Posted by Daniel Hall on October 20, 2007
My (admittedly dysfunctional) utility company charges all residents in my building the same amount for water in a given month — they simply measure total building water use and divide by the number of units, charging each unit the same amount. (Yes, at least all units are the same size.)
I think it’s pretty clear this makes water a common pool resource in our building. No one resident has the proper incentive to use the appropriate amount of water — I’m only paying for one-tenth of those extra 3 minutes I spend in the shower.
This problem frequently comes up with large commercial buildings. In addition to the principal-agent problems that affect landlord-tenant interactions, utility companies turn electricity use into a collective action problem by metering the use of the entire building, but not individual tenants. But this may be about to change. Via the CS Monitor:
In a move last month that could spread nationally, Pacific Gas & Electric (PG&E) will now allow high-rise owners to meter each tenant’s electricity usage and penalize energy hogs, rather than rely on one bill for an entire building.
It’s a simple idea, and one that should get tenants to properly internalize their electricity use. Now if we as a society could just get some of the other externalities associated with energy use internalized…