The analysis here employs research on water done by Ari Michelsen, J. Thomas
McGuckin and Donna Stumpf in the Effectiveness of Residential Water Conservation Price and
Non-price Programs in Urban Areas in the Western U.S., American Water Works Association -
Research Foundation, December 1998. Seven study areas were selected, and with the
cooperation of water utilities in three southwestern states, information on residential water
consumption, rate structures, revenues and non-price conservation programs covering the period
from 1980 through mid-1995 was collected. The study area cities are: Los Angeles and San
Diego, California; Broomfield and Denver, Colorado; and Albuquerque, Las Cruces and Santa
Fe, New Mexico. Similarities and differences in residential water use, prices and rate structures,
climatic conditions and socioeconomic characteristics across the study areas provide an excellent
cross-section of cities in the southwestern United States. These cities also exhibit a wide range of
non-price conservation programs, from cities that have numerous concurrent conservation
programs to cities that have yet to implement non-price conservation programs.
What are the general findings of the Michelsen study? Water price has a significant and
negative impact on water use, but water demand is very price inelastic, more so than has been
suggested in other studies. The highest elasticity estimate was for summer use (approximately -
0.30). At this degree of consumer responsiveness water utilities could double their water rates
and expect, at a maximum, only a 30 percent decrease in water use during the peak season.
Non-price conservation programs appear to be effective if the water utility achieves a
critical mass of programs. For Los Angeles, San Diego and Denver, the number of non-price
programs has had the desired effect. For cities with fewer programs or relatively new experience
with conservation programs, non-price programs had no observable effect on demand.
Conservation programs work independently of a drought environment, such as California’s in the