Demand Management Strategies of North Carolina Public Water Systems

Abstract

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 systems. 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.