IDEAS home Printed from https://ideas.repec.org/a/eee/agiwat/v145y2014icp92-97.html
   My bibliography  Save this article

Best practice pricing principles and the politics of water pricing

Author

Listed:
  • Cooper, Bethany
  • Crase, Lin
  • Pawsey, Nicholas

Abstract

Considerable progress has been claimed regarding the establishment of economic reforms in the water sector in Australia, including the development of cost-reflective pricing for water users. This is evidenced by the highly developed status of water markets, especially in agricultural areas, and the substantive efforts that have been made to measure and include the cost of capital and its replacement in charges paid by water users. However, recent government responses to secure additional water for environmental purposes have given rise to a spate of public investments in irrigation infrastructure arguably reminiscent of bygone eras of policy (see, for example, Musgrave, 2008). A critically important, but under-investigated feature of this latest policy response, is that irrigators are subsequently not obliged to pay water prices that reflect the cost of publicly funded irrigation infrastructure. This paper investigates the processes for establishing water charges that are generally cost reflective and contrasts these with the political influences that can markedly distort best practice water pricing. An assessment framework that draws from best practice pricing principles embodied in the National Water Initiative, the Water Industry Regulatory Order and the Victorian Essential Services Commission Act (2001) is used as a framework to consider areas of improvement. Whilst special attention is given to arrangements in Victoria, Australia, we argue that caution about the risks of political interference in water pricing in irrigation should be broadly understood.

Suggested Citation

  • Cooper, Bethany & Crase, Lin & Pawsey, Nicholas, 2014. "Best practice pricing principles and the politics of water pricing," Agricultural Water Management, Elsevier, vol. 145(C), pages 92-97.
    • Handle: RePEc:eee:agiwat:v:145:y:2014:i:c:p:92-97
    DOI: 10.1016/j.agwat.2014.01.011
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378377414000274
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.agwat.2014.01.011?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lin Crase & Nicholas Pawsey & Sue O'Keefe, 2013. "A Note on Contradictions in Australian Water Policy," Economic Papers, The Economic Society of Australia, vol. 32(3), pages 353-359, September.
    2. Lin Crase & Eve Merton, 2013. "Correcting Misconceptions about Links between Water Planning and Food Security in the Murray–Darling Basin," Economic Papers, The Economic Society of Australia, vol. 32(3), pages 298-307, September.
    3. Crase, Lin & O'Keefe, Sue & Dollery, Brian, 2013. "Talk is cheap, or is it? The cost of consulting about uncertain reallocation of water in the Murray–Darling Basin, Australia," Ecological Economics, Elsevier, vol. 88(C), pages 206-213.
    4. Joe Wallis & Brian Dollery, 1999. "Market Failure, Government Failure, Leadership and Public Policy," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-37296-2, December.
    5. Nicholas Pawsey & Lin Crase, 2013. "The Mystique of Water Pricing and Accounting," Economic Papers, The Economic Society of Australia, vol. 32(3), pages 328-339, September.
    6. Abbott, Malcolm & Cohen, Bruce, 2009. "Productivity and efficiency in the water industry," Utilities Policy, Elsevier, vol. 17(3-4), pages 233-244, September.
    7. Brooks, Robert & Harris, Edwyna, 2014. "Price leadership and information transmission in Australian water allocation markets," Agricultural Water Management, Elsevier, vol. 145(C), pages 83-91.
    8. Kolm, Serge-Christophe, 1996. "Playing Fair with Fairness (A Comment on Arnsperger's 'Envy-Freeness and Distributive Justice')," Journal of Economic Surveys, Wiley Blackwell, vol. 10(2), pages 199-215, June.
    9. Alistair Watson & Eve Merton, 2013. "Food Security in Australia: Some Misplaced Enthusiasms?," Economic Papers, The Economic Society of Australia, vol. 32(3), pages 317-327, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Javier Martínez-Dalmau & Carlos Gutiérrez-Martín & Alfonso Expósito & Julio Berbel, 2023. "Analysis of Water Pricing Policy Effects in a Mediterranean Basin Through a Hydroeconomic Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(4), pages 1599-1618, March.
    2. Crase, Lin & Khosroshahi, Saeideh & Cooper, Bethany, 2020. "Hydrology, topography and demography matter: Why care needs to be exercised when assessing water prices and regulation and the extent to which they conform with best practice," Utilities Policy, Elsevier, vol. 62(C).
    3. Hao Wang & Sander Meijerink & Erwin van der Krabben, 2020. "Institutional Design and Performance of Markets for Watershed Ecosystem Services: A Systematic Literature Review," Sustainability, MDPI, vol. 12(16), pages 1-26, August.
    4. Silvestre García de Jalón & Marta González del Tánago & Carlos Alonso & Diego García de Jalón, 2017. "The Environmental Costs of Water Flow Regulation: an Innovative Approach Based on the ‘Polluter Pays’ Principle," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(9), pages 2809-2822, July.
    5. Jayanath Ananda & Nicholas Pawsey & Tahmid Nayeem, 2022. "Customer‐centric regulation: The case of Victorian urban water sector," Regulation & Governance, John Wiley & Sons, vol. 16(2), pages 536-556, April.
    6. Zeyu Wang & Juqin Shen & Fuhua Sun & Zhaofang Zhang & Dandan Zhang & Yizhen Jia & Kaize Zhang, 2019. "A Pricing Model for Groundwater Rights in Ningxia, China Based on the Fuzzy Mathematical Model," IJERPH, MDPI, vol. 16(12), pages 1-20, June.
    7. Romano, Giulia & Guerrini, Andrea & Senoner, Thomas, 2020. "Establishing a new water tariff method that complies with european principles and respects statutory autonomy: The case of South Tyrol," Utilities Policy, Elsevier, vol. 64(C).
    8. Jayanath Ananda & Nicholas Pawsey, 2019. "Benchmarking service quality in the urban water industry," Journal of Productivity Analysis, Springer, vol. 51(1), pages 55-72, February.
    9. Andrea Pronti & Julio Berbel, 2020. "Analysis of the impact of a volumetric tariff for irrigation in Northern Italy through the “Inverse DiD†approach," SEEDS Working Papers 1320, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jul 2020.
    10. Cortignani, Raffaele & Dell’Unto, Davide & Dono, Gabriele, 2018. "Recovering the costs of irrigation water with different pricing methods: Insights from a Mediterranean case study," Agricultural Water Management, Elsevier, vol. 199(C), pages 148-156.
    11. Julio Cesar Pascale Palhares & Esther R. Afonso & Augusto H. Gameiro, 2019. "Reducing the water cost in livestock with adoption of best practices," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 21(4), pages 2013-2023, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cooper, Bethany & Crase, Lin & Rose, John M., 2018. "Cost-reflective pricing: empirical insights into irrigators’ preferences for water tariffs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(2), April.
    2. Ananda, Jayanath & Hampf, Benjamin, 2015. "Measuring environmentally sensitive productivity growth: An application to the urban water sector," Ecological Economics, Elsevier, vol. 116(C), pages 211-219.
    3. Malcolm Abbott & Bruce Cohen, 2017. "Drawing a Line in the Sand: Valuing Regulated Assets of the Australian Water Industry," Economic Papers, The Economic Society of Australia, vol. 36(1), pages 32-48, March.
    4. Jayanath Ananda & Nicholas Pawsey & Tahmid Nayeem, 2022. "Customer‐centric regulation: The case of Victorian urban water sector," Regulation & Governance, John Wiley & Sons, vol. 16(2), pages 536-556, April.
    5. B. James Deaton & Bethany Lipka, 2023. "Cooperation between First Nations and Municipalities: Do Water-Sharing Arrangements Improve Drinking Water Quality?," Land Economics, University of Wisconsin Press, vol. 99(3), pages 433-457.
    6. FuloP ARPAD ZOLTAN & BAKO KINGA ERZSEBET, 2017. "The Analysis Structures Of The Costs And Of The Relationship Between Costs And Revenues In The Sector Of Sewerage And Wastewater Treatment In Romania," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 188-196, December.
    7. Shivendra Kumar & Andrew Groth & Ljubo Vlacic, 2015. "Cost Evaluation of Water and Wastewater Treatment Plants Using Water Price Index," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 29(9), pages 3343-3356, July.
    8. Joe Wallis, 2006. "Coaching and the supply of hope:The Economics of commitment and a case study of supported employment services," Forum for Social Economics, Springer;The Association for Social Economics, vol. 35(2), pages 1-20, September.
    9. Capece, Guendalina & Cricelli, Livio & Di Pillo, Francesca & Levialdi, Nathan, 2012. "New regulatory policies in Italy: Impact on financial results, on liquidity and profitability of natural gas retail companies," Utilities Policy, Elsevier, vol. 23(C), pages 90-98.
    10. Michael Zschille, 2014. "Nonparametric measures of returns to scale: an application to German water supply," Empirical Economics, Springer, vol. 47(3), pages 1029-1053, November.
    11. Hellwig, Michael & Polk, Andreas, 2021. "Do political links influence water prices? Determinants of water prices in Germany," Utilities Policy, Elsevier, vol. 70(C).
    12. Jinjin Zhao, 2020. "Productivity change in the privatized water sector in China (1999–2006)," Journal of Productivity Analysis, Springer, vol. 53(2), pages 227-241, April.
    13. Goh, Kim Huat & See, Kok Fong, 2021. "Measuring the productivity growth of Malaysia's water sector: Implications for regulatory reform," Utilities Policy, Elsevier, vol. 71(C).
    14. Henriques, Alda A. & Camanho, Ana S. & Amorim, Pedro & Silva, Jaime G., 2020. "Performance benchmarking using composite indicators to support regulation of the Portuguese wastewater sector," Utilities Policy, Elsevier, vol. 66(C).
    15. David A McDonald, 2016. "The weight of water: Benchmarking for public water services," Environment and Planning A, , vol. 48(11), pages 2181-2200, November.
    16. James I. Price & Steven Renzetti & Diane Dupont & Wiktor Adamowicz & Monica B. Emelko, 2017. "Production Costs, Inefficiency, and Source Water Quality: A Stochastic Cost Frontier Analysis of Canadian Water Utilities," Land Economics, University of Wisconsin Press, vol. 93(1), pages 1-11.
    17. Cooper, Bethany & Crase, Lin, 2006. "Equity and Efficiency Tradeoffs in Water: Prospects for Choice Modelling," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 174097, Australian Agricultural and Resource Economics Society.
    18. Saal David S. & Arocena Pablo & Maziotis Alexandros & Triebs Thomas, 2013. "Scale and Scope Economies and the Efficient Vertical and Horizontal Configuration of the Water Industry: A Survey of the Literature," Review of Network Economics, De Gruyter, vol. 12(1), pages 93-129, March.
    19. Peeter Peda & Giuseppe Grossi & Margo Liik, 2013. "Do ownership and size affect the performance of water utilities? Evidence from Estonian municipalities," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 237-259, May.
    20. Di Foggia, Giacomo & Beccarello, Massimo, 2018. "Improving efficiency in the MSW collection and disposal service combining price cap and yardstick regulation: The Italian case," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 79, pages 223-231.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:agiwat:v:145:y:2014:i:c:p:92-97. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/agwat .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.