ABSTRACT
This chapter addresses the needs of local government officials and utility managers. It presents the methodology of creating volumetric tariffs. This is a discussion of how such tariffs can be regulated by local governments to assure users of the basic fairness of the tariff design. The chapter discusses the following four topics as sources of funding for environmental utility and other utility type of funding: decision making objectives, full cost recovery tariffs, tariff design options, and regulation of water tariffs. It focuses on two of the objectives that are most directly related to the financial stability of the utility: cost recovery and economic efficiency. The objectives provide a guideline for utility managers to follow when deciding on water tariffs; however, not all of the objectives can be met at the same time. When setting the tariff, utility managers must understand that they must at least be able to recover the cost of operating the water system from the revenues earned.
