Water Pricing for Agriculture between Cost Recovery and Water Conservation: Where do we Stand in France? - Water and Agriculture: Sustainability, Markets and Policies - page 25

From a general perspective, the design of water pricing systems is generally a
compromise between the two approaches: from the demand side versus the supply side
and costs. Combining various water pricing structures and being applied in very different
situations, a large range of types of tariffs is to be achieved from classical average cost
pricing to more sophisticated as a long run marginal cost pricing or optional tariffs. What
is important is to be convinced that the toolbox is rich enough that it is certainly possible
to find an instrument that will be in accordance with the selected case in question.

Conjunctive use of water pricing and quotas

When the pressure on water resources is high and the available resources are scarce,
French water managers are more likely to choose to implement water quotas. This is
illustrated by two cases; the Charentes river basin and the Neste canal system. In both, a
water pricing instrument is imposed, as charging for water remains essential to cover all
the costs needed to maintain the quality of the water service.
The Neste system is part of a river basin with upstream dams that re-supply rivers
from which farmers directly withdraw water for irrigation. CACG -Company for the
development of the Coteaux de Gascogne Region- (South-West France) is a Regional
Development Company (SAR) and has been managing this system since 1991. In this
basin water resources are not able to meet all the demands and the pressure on water
resources is high in summer during the low flow period.
In order to be allowed to withdraw water from the re-supplied rivers, farmers are able
to apply for contracts, called convention de restitution, with CACG. These contracts
allocate quotas among farmers. They subscribe for a volume according the characteristics
of their irrigation equipment and plot characteristics. This allocated amount is at
maximum 4 000 m3 per l/s with a frequency of 8 years out of 10 and could be lowered by
2 years when drought periods occur. This quota ensures that the total water delivered will
not exceed the available volume of the dams and the minimum flow in rivers to be
maintained.
A pricing system (Table 7) is implemented with two objectives: (i) reinforce the quota
system by charging the water volumes exceeding the amount of the quota; (ii) charge the
average supply costs to the users. The design is rather closed to an increased bloc rate
tariff.

Table 7. Water pricing of the Neste canal system

Basis Pricing structure Amount ( ￿

Subscribed flow (l/s) Fixed part 60*p

Metering fee (l/s) Fixed part 40*p

Exceeding volumes over the quota (m3) Volumetric part .120*p

“p” value ( ￿ 0.901

Source : CACG, 2005.