Ricerc@Sapienza

The advent of smart metering is set to revolutionize many aspects of the relationship between water utilities and their customers, and this includes the possibility of using time-varying water prices as a demand management strategy. These dynamic tariffs could promote water use efficiency by reflecting the variations of water demand, availability, and delivery costs over time. This paper relates the potential benefits of dynamic water tariffs, at the utility and basin scale, to their design across a range of timescales.

Focusing on two different European institutional contexts, a stated preference approach is adopted to elicit the willingness to save water under three alternative incentive policies: a water price increase, monetary reward, and symbolic prize. In addition, two water scarcity scenarios, a ‘critical’ and a ‘regular’ scenario, are devised to analyze how information on water scarcity moderates the effect of incentives. Empirical results show that users become sensitive to monetary incentives (while they remain insensitive to non-monetary ones) when water is scarce.