Socio-hydrological impacts of rate design on water affordability during drought

Abstract

Unaffordable water threatens water access in the United States, particularly for low-income households. In water-scarce cities, water shortages during drought necessitate either expensive infrastructure development or costly emergency measures to meet demand, which can in turn increase water rates. Rate design plays a key role in determining whether these costs threaten water affordability for low-income households, but water utilities are often constrained by local and state policy in their ability to set progressive rates. Therefore, new approaches to assess the impact of rates on water affordability within the local legal and hydrological context are needed in drought-prone regions. To address this gap, we design a socio-hydrological modeling framework that fuses legal analysis, behavioral economics, and water resource systems modeling to assess the impacts of rate design on household water affordability. We demonstrate this framework in an illustrative application in Santa Cruz, California, where droughts threaten water supplies and California Proposition 218 deters public water utilities in setting progressive rate design. Our results demonstrate that legal constraints reduce affordability during droughts by limiting drought surcharge rate structures. This framework can help utilities design rates to improve water affordability in their socio-hydrological context and illuminate the impacts of state policy on affordability outcomes.