Simulating the Effects of Various Pricing Scenarios on Water Tariff System

Water demand management policies and water pricing tools have important effects on optimal water allocation. An important water pricing policy is determining suitable water tariffs for urban water uses. In this regard، the emphasis laid by the targeted subsidy law on water pricing based on supply cost will have a great impact on the price of water and on water resources management. Based on these considerations، the present study was designed and conducted in 2010-2011 to identify proper water prices for Golestan Province under the targeted subsidy law. For this purpose، the economic value of water as veiwed by urban users was estimated using the contingent valuation method. In a second stage، the average cost approach was employed to determine the cost of water production from surface and ground water resources from the viewpoint of suppliers. Finally، the present water tariffs، the economic value of water، and the average cost of water production obtained in the previous sategs were compared to evaluate various scenarios of water pricing under the targeted subsidy law. Based on our findings، a stepwise water pricing system that strikes a balance between the economic value of water and water production cost is recommended for implementation in order achieve simultaneous improvements in both water demand and supply management.