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Description:
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Price has been noted to be an important ingredient in any evaluation of future
water demands , since it is a signal of cost administered by water wholesalers or retailers .
The purpose of this study is to contribute to a better understanding of rates and ratesetting
strategies adopted by the river authorities of Texas , and the relevance of
economic efficiency for wholesale purveyors of water . Methods employed to accomplish
the objectives include collecting sample water supply contracts , surveying rate
structures , and surveying authorities' rate -setting objectives .
In its current form the economic theory of pricing emphasizes price
establishment by retail water suppliers . There are certain distinctions between wholesale
suppliers and retail distributors of water that question the adequacy of the existing theory
in its universal application . This calls for a different theory of pricing for wholesale
suppliers of water . Therefore , an efficiency -seeking pricing theory for wholesale water
purveyors is explored here .
Out of the fifteen existing river authorities in Texas , ten have wholesale supply
operations . This study finds that out of the ten authorities that have wholesale operations ,
some authorities charge the same uniform rate to all their customers , while some charge a different rate to each of their customers . The fact that some river authorities charge
different rates to different categories of customers for the same water is considered
economically inefficient . Another element that lends itself to economic inefficiency is
the usage of the block rates .
Through a questionnaire , the study finds that river authorities rank revenue
sufficiency highest among six objectives pertaining to rate -setting processes . Legality is
ranked second and economic efficiency is ranked third among these six goals . Though
there are ten river authorities that supply water on a wholesale basis , only eight valid
questionnaires responses could be used for the study .
All river authorities involved with the wholesale supply of water commit most of
their water supplies to municipal , agricultural , and industrial uses and customers through
water supply contracts that contain legal agreements , which are dealt with before the
river authority supplies the water to the customer . This study discusses the various
similarities and differences between contracts of the ten river authorities that are
involved in wholesale supply of water . Out of the ten river authorities , nine responded
with their wholesale water supply contracts . One river authority responded with two
contracts , therefore there were ten contracts that were studied . |