Drought and dwindling supplies coupled with a growing
population are severely straining California's water
resources, and traditional water supply planning and
analysis are proving inadequate to help the state prepare for
future needs. To help ascertain the value of urban water use in
California, one alternative has been the development of economic
loss functions, which represent a flexible yet rigorous
method to replace yield, shortage, and requirements-based
approaches to assessing water supply performance for planning
studies, regulatory impact assessments, and other evaluations.
The approach in this article applied residential water demand
elasticities for residential willingness-to-pay for water, used an
industry study for industrial willingness-to-pay for water, and
assumed fixed commercial sector water use for 2020 population
levels. On the basis of economic loss functions described in this
article, urban water scarcity in California in 2020 would cost
end users an estimated average of $1.6 billion per year, given
current operations, allocations, and infrastructure. Includes 28 references, tables, figures.