Project Info

Team Members

Ramee El , James , Nicki , Matt

Project Description

Equitable Pricing Model

Looking at water pricing from the lens of human rights, it only makes sense that a reasonable usage of water, that which comes with living, be affordable for all people. To provide this, we have built a pricing dashboard that introduces a two tier system: the reasonable usage tier with a flat fee, and the excess tier with a surcharge driven model.

Our project sets out to segment the population into four equity tiers using available ABS data. According to these tiers, we create a person level water pricing that applies surcharges for excess usage (e.g. swimming pools to disincentivize excess consumption) and discounts for people who are most likely to struggle to pay (based on the SEIFA index) when excess usage is reached.

Our dashboard:

#r #shiny #clustering #water

Data Story

Humanising the cost of water

Water is a precious resource, yet deeply necessary to sustain life and propel health.

Luxury and wasteful use of water is not a fundamental human right but right now the cost of consumption doesn't distinguish between what is necessary and what is noy.

The cost of water for maintaining a swimming pool should not cost the same as water used for living needs. An equitable, simple solution, is to price according to personal capacity and usage types:
Does the household engage in water-preserving practices like rainwater tanks or efficient gardens? (reduce)
How likely is the household to be under financial stress? (reduce)
Do they have a swimming pool? (increase)
Are they using over and above a reasonable usage (adjusted for household size)? (increase)

To maintain equity to all Australians, independent of wealth, pricing starts on a fixed tier capped to the reasonable usage. This is analogous to the tax-free threshold, guaranteeing all households an affordable supply of water for living needs.

The existing model applies a fixed price across all households (sometimes tiered by consumption). It ignores fundamental questions like:
How do we identify non-essential usage?
How do we identify those with capacity to pay more for water saving methods, and in turn should be held at higher standards?

Ultimately, we are proposing pricing in the capacity to pay.

Pricing model

Reasonable usage determined using City of Melbourne's household water use calculator , and considering Melbourne Water's Target 155 - for each person to use <155 L per day (56 kL per year)

Base Service Fee
+ water retailer's existing fee
+ Charge for delivery of service to a fixed household

Tier 1: <= 60 kL per person
+ $0.80/kL
+ For good usage, a minimal charge for service is applied

Tier 2: 61 - 80 kL per person
+ 1.25 x water retailer's existing Tier 1 rate x equity adjustment
+ For reasonable usage, a charge a bit above the retailer's current lowest rate is applied, so the retailers return some of the revenue lost from the changes to Tier 1.

Tier 3: > 80 kL per person
+ 2 x water retailer's existing Tier 1 rate x equity adjustment
+ For excessive usage, the cost per kilolitre doubles

In making equity adjustments, we have applied a clustering method that looks at SEIFA and new developments. This model groups SA1s into three buckets, connecting each person (via SA1) into their nearest cluster. This allows for some fuzziness, whereby hard thresholds would be arbitrarily defined, we can extend this in future by weighting according to the “distance” to the cluster. If someone sits in the middle of two clusters (lowest equity and low equity), then they would get an adjustment halfway in between.

A future extension to our project is automatic identification of swimming pools using readily available satellite imagery (OpenStreetMaps ESRI World Imagery dataset). This would ensure fair enforcement of pricing rules.

Our slides walking through this are available here.

By water corporations adopting this method, they will bring state-of-the-art equity modelling to water pricing. Overturning centuries of unfair distribution of water, they will initiate a revolution by ensuring the poorest and richest are treated equitably, opening access to all for generations to come. Nobody should be left to ration their drinking water.

Evidence of Work


Team DataSets

City of Melbourne's water use household calculator

Description of Use Last page used to estimate good, reasonable and excessive water usage

Data Set

Urban water use by water retailers for 2018/19

Description of Use To understand current state combined with average household occupants (by SA2) to get an average use per person for each water retailer

Data Set

Building Approvals, Australia

Description of Use Used as input to pricing model

Data Set

Census 2016, Household Composition By Number Of Persons Usually Resident (SA2+)

Description of Use Used as input to pricing model

Data Set

Census of Population and Housing: Socio-Economic Indexes for Areas (SEIFA), Australia, 2016

Description of Use Used as input to pricing model

Data Set

Shapefiles of metropolitan and regional water retailers

Description of Use Combined with ABS SA1 2016 and a user's entered address to determine the user's water retailer

Data Set

Fixed annual rate and price per 1000 L as at 1 July 2021

Description of Use To determine existing rates and as input into the model

Data Set

Challenge Entries

The cost of water

How can we use data to achieve an equitable way of distributing the costs of providing clean water to residents?

Eligibility: Must use at least one open dataset.

Go to Challenge | 6 teams have entered this challenge.