Water supply aspects of river authorities in Texas

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.