admin /24 August, 2007
The pricing regulatory body (IPART Tribunal) proposed to conduct further research on alternative approaches for setting water prices including the use of scarcity pricing, according to a recent report.
Price rises when water becomes more scarce: Scarcity pricing had been advocated by a number of commentators as a better means of bringing the demand for water into line with the available supply. Under such an approach the price of water would increase during droughts when rainfall decreases and water storage levels decrease. Conversely, lower prices would apply where water was in relative abundance such as when water storages were at a near full storage level.
Restricting demand less costly than increasing supply: Where the supply/demand imbalance appeared to be short term or intermittent in nature, a pricing mechanism that allocated existing supply of water (for instance, through a combination of scarcity pricing and other demand management measures, such as water restrictions) was likely to be efficient because restricting demand would generally be less costly than increasing supply.