||The traditional approach to water resources management in the Southeastern United
States does not take full advantage of economic tools for managing scarcity. It fails
to prevent economically inefficient uses of water, imposes additional costs to downstream
users, and degrades the natural environment. The recent drought in the Southeastern
United States reveals these shortcomings and indicates that water supply planners
should be aware of the role of demand management in reducing waste and misallocation
during times of water stress.
This analysis draws on data from the State of North Carolina’s Local Water Supply
Plan Database. In the absence of statewide standards for technical and economic efficiency,
it examines the decision of public water systems to voluntarily adopt demand management
practices. An empirical model of water use is then estimated to determine the effectiveness
of current demand management strategies, as employed by North Carolina public water
Results of the analysis confirm the view held by experts; individual demand management
strategies are context-specific and should be adopted with careful attention to local
conditions. In North Carolina, the degree of demand management pursued by public
systems reflects a policy choice of system managers, customers, and decision makers.
River basin planning is also shown to positively affect the degree of demand management
pursued by public systems. A model estimating overall system demand shows that conservation
pricing can be effective at reducing levels of water use; however, estimating the
effectiveness of demand management strategies is complicated by a lack of criteria
for determining systems’ program participation.