Regulatory And Legislative Mechanisms For Water Efficiency

By American Water

Although improving water efficiency, energy efficiency and conservation are increasingly viewed as essential elements of public policy, under most current rate structures, water utilities are rewarded for selling more water — the antithesis of the efficiency and conservation ethic.

A water efficiency mechanism is a regulatory and legislative tool that has been adopted in many states for gas, electric and water utilities. Water efficiency mechanisms separate a water utility’s cost recovery from the amount of water it sells. Rather than implicitly encouraging water use and penalizing a water utility for encouraging conservation, a water efficiency mechanism adjusts rates periodically to ensure that a utility’s revenue will be sufficient to cover its fixed costs regardless of sales volume, while providing an incentive for customers to use water more efficiently.