Introduction

Efficient Water Management and Block Pricing for Integrated Aquifers: Lessons from Southern Oahu

Efficient Water Management and Block Pricing for Integrated Aquifers: Lessons from Southern Oahu

SPONSOR:
WRRIP 2007

PROJECT PERIOD:
03/01/07 - 02/28/08

ABSTRACT:

We used an intertemporal and spatial optimization process to derive an efficient pricing scheme for the integrated water system of Southern Oahu, accounting for above-ground and subsurface transfers. Welfare gains from this scheme were analyzed and compared to those associated with the new pricing scheme initiated by the Honolulu Board of Water Supply, effective October 2006. An additional pricing mechanism was explored utilizing variations in the block structure and the welfare gains associated with this scheme investigated.

Inframarginal consumption blocks are utilized to make the recommended schemes politically feasible (win-win) by ensuring consumer welfare does not decrease for any consumption group. Recommended demand management schemes extended the useful life of the Southern Oahu aquifers, delaying dependence on a backstop resource, such as desalination, and induce conservation through pricing mechanisms accounting for marginal user cost.

PRINCIPAL INVESTIGATOR

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