Nonlinear pricing and capacity planning for water and wastewater services

The purpose of this paper is to determine the optimal nonlinear pricing rules for water services. The model presents a standard water distribution system and a separate wastewater collection and treatment system. Technical and financial constraints are considered. The optimization process of a welfare utility function subject to different kind of constraints provides the optimal pricing rules for drinking water and sewerage services. These prices reflect efficiently the costs of systems constraints, the cyclicity of demands, the time-of-use, heterogeneity types of consumers and the real value of water resources scarcity. They provide important guidance in the design of efficient water rates and in the development of different water utilities planning strategies. New technologies in water metering (telemetry) should permit applying this model.