Are water tariffs sufficient incentives to reduce water leakages? An empirical approach for Chile

María Molinos-Senante, Andres Villegas and Alexandros Maziotis

Utilities Policy, 2019, vol. 61, issue C

Abstract: Given a changing and uncertain future climate with increasedwater scarcity, one of the main challenges of water companies is to reduce leakage in the water distribution system. To deal withthis challenge, water regulators should introduce efficient economic incentives. In this study, shadow prices of water leakage for 23 Chilean water companies over the period 2007–2015 were computed by estimating a translog input distance function using stochastic frontier techniques. The results indicate that the average shadow price of water leakage is 0.441€/m3, which means that on average the cost of losing one cubic metre from the water distribution system is 0.441€. Moreover, a comparison of the volumetric water tariffs and the shadow prices of water leakage evidenced that most water companies have economic incentives to reduce water losses, but they do not. Hence, the water regulator should introduce direct penalties to achieve water leakage targets. The findings of our study are of great importance for policy makers to define incentives to water companies to achieve environmental targets and more efficiently manage water resources.

Keywords: Water leakage; Shadow price; Stochastic frontier analysis; Chilean water industry; Water tariffs (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0957178719303248
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:61:y:2019:i:c:s0957178719303248

DOI: 10.1016/j.jup.2019.100971

Access Statistics for this article

Utilities Policy is currently edited by Beecher, Janice

More articles in Utilities Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().