Full‐Cost Water Pricing

Many municipal water systems have traditionally priced water at far less than the cost of service, thereby requiring subsidies from general funds. Conversely, some water revenues have been diverted to meet other expenses of the city. The author cites the benefits of separate accounting for water revenues and expenses and full-cost pricing, drawing on the situation in Massachusetts. Increased efficiency and ultimate economies can be realized from allocation of sufficient funds to undertake rehabilitation and maintenance programs. Methods of structuring rates and implementing full-cost rates are reviewed, and Boston's recent restructuring of water and sewer services is given as an example of improvements made possible by full-cost pricing.