extent to which price and alternative policy instruments (such as use and quantify restrictions and subsidies for water efficient technologies) reduce residential demand and their distributional implications by type of household. Using detailed household-level panel data for two California communities, the results suggest that the ultimate effects of DSM policies in terms of the reduction in aggregate demand and distribution of water savings among household classes depend both on the policy instrument selected and the composition of aggregate demand.
Article
This article is devoted to the analysis of the advantages and disadvantages of convex pricing, more particularly Increasing-Block Pricing. We show that, contrary to the expectations of public authorities, progressive rates do not allow to both fighting against energy poverty and reducing total energy consumption. We also analyse the differences between the means-tested tariff for low-income households currently used in France for electricity, and the bonus-malus system on energy consumption by households stated by the law of April 15, 2013 and cancelled later.
Article
Nonlinear pricing and taxation complicate economic decisions by creating multiple marginal prices for the same good. This paper provides a framework to uncover consumers' perceived price of nonlinear price schedules. I exploit price variation at spatial discontinuities in electricity service areas, where households in the same city experience substantially different nonlinear pricing. Using household-level panel data from administrative records, I find strong evidence that consumers respond to average price rather than marginal or expected marginal price. This suboptimizing behavior makes nonlinear pricing unsuccessful in achieving its policy goal of energy conservation and critically changes the welfare implications of nonlinear pricing.
Article
ESTIMATION OF THE RESIDENTIAL WATER DEMAND FUNCTION IN FRANCE Few works have been done on the estimation of the residential water demand in France. We propose to estimate the residential water demand function in two french departments which are relatively similar in terms of water resources endowments but differ concerning climatic conditions and socio-demographic characteristics. Socio-economic and meteorologic variables have thus been introduced, in addition to water consumption and price of water, in the demand function. Specific econometric panel data methods are employed in order to avoid biased coefficients. The results emphasised a statistically significant price-elasticity in the two departments, estimated at – 0.22 and – 0.08. The income elasticity is significant in one of the two departments, evaluated at 0.01. Classification JEL : C23, D12, Q25
Article
This paper surveys the main issues in the literature on residential water demand. Several tariff types and their objectives are analyzed. Then, the main contributions to the literature on residential water demand estimation are reviewed, with particular attention to variables, specification model, data set, and the most common econometric problems. The paper concludes with comments on future trends and a summary of the contents of the study.
Article
Evidence about the best methods with which to accelerate progress towards achieving the Millennium Development Goals is urgently needed. We assessed the effect of performance-based payment of health-care providers (payment for performance; P4P) on use and quality of child and maternal care services in health-care facilities in Rwanda. 166 facilities were randomly assigned at the district level either to begin P4P funding between June, 2006, and October, 2006 (intervention group; n=80), or to continue with the traditional input-based funding until 23 months after study baseline (control group; n=86). Randomisation was done by coin toss. We surveyed facilities and 2158 households at baseline and after 23 months. The main outcome measures were prenatal care visits and institutional deliveries, quality of prenatal care, and child preventive care visits and immunisation. We isolated the incentive effect from the resource effect by increasing comparison facilities' input-based budgets by the average P4P payments made to the treatment facilities. We estimated a multivariate regression specification of the difference-in-difference model in which an individual's outcome is regressed against a dummy variable, indicating whether the facility received P4P that year, a facility-fixed effect, a year indicator, and a series of individual and household characteristics. Our model estimated that facilities in the intervention group had a 23% increase in the number of institutional deliveries and increases in the number of preventive care visits by children aged 23 months or younger (56%) and aged between 24 months and 59 months (132%). No improvements were seen in the number of women completing four prenatal care visits or of children receiving full immunisation schedules. We also estimate an increase of 0·157 standard deviations (95% CI 0·026-0·289) in prenatal quality as measured by compliance with Rwandan prenatal care clinical practice guidelines. The P4P scheme in Rwanda had the greatest effect on those services that had the highest payment rates and needed the least effort from the service provider. P4P financial performance incentives can improve both the use and quality of maternal and child health services, and could be a useful intervention to accelerate progress towards Millennium Development Goals for maternal and child health. World Bank's Bank-Netherlands Partnership Program and Spanish Impact Evaluation Fund, the British Economic and Social Research Council, Government of Rwanda, and Global Development Network.
Article
Utility regulators frequently focus as much or more on the distributional impact of electric rate structures as on their efficiency. The goal of protecting low-income consumers has become more central with recent increases in wholesale power costs and anticipation of significant costs of greenhouse gas emissions in the near future. These concerns have led to the widespread use of increasing-block pricing (IBP), under which the marginal price to the household increases as its daily or monthly usage rises. There is no cost basis for differentiating marginal price of electricity by consumption level, so perhaps nowhere is the conflict between efficiency and distributional goals greater than in the use of IBP. California has adopted some of the most steeply increasing-block tariffs in electric utility history. Combining household-level utility billing data with census data on income distribution by area, I derive estimates of the income redistribution effected by these increasing-block electricity tariffs. I find that the rate structure does redistribute income to lower-income groups, cutting the bills of households in the lowest income bracket by about 12% (about $5 per month). The effect would be about twice as large if not for the presence of another program that offers a different and lower rate structure to qualified low-income households. I find that the deadweight loss associated with IBP is likely to be large relative to the transfers. In contrast, I find that the means-tested program transfers income with much less economic inefficiency. A much larger share of the revenue redistributed by the IBP tariff, however, comes from the wealthiest quintile of households, so IBP may be a more progressive structure of redistribution. In carrying out the analysis, I also show that a common approach to studying (or controlling for) income distribution effects by using median household income within a census block group may substantially understate the potential effects.
Equity effects of increasing-block electricity pricing Center for the Study of Energy Markets
  • Borenstein S
BORENSTEIN S. [2008], Equity effects of increasing-block electricity pricing Center for the Study of Energy Markets. Working Paper 180, Nov.
Composantes du prix de l'eau: quels objectifs pour quels prix
  • G Fauquert
  • Montginoul M
FAUQUERT G., MONTGINOUL M. [2011], "Composantes du prix de l'eau: quels objectifs pour quels prix", Des tuyaux et des hommes, Versailles Cedex, Éditions Quae, "Indisciplines", p. 101-119.