Policies versus perception: estimating the impact of drought awareness on residential water demand

Abstract

In response to the water shortages of 2002, Colorado utilities adopted numerous policies promoting water conservation. However, despite this demand-management emphasis, utilities are still distinguishing between the impacts of conservation programs and the psychological impacts of the drought itself. That is, water managers are unsure if post-drought decreases in water consumption are solely due to utility-controlled policies or if they result from a combination of drought awareness and/or permanent changes in water-use behaviors. For this reason, gauging the effectiveness of conservation policies requires answering the following: First, did awareness of the drought lead consumers to conserve more water than predicted, given utility policies alone? Next, if drought awareness did influence demand, is continued awareness--as opposed to utility policies or permanent changes in water use--the reason water demand has failed to return to pre-drought levels? To answer these questions, this research estimates an econometric water demand model using billing data from a major Colorado utility. Results show that drought awareness did decrease water demand both during and after the height of the drought; however, baseline demand still appears to be trending downward even after we control for both drought awareness and utility policies.