The value of metering customer connections to public utilities is often taken for granted. The paper proposes methods for evaluating customer metering in terms of maximizing economic efficiency, utility profits, and economic equity. Significant improvements are made in methods for assessing the conservation benefits of metering. Methods are illustrated using domestic water supply examples, but are applicable to any utility service. When metering is inefficient, so is marginal cost pricing. The paper also applies Bayesian decision analysis and regeneration theory to the maintenance of water meters. This maintenance scheduling method is relevant for other component maintenance problems in water resource systems. the economic efficiency and profitability trade-offs necessary to realize equity benefits from metering. The method is applicable to both the decision to meter an individual connection and the decision to meter a class of similar connections for any utility industry. The methods are developed and applied specifically for water supply metering problems.
BENEFITS OF METERING"There are two reasons for the use of water meters. The first is that selling water by measurement is the only logical and fair way of conducting business. It is the only way that does not result in gross inequalities and discriminations against some takers, and in favor of others. The second reason is that metering water is the only practical method yet found four restricting excessive waste" Hazen [ 1918]. 802 LUND: METERING UTILITY SERVICES 803 Cost Savinas From Use Curtailment The most tangible benefit of metering is the reduction of service use accompanying introduction of metered service. For domestic water supplies this reduction has been estimated between 6% [Phillips and Kershaw, 1976] and 50% [Berry, 1972] of unmetered use. Estimates of reduction from various studies of domestic water metering are detailed in Table I. Changes in water use with the installation of meters seems to vary with climatic and economic conditions. These decreases seem less related to the level of the new marginal price of water than to the new marginal price of water being nonzero [Hanke, 1970b]. This implies that much of the conservation experienced accrues from either low-value uses of water (e.g., deferring leak repair and extensive lawn irrigation) or psychological factors arising from a new causal relation between water use and billing [Hanke, 1970a, b; Sims, 1978].The initial benefits of reducing water use are reductions in the short-range marginal costs of pumping and chemicals.These are virtually the only benefits of reduced water use that may always be counted, and they are often small. For a water system of 1200 people in Pennsylvania, Bhatt and Cole [1985] calculated that a 20% reduction in water use only resulted in a 2% reduction in total water system costs from savings in pumping and chemicals. If water is bought from a larger regional supplier, the price of this water is its marginal cost to the community in question.Additional short-ran...