Impact of water volume on operating cost

Sustainable water management relies on the ability to control operating cost which relies in turn on a working knowledge of factors which can affect this ability. The impact of water volume on operating cost is investigated for water utilities using data from the International Benchmarking Network for Water and Sanitation Utilities (IBNET) online database. Econometric models are estimated for water utilities located in Albania, Moldova, Brazil, Zambia, Kazakhstan, and Russia. Estimations provide similar quantitative findings and identical qualitative findings across locales. Results suggest that expected operating cost is inelastic with respect to water volume and that operating cost variability increases with water volume. Implications of these findings are that (1) current world-wide strategies to promote water conservation may necessitate an increase in the expected per unit cost of water supply and (2) policies framed as incentives for short-run cost efficiency may need to recognize the difficulty of reducing expected operating cost at existing output levels and that utility managers may face added difficulty in controlling cost if efficiency is pursued by expanding volume.