What Factors Help Determine Water Rates?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 02 November 2019
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Sometimes it seems like the water bill keeps going up, but water usage stays the same, leading many consumers to puzzle over how the water company determines rates. A number of factors go into water pricing, but consumers may be heartened to hear that rate increases are usually regulated; in order for rates to rise, they must often be approved by a government agency or a vote from elected officials. Prices are often influenced by water system maintenance costs, the time of year, and average household use.

Water and sewer services often go hand in hand. Individual billing for a household is usually determined with the use of a water meter, which tracks how much water enters the house, and the water company extrapolates, assuming that the same amount of water enters the sewage system. Water companies may provide special garden allowances, using statistics about average water usage outside the home to lower sewer rates slightly with the understanding that not all of the water which enters a property ends up in the sewers.

One of the key factors used to determine water rates is the cost of the water and sewer system. Many such systems are very expensive to maintain, and as cities grow, these systems require expansion and upgrades. If rates are held too low, it may not be possible to provide proper maintenance, which could lead to long term problems.


Available supplies are also a concern; rates may be elevated during shortages to discourage excessive water use. In some regions, water rates may be influenced by the seasons. Rates may be cheaper when there is ample water available, and higher during dry seasons. If drought conditions emerge, an emergency rate hike may be approved, and people may also be subjected to water usage restrictions.

Water companies also tend to provide a tiered metering structure. Using statistical data, they determine how much water a household should use. As long as a household stays within this allotted amount, water rates stay relatively low. As the household exceeds this average usage, however, water rates start to climb. This system is used to encourage people to conserve water by providing an incentive to keep water usage reasonable.

In many cities, water is a municipal service, and water rates are set by the local government. Members of the city government classically vote on rate increases, and members of the public can attend meetings at which water and sewer charges are discussed if they want to have input in the process. Rate increases may be structured to kick in over time, or to take place immediately if the city is concerned about running out of money to manage the municipal water supply. Private utilities that provide water may be obliged to submit proposed rate increases to the government for evaluation to confirm that they are fair.


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