Pricing for Water Conservation and Equity Consideration: The Case of Texas

Abstract

Water utility providers in Texas have been trying to coordinate demand for and supply of water to ensure a stable source of water given the state’s recent rapid population growth and persistent drought-like conditions. Their efforts, however, vary across municipalities throughout Texas. The paper provides a broad analysis of pricing practices in 423 municipalities across Texas from 2014 to 2020 and their impact on residential water consumption. We also assess how other socio-demographic and climatic conditions may influence water use and water rates decisions across municipalities. Besides investigating the potential determinants of water demand, the paper also looks at several supply-side variables and the income gap to address the endogeneity of water block prices. Our results shed light on how current water pricing practices in Texas incorporate aspects of the Integrated Water Management Practices that have been shaping water management for decades.