Team Name

Super DESE

Team Members

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: https://imgur.com/a/gxEsjIO

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.