Do Residential Water Demand Side Management Policies Measure Up? An Analysis of Eight California Water Agencies

To assess the potential of price and alternative demand side management (DSM) policies as an urban water resource management tool, an econometric model of residential demand is formulated and estimated. This econometric model incorporates alternative DSM policy instruments (such as water allocations, use restrictions, public education) and increasing block pricing schedules. The analysis relies on cross-sectional monthly time-series data for eight water agencies in California representing 24% of the state's population (7.1 million people). Results suggest that both price and alternative DSM policies were effective in reducing demand. However, the magnitude of the reduction in demand varied among policy instruments.