The Australian urban water industry has been substantially reformed over the past 20 years. Critical amongst these reforms has been the separation of operational and regulatory responsibilities. Under these arrangements the performance standards expected of water companies are specified by independent regulatory bodies or governments, and codified. Both regulators and water service providers have an interest in ensuring that regulatory standards are efficient and meet customer expectations, particularly as such standards can greatly affect the industry’s capital expenditure. A project has therefore been initiated to develop a framework for setting standards that are economically efficient, taking into account customer preferences. The project included development of methods to:

  • identify customer preferences and means by which they would be measured;

  • identify and evaluate the whole life cost of meeting standards for water continuity;

  • value customers’ preferences, measure social costs associated with water interruptions and construct the overall cost benefit framework.

Water system continuity was the service chosen for testing the methodologies developed. We conclude that a viable methodological framework for setting customer service standards can be developed.

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