Analytical Cost Model for Urban Water Supply

The local water utility is ordinarily a pure monopoly except that industrial customers of water may establish their own supplies. Water supply systems can be separated into components: (1)Acquisition-treatment; and (2)delivery. Each of these components has its own cost function. Economies of scale gained in treatment may be lost in transportation. The tradeoffs between economies of scale in production and the costs of transportation have significance for the development of regional water supply systems. Cost functions are developed that allow a decision maker to evaluate these tradeoffs. Under specific circumstances the minimum average cost point for delivered water is approximately 8 miles.