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Journal article

Using economic and other performance measures to evaluate a municipal drought plan

This paper explores the welfare costs associated with drought plan transactions between a public municipal water agency, the El Dorado Irrigation District (EID) in California USA and its customers.

Jack Sieber, David Purkey / Published on 10 July 2013

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Citation

Yates, D.N., F. Vásquez Lavin, D.P. Purkey, S. Guerrero, M. Hanemann and J. Sieber (2013). Using economic and other performance measures to evaluate a municipal drought plan. Water Policy, in press, published online July 2013.

The EID imposes a tiered pricing plan for municipal customers, which was analyzed as a discrete continuous choice (DCC) model by water users within a climate driven water evaluation and planning (WEAP) model of the EID water system. The DCC is subsequently used to estimate the compensating variation (CV) measure of the loss of consumer welfare in the case where a customer does not receive water that matches a preferred level of demand.

In addition to monetized welfare loss, the authors look at other metrics of performance such as reservoir storage and hydropower generation. For the drought-of-record under full build-out, results show that the welfare loss to EID customers from the imposed drought plan is far less than if no drought plan were in place.

This suggests that current consumption is well beyond essential needs and, without a drought plan, water shortages in the later period of a drought would generate a much greater welfare loss. Most of the cost associated with the drought plan is born by EID in the form of reduced revenues.

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SEI authors

Profile picture of Jack Sieber
Jack Sieber

Senior Scientist

SEI US

David Purkey

Centre Director

SEI Latin America

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