Estimating stakeholder benefits of community water system regionalization

• Published in: Journal - American Water Works Association 2013-10, Vol.105 (10), p.E561-E567
• Main Author: Hansen, Jason K.
• Format: Article
• Language: English
• Subjects: Average cost; Case Studies; Communities; Community; Consumer economics; Consumer prices; Cost Savings; Customers; Economic benefits; Economics; Economies of scale; Fixed costs; Groundwater; New Mexico; Producer surplus; Regionalism; regionalization; small community water system; Small Water Systems; stakeholders; Utility rates; Water consumption; Water management; Water Systems; Water utilities
• ISSN: 0003-150X; 1551-8833
• DOI: 10.5942/jawwa.2013.105.0105

Community water system regionalization (CWSR) provides small community water systems with a solution to the conundrum of large fixed costs and a small rate base. In practice, however, very few systems actually regionalize. Applying social welfare theory, this article estimates stakeholder benefits from CWSR. Results are reported for three New Mexico communities as case studies in which CWSR was hypothetically imposed. Benefits for consumers are non-negative across price scenarios, but in some cases producer benefits are negative. The findings suggest that reluctance to regionalize is not in consumers' economic interest, but it may be for producers. Depending on the water price that follows CWSR and savings achieved by economies of scale, consumers gain at producers' expense. The results shed light on issues that policymakers should consider when evaluating the merits of CWSR. Producers' historic reluctance to adopt CWSR may in fact be driven by economics.