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Value Philosophies Applied to Reclaimed Water

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Abstract:

The effluent from municipal wastewater treatment plants is increasing referred to as “reclaimed water” and the facilities themselves as “water reclamation facilities”. The pricing of this reclaimed water product is evolving as utilities essentially search for the right philosophy to employ to promote the use of the product and recover capital and operational costs. Often the reuse of reclaimed water is the key to an effluent management strategy. Many times it is also a means to offset the use of potable water, extending the use of the raw water resource. It is easy for utilities to estimate the cost of implementing a reuse project. Establishing the right price for the product is more difficult and is a matter of accepting a particular pricing philosophy. This paper explores the philosophies of pricing that are emerging and defines the relationship between cost, price, and value.

Many utilities providing reclaimed water use pricing strategies based on promotional pricing to stimulate user demand instead of considering the true cost or value of the water. As reclaimed water programs have evolved from mainly effluent disposal systems to systems focusing on potable water offsets, new pricing philosophies are emerging. The price for potable water utility service for irrigation and other non-potable uses is generally based on conservation pricing methods that charge higher rates as consumers use more water. As reclaimed water began to be considered as a substitute for potable water, promotional pricing was used to gain greater consumer acceptance for the product. Now that consumers have gained confidence using reclaimed water for irrigation, and other nonpotable water uses, the perceived value of the product has increased and consumers are willing to pay more. For some utilities, the pricing philosophy has evolved to the point that reclaimed water is considered equal in value to potable water and pricing is set accordingly. This paper defines various pricing philosophies for reclaimed water and shows the impact of these philosophies on the real value of the reclaimed water product. This paper also explores factors that affect the value of reclaimed water and provides examples from the State of Florida.

Keywords: Reclaimed water; price point; tiered rate structure; value

Document Type: Research Article

DOI: https://doi.org/10.2175/193864711802793650

Publication date: 2011-01-01

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