Water metering in Hobart-An appraisal of the cost-benefit study

Hobart is the only capital city in Australia where water is supplied to the consumers unmetered. A flat rate is charged annually in return for which consumers may take virtually unlimited water. There seems to be a prevalent belief that water should not be sold to the community of Hobart on the basis of consumption because of the natural abundance of water in Tasmania. This view is reflected in the 'requirements approach' used by the Metropolitan Water Board in planning supply expansions. What is little realised is that the source of Hobart's water (although virtually inexhaustible) is situated a fairly great distance away from the metropolitan area. Transporting water through pipelines over long distances is not a cost-less affair and by virtue of this fact, water must be looked upon and treated as an economic good. This study has a three-fold objective. Firstly, it is to examine the efficacy of the present investment criteria used by the Metropolitan Water Board. The potential of the requirements approoch to allocate society's resources efficiently is assessed. The price variable is suggested as a means of exercising water demand management and the second objective is to compare the efficiency of a marginal cost pricing approach with the requirements approach in 0 tel~s of resource allocation.Finally, no matter how superior a marginal cost pricing policy may be to the present flat-rate policy theoretically, it needs to be proven that the costs involved in implementing such a scheme do not outweigh the benefits. To this end, a cost-benefit analysis is conducted to determine whether or-not universal metering should be introduced in Hobart.The cost-benefit analysis implicitly compares the two alternatives available to water authorities to meet demand after 1978/9 when the present supply is expected to reach full capacity.