Valuing water and wastewater service improvements via impact-weighted numbers of service failures

ABSTRACT

Stated preference valuations of water and wastewater service improvements in Great Britain have been found to be highly variable across studies for similar units of service, driven primarily by a substantive dependence on the scope of service change offered to survey participants. The present paper motivates and describes a new approach that is simpler for survey participants and sidesteps the key problems caused by scope insensitivity. It relies on first deriving estimates of the relative impact of different types of service issue, and then using these to apportion a package valuation into valuations of individual service level improvements. The paper presents a case study that implements the new approach in a real business planning context and discusses the impact the new approach has on the valuation results obtained. We contend that the new approach has significant advantages over traditional discrete choice experiment approaches to water and wastewater service valuation and recommend it for future use in similar policy/planning contexts.

KEYWORDS:

• Risk
• scope sensitivity
• stated preference
• valuation
• water and wastewater services
• willingness-to-pay

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 A peer reviewer noted that the values for bathing water quality improvements seemed high in relation to previous research. We judged that this might be due to a potential discrepancy between how participants construed the language defining river and bathing water quality service issues, and how they are primarily to be used in appraisals. A possible reason for overstating these issues was that participants may have interpreted them as deteriorations in quality for which willingness to accept, or WTA, is typically elicited, rather than as states of affairs that could potentially be improved upon, as intended, and for which WTP is typically elicited. This potentially led to typical case of loss/gain or WTA/WTP discrepancy, which according to a meta-analysis by Tunçel and Hammitt (2014) amounts to an average ratio of 6.23. The extent to which they did so was empirically explored via a series of further telephone interviews with customers. Reassuringly, the majority of participants interpreted the wording of the river and coastal water quality service issues in the intended way, i.e. as describing a service level that could potentially be improved (92% and 82%, respectively) and therefore congruent with WTP, with the remaining minorities (8% and 18%) interpreting them as deteriorations subject to WTA. The estimated impact scores for bathing water quality and river water quality were therefore adjusted by dividing them by 0.92 + 0.08 × 6.23 and 0.82 + 0.18 × 6.23, respectively. All impact scores were then rescaled such that the revised total added up to 100 again. Both sets of adjusted and unadjusted scaled impact scores are presented in Table 6.

2 Further analysis was undertaken to derive +1 to +2 utility and WTP values. Results from this analysis and for the original unrestricted model are available upon request.

Additional information

Funding

This work was supported by Dwr Cymru Welsh Water.