Drought Management Policies and Economic Effects in Urban Areas of California, 1987-1992

by Lloyd Dixon, Nancy Y. Moore, Ellen M. Pint

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Abstract

The 1986-1992 California drought caused most urban water agencies to adopt policies that aimed to reduce water consumption in their service areas. These policies determined in part how much customers reduced water use and the size and distribution of any accompanying economic and noneconomic losses. Understanding these losses is important because this knowledge should enter into decisions on how to allocate water among competing uses and whether or not to invest in new water projects. The authors evaluate the losses caused by the drought using the concept of "willingness-to-pay," i.e., the amount that water users would have been willing to pay to avoid drought management policies. This study reports the results of a detailed survey of urban water agencies to provide the background information needed for future studies to determine willingness-to-pay. The survey data presented suggest when and where the drought effects were most severe and how the effects were distributed across residential, commercial, industrial, government, and agricultural users. To illustrate how willingness-to-pay can in part be quantified, this report includes a pilot study of residential consumer surplus losses due to the drought, based on household-level water use data in the Alameda County Water District.

Table of Contents

  • Chapter 1

    Introduction

  • Chapter 2

    Background and Conceptual Framework

  • Chapter 3

    Change in Water Use During the Drought

  • Chapter 4

    Drought Management Strategies

  • Chapter 5

    Pilot Study of Residential Welfare Losses

  • Chapter 6

    Conclusions

  • Appendix

  • References

The analysis presented here was funded by California Urban Water Agencies (CUWA), an association of 11 large wholesale and retail water agencies; California's Department of Water Resources; and the National Science Foundation.

This report is part of the RAND Corporation monograph report series. The monograph/report was a product of the RAND Corporation from 1993 to 2003. RAND monograph/reports presented major research findings that addressed the challenges facing the public and private sectors. They included executive summaries, technical documentation, and synthesis pieces.

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