willingness to pay research project - monash...

1 This document is a copy of the research report for posting on Michael Ward’s personal academic webpage

(http://users.monash.edu.au/~mward/). Michael Ward’s affiliation changed to Monash University after this

report was completed.

The Australian National University

Willingness to pay research project Final report1

Prepared for ACTEW Corporation by: Dr. Ben J. McNair Dr. Michael B. Ward 20/03/2012

http://users.monash.edu.au/~mward/

Acknowledgements

The authors thank Professor Riccardo Scarpa for expert peer review, Taverner Research (particularly

Connie Jansen) for recruitment of research participants, Russell Pizel for online survey

implementation, and David Hensher for assistance with NLogit econometric software.

Foreword

This document reports on independent research undertaken by the Australian National University

(ANU). Dr Michael Ward, a full-time employee of the ANU, was the Chief Investigator with final

authority over all research project decisions. ACTEW and ActewAGL are industry partners in the

research in an arrangement akin to an Australian Research Council Linkage Grant. They provided

funding through their donations to the Endowment of Excellence at the ANU and contributed in-kind

support by way of salary for a research team member, Dr Ben McNair. Dr McNair was physically

separated from the industry partner when conducting this research in his office in the Crawford

School of Economics and Government. Dr McNair did not discuss data analysis or results with the

industry partner staff without Dr Ward’s involvement and consent. While feedback from the industry

partners was welcome, the industry partners had no control over research design or analysis. An

independent expert peer reviewer, Professor Riccardo Scarpa, has verified the quality of the

research.

Contents

EXECUTIVE SUMMARY I

BACKGROUND I

SUMMARY OF RESULTS I

1 INTRODUCTION 1

1.1 BACKGROUND 1

1.2 OBJECTIVES 1

1.3 CHOICE SURVEYS 2

1.4 OUTLINE OF THIS REPORT 3

2 CONSTRUCTING THE SURVEY INSTRUMENT 4

2.1 CONSULTATION WITH ACTEW 4

2.2 FOCUS GROUPS AND IN-DEPTH INTERVIEWS 7

2.3 EXPERT PEER REVIEW 8

2.4 THE INSTRUMENT USED IN THE MAIN SURVEY 9

2.4.1 ATTRIBUTES AND LEVELS 10

2.4.2 INVESTIGATING EXTERNALITIES AND THE EFFECTS OF SOCIAL INTERACTION 13

2.4.3 CONTROLS 13

3 SURVEY FIELDWORK 15

3.1 RECRUITMENT 15

3.2 SAMPLE CHARACTERISTICS 16

4 RESULTS 20

4.1 ESTIMATES OF WILLINGNESS TO PAY 20

4.1.1 OVERVIEW 20

4.1.2 SELECTING THE SAMPLE FOR ESTIMATION 20

4.1.3 CHOICE MODELS 23

4.1.4 WILLINGNESS TO PAY 25

4.1.5 COMPARISON WITH NERA AND ACNIELSEN 2003 29

4.2 PREFERENCES FOR GOVERNMENT WATER USE 29

4.3 ATTITUDES TOWARDS WATER RESTRICTIONS AND PRICING 30

APPENDIX A: TELEPHONE INTERVIEW SCREENER 35

APPENDIX B: EMAIL INVITATION 45

APPENDIX C: WATER QUESTIONNAIRE 48

APPENDIX D: WATER EXPERIMENTAL DESIGNS 69

APPENDIX E: PEER REVIEW 77

GLOSSARY 79

REFERENCES 80

Willingness to pay research project i

Executive Summary

Background In March 2011, the Australian National University (ANU) commenced an independent research

project, funded by ACTEW and ActewAGL through their donations to the ANU Endowment of

Excellence, focussing on demand for water supply security and energy supply reliability.2 The project

was undertaken by Dr Ben McNair and Dr Michael Ward, with expert peer review by Professor

Riccardo Scarpa of University of Waikato. The primary objective of the study was to estimate the

amounts of money that households in the Australian Capital Territory (ACT) are willing to trade for

changes in water supply security, and electricity and gas supply reliability. This report focuses on the

water component of the study. It details the data collection process undertaken by the ANU

research team and outlines the main results from data analysis.

The values placed by households on the various service attributes of interest were elicited using

choice surveys. Choice surveys involve presenting respondents with one or more choice questions,

where each choice question presents two or more scenarios with specified cost and asking the

respondent to indicate their preferred option. The scenarios are described by multiple attributes and

the levels assigned to attributes vary over scenarios and over questions to provide the variation

necessary for statistical estimation of the value placed by respondents on marginal changes in each

attribute.

This research builds on two previous studies of willingness to pay for water supply security in the

ACT. In 1997, the Centre for International Economics undertook one of the first applications of

choice modelling surveys to utilities in Australia, focussing on the environmental costs of various

options for addressing future supply-demand imbalance (Centre for International Economics 1997).

In 2003, NERA Economic Consulting and ACNielsen undertook choice surveys of ACTEW and

ActewAGL customers across a range of utilities service attributes, including attributes relating to

water supply security (NERA Economic Consulting and ACNielsen 2003). Where relevant, the results

from the NERA and ACNielsen study are compared to those from the present research project with a

view to understanding the way in which customer preferences may have changed over time.

Summary of results Attitudes towards water restrictions and willingness to pay (WTP) to avoid restrictions vary

considerably across households in Canberra. However, a clear finding is that most households care

about how others are using water. In particular, households evidenced a strong desire for fairness

and conformity in the way water is used.

While almost all households enjoy seeing green gardens in their neighbourhood when restrictions

are not in place, less than half get this enjoyment when restrictions are in place. Even when

2 The project was agreed by ACTEW, ActewAGL and the ANU following an application for a research grant by Dr

Ben McNair and Dr Michael Ward of the Crawford School of Economics and Government at the ANU in January

2011.

ii McNair, B. J. and Ward, M.B.

restrictions are not required for water security reasons, there is majority support for regulation of

water use, with around three in four households supporting the permanent imposition of water

conservation measures. On average, households even prefer Stage 1 restrictions to a situation with

no restrictions and are willing to pay an additional amount each year to ensure some low-level

restrictions are in place.

Households are opposed to higher-level restrictions. In particular, households evidenced a strong

aversion to the risk of Stage 4 restrictions and are willing to pay around $200 each year on average

to reduce the likelihood of Stage 4 restrictions by five percentage points (see Figure 1). The average

willingness to pay for five percentage point reductions in the likelihood of Stage 2 and Stage 3

restrictions are around $20 and $70 per year.

Figure 1: Average willingness to pay to avoid a five percentage point increase in likelihood of restrictions

relative to water conservation measures (dollars per annum)

These estimates can be used to quantify the benefits to households from improvements in supply

security. A comparison of these benefits with estimates of the cost to households from improving

the level of supply security shows that households want an increase in supply security (over levels

estimated during the drought) and they are willing to pay for it. ACTEW may find it useful to

incorporate these WTP estimates within its existing cost-benefit analysis framework to assess

decisions on potential investments in supply security.

Turning to a comparison with the 2003 study by NERA and ACNielsen, our results confirm the 2003

finding that households are unwilling to pay to avoid low-level restrictions (water conservation

measures and Stage 1 restrictions). In fact, households now prefer low-level restrictions to a

situation with no restrictions. However, households are now more opposed to higher-level

restrictions than they were in 2003 and are willing to pay more to avoid them.

0

50

100

150

200

250

Stage 1 Stage 2 Stage 3 Stage 4

Willingness to pay research project iii

Households’ desire for fairness and conformity in water use was further demonstrated by a group of

survey respondents who were asked to consider a situation in which ACTEW offered tariff options

that would allow individual households to pay a higher price and face fewer restrictions or pay a

lower price and face more restrictions. Only around one quarter of households thought such a policy

should be introduced. There appears to be some social stigma associated with choosing higher-

security options, with most households agreeing they would think poorly of those choosing a higher-

security tariff and that they expect others would feel the same way.

Consistent with these attitudes, average WTP to avoid higher-level water restrictions was lower

when the scenarios in the choice tasks were described as tariff options rather than community-wide

options (see Figure 2). Households’ WTP for low-level restrictions was lower when questions were

described as tariff options, suggesting that part of the benefit households obtain from low-level

restrictions is derived from preventing other households from using water in ways that they perceive

to be wasteful.


(dollars per annum)

On average, households want the burden of water conservation to be shared between public and

private spaces. The median view of households is that half of ovals, sports grounds, parks and public

spaces should be allowed to brown off when Stage 2 restrictions are introduced, with the remaining

half allowed to brown off when Stage 3 restrictions are introduced. Households placed a relatively

high value on watering of street trees, with a median view that street trees should only be allowed

to die due to drought once Stage 3 restrictions have been imposed.

-50

0

50

100

150

200

WCM Stage 1 Stage 2 Stage 3 Stage 4

Community-wide Tariff options

iv McNair, B. J. and Ward, M.B.

Willingness to pay research project 1

1 Introduction

1.1 Background In March 2011, the Australian National University (ANU) commenced an independent research

project, funded by ACTEW and ActewAGL through their donations to the Endowment of Excellence,

focussing on demand for urban water supply security and energy supply reliability.3 The project was

undertaken by Dr Ben McNair and Dr Michael Ward, with expert peer review by Professor Riccardo

Scarpa of University of Waikato. The primary objective of the study was to estimate the amounts of

money that households in the Australian Capital Territory (ACT) are willing to trade for changes in

water supply security, and electricity and gas supply reliability. This report focuses on the water

component of the study. It details the data collection process undertaken by the ANU research team

and outlines the main results from data analysis.

This research builds on two previous studies of willingness to pay for water supply security in the

ACT. In 1997, the Centre for International Economics undertook one of the first examples of a choice

modelling survey in Australia, focussing on the environmental costs of various options for addressing

future supply-demand imbalance (Centre for International Economics 1997). In 2003, NERA

Economic Consulting and ACNielsen undertook choice surveys of ACTEW and ActewAGL customers

across a range of utilities service attributes, including attributes relating to water supply security

reliability (NERA Economic Consulting and ACNielsen 2003). Where relevant, the results from the

NERA and ACNielsen study are compared to those from the present research project with a view to

understanding the way in which customer preferences may have changed over time.

1.2 Objectives The broad objective is to understand customer preferences with respect to the trade-off between

improved water supply security and higher water bills. In particular, the aim is to understand

customers’ WTP for the following service attributes:

a) the frequency of water restrictions; and

b) the severity of water restrictions.

While estimates of households’ WTP are of interest on their own, the primary benefits to be gained

from the study are in the comparison of these estimates with the marginal costs (or cost savings)

from changing service attributes. ACTEW may find it useful to use these results in cost-benefit

analysis as they have with past WTP studies to identify the investments that would achieve a

sustainable balance between demand and supply in the long term at the lowest cost to the

community.

3 The project was agreed by ACTEW, ActewAGL and the ANU following an application for a research grant by Dr

Ben McNair and Dr Michael Ward of the Crawford School of Economics and Government at the ANU in January

2011.

2 McNair, B. J. and Ward, M.B.

1.3 Choice surveys The natural monopoly nature of urban water provision and indivisibilities in the services mean that

consumers are rarely able to choose their preferred version of the service. Consumers are only

offered one version of the service for a given property. In general, it is not possible to observe

households trading off price against supply security in a real market; but, these trade-offs can be

observed in the context of a choice survey.

Choice surveys, particularly those employing conjoint analysis or choice modelling techniques, are

increasingly being used to understand consumers’ preferences for utilities services (for example,

Accent 2003; Accent 2008; Carlsson and Martinsson 2008; Kelly and Alford 2010; KPMG 2003;

McNair et al. 2011; NERA Economic Consulting and ACNielsen 2003; Willis et al. 2005) and as an

input to economic regulation – either as a means of quantifying benefits for cost-benefit analysis of a

given project (for example, Centre for International Economics 2008) or to set the incentive rates

(financial rewards and penalties) for under- or over-performance on various service attributes

(Ajodhia 2006; Giannakis et al. 2005; Netherlands Competition Authority 2006).

Choice surveys involve presenting respondents with one or more choice questions, where each

choice question presents two or more hypothetical scenarios with specified cost and asking the

respondent to indicate their preferred option. In choice modelling, the scenarios are described by

multiple attributes and the levels assigned to attributes vary over scenarios and over questions to

provide the variation necessary for statistical estimation of the value placed by respondents on

marginal changes in each attribute.

A choice survey provides an opportunity to observe choices that do not or cannot be observed in

real markets. A criticism sometimes levelled at choice surveys is that they simulate a market that is

hypothetical and therefore may not replicate the financial constraints confronted by consumers in

real markets. However, the extent of this disadvantage depends on the nature of the survey

mechanism. Financial constraints may be absent if a respondent believes that their response will

have no influence on the agency’s actions or if they believe the agency would not be able to enforce

payment. However, if a respondent believes that their response may (up to some non-zero

probability) influence the agency’s actions and that the agency could enforce a policy outcome

(including payment) based on their response, then the survey becomes a real market transaction of

sorts and financial constraints are present.4 Fortunately, when surveys are carefully designed in the

utilities services context, respondents are likely to fall into the latter category rather than the

former.

4 A hypothetical survey is consequential if respondents believes their responses will influence up to some non-

zero probability the likelihood of an alternative being implemented by the agency (Carson and Groves 2007).

Economic theory predicts that responses to a consequential hypothetical survey and a survey with immediate

and certain implementation will be equivalent. Consistent with this theory, Carson et al. (2006) found a

difference between responses to inconsequential hypothetical questions and questions involving 100 per cent

probability of actual payment, but, importantly, found equivalence in responses to all questions involving a

non-zero (20 per cent, 50 per cent, 80 per cent and 100 per cent) probability of actual payment.


In the present study, most respondents were informed by experience as to how water restrictions

would affect their household and most respondents believed that the results would influence

ACTEW operations, as evidenced by responses to specific survey questions as well as the media

coverage of the survey on 11 October 2011 and subsequent public debate. Respondents were

excluded from the choice models where they indicated they had answered a different question from

that being asked. As a result, we have confidence in the study’s findings.

The design of the hypothetical choices in terms of the levels of service attributes allocated to

competing alternatives determines the information that will be gathered. It is important that choice

questions are designed carefully to ensure that the trade-offs required to estimate values for each

attribute are induced. Modern techniques in experimental design allow the analyst to do this in a

way that maximises the statistical significance of the estimation results for a given sample size.

1.4 Outline of this report Section 2 of this report details the process of constructing the survey instrument, including

consultation with ACTEW and testing in focus groups and in-depth interviews. The service attributes

and associated levels used to describe scenarios in the choice questions are set out in this section.

Section 3 of the report describes the survey fieldwork, including the recruitment of participants and

the characteristics of the sample. The results of analysis of the survey responses are presented in

Section 4.


2 Constructing the survey instrument The survey instrument used in this study was constructed through several phases of careful planning

and testing. When constructing the survey instrument, considerations included the following.

1. The number of alternatives to be included in the choice questions (and whether one of the

alternatives should characterise the status quo);

2. The service attributes to be included in the choice questions and how those attributes

should be defined;

3. The levels that the service attributes can take in the questions and whether these levels

should vary across respondents on the basis of respondent characteristics;

4. The number of questions to be answered by each respondent;

5. The combinations of attribute levels in each question (that is, the experimental design); and

6. The order in which questions are presented to each respondent.

The construction of survey instrument was informed by consultation with ACTEW, testing in focus

groups and in-depth interviews, advice from expert peer reviewer Professor Riccardo Scarpa, and

pilot survey responses. Each of these phases is discussed in turn in the following sections.

2.1 Consultation with ACTEW In early April 2011, the ANU provided a plan document outlining a proposed approach to the project,

focussing on the information to be sought from customers, the design of the surveys to elicit that

information, and the practical means by which the surveys would be undertaken.

The ANU research team proposed that the survey employ a different choice design to that used by

NERA in 2003 to reflect developments in the restrictions regime taking place over the intervening

period. In the NERA and ACNielsen study, restrictions are defined by both ‘level’ and ‘types of days

that water restrictions apply’. This definition led to scenarios in which restrictions are applied every

second day (see Package B in Figure 3). It is no longer consistent with the way in which restrictions

are applied. Stage 3 restrictions are based on an ‘every second day’ approach, but the approach

involves alternating daily between a total ban and morning and evening watering, rather than

alternating between unrestricted use and morning and evening watering as the choice tasks used in

2003 imply. The preference information revealed by the pioneering NERA and ACNielsen survey

allows us to generate an experimental design (combinations of service attribute levels) that elicits

preferences more efficiently (that is, a design that requires a smaller sample size to achieve a given

level of statistical significance in estimation).


Figure 3: Example of choice task from NERA 2003 survey

The ANU research team developed a set of attributes based on the existing restrictions regime.

Respondents were expected to be well informed about the regime as a result of its enforcement

over the previous eight years. This familiarity with the consequence component of the water

shortage risk allowed the design to focus on the probability component of the risk – something that

is otherwise difficult to achieve in a choice survey. This allowed the service scenarios to be defined in

quite realistic terms that characterise trade-offs that closely resemble those considered by ACTEW in

its water security planning. The attributes and associated levels used in consultation with ACTEW are

presented in Table 1.


Table 1: Attributes and associated levels for consultation with ACTEW

Attribute Level

Expected number of years

spent in each level of

restrictions over the next 30

years:

Water conservation measures 6, 10, 14

Stage 1 2, 4, 6

Stage 2 2, 4, 6

Stage 3 0, 2, 4

Stage 4 0, 1, 2

Your ongoing annual water and sewerage bill (proportion of

current bill)

0.90, 0.92, 0.94, 0.96, 0.98,

1.00, 1.02, 1.04, 1.06, 1.08,

1.10, 1.12

The draft choice questions constructed from these attributes and levels and used as a basis for

consultation were constructed in a binary choice format with no status quo option and annual bill

amounts pivoted on the respondent’s perception of their own annual bill. These aspects of the

design were later revised following discussion with the project team’s expert peer reviewer.

On 18 May and 23 May 2011, the research team met with ACTEW and ActewAGL representatives.

The following points were raised:

ACTEW indicated that it would be useful to separately value restrictions on government use

and the resulting impacts on ovals, parks, and street trees.

ACTEW questioned whether the increments in the price levels chosen for the experimental

design were too small. It was agreed that this could be tested in focus groups and fine-tuned

after the pilot survey.

ACTEW questioned whether the supply security scenarios should include periods of no

restrictions given that current government policy is that Water Conservation Measures will

apply permanently. It was agreed that Water Conservation Measures should not be treated

as permanent for the purpose of the survey to allow the effect of the measures to be

estimated. However, ACTEW suggested that the choice tasks specify the number of years

without restrictions so that the number of years sum to the same total in every case.

The research team agreed to include in the final survey questions about respondents’ preferred

timing for the introduction of various types of restrictions on government water use relative to the

timing of the introduction of the various stages of household restrictions. The price increments used

in the choice design were carefully adjusted on several occasions, including twice as part of the

adaptive experimental design approach used in the survey to cover the range of WTP (or willingness

to accept) implied by responses in the survey to that point. The number of years in “no restrictions”

was included as an attribute in the choice questions so that the sum of years across all attributes

was equal to 20 in every question.


2.2 Focus groups and in-depth interviews On 28 July and 1 August 2011, the ANU conducted two focus group sessions with a total of eleven

participants at the Colmar Brunton offices in Yarralumla. The main purpose of the sessions was to:

1. assess clarity and interpretation of draft questionnaires;

2. investigate how attitudes towards restrictions on use, infrastructure spending and tariff

options may influence responses to preference questions;

3. investigate how perceptions about how the survey results would be used by ActewAGL may

influence responses to preference questions; and

4. check the level of fatigue and understand whether respondents would complete the

questionnaires if self-administered online.

This process facilitated identification of questions that had been misinterpreted by respondents and

ways of improving those questions prior to fielding the survey. It also provided a richer

understanding of the data collected in the survey itself. This phase of the research was particularly

important in this study because the survey was self-administered online (without an interviewer

present).

The sessions comprised two stages. In the first stage, the participants completed the questionnaire

and, in the second stage, ANU researchers engaged the participants in a conversation exploring the

meaning of specific parts of the questionnaire and how the participant arrived at their answers. The

sessions also included more general discussion about water restrictions, tariff options, government

water use and water prices.

Despite awareness of the Extended Cotter Dam project, almost all participants expected that some

temporary water restrictions would be required over the next 20 years. Almost all participants

indicated they wanted low level restrictions all the time in order to reduce the risk of more severe

restrictions and to reinforce ‘good’ habits. Most participants were fairly negative about the idea of

tariff options that would allow the level of restrictions to vary across households, though some were

positive, particularly about the idea of a ‘budget’ tariff option that would allow households to opt to

pay less and face restrictions more often. Most participants thought that there would be animosity

towards households opting for a high security tariff. Most participants expressed the view that

public spaces, such as parks and sports fields, should continue to be watered even once severe levels

of restrictions are placed on households. Most participants supported the idea of prices being higher

during shortages and lower during times of plenty, but a few participants wanted prices to be stable

over time.5

Some of the main outcomes in terms of constructing the choice questions were as follows.

In line with earlier feedback from ACTEW, some participants in the first focus group

expressed the view that the bill amounts were too similar across options. The water bill level

5 It was later found, in the main survey, that households were evenly split on this issue.


differences were doubled in the second focus group. This revision was later judged to have

over-compensated and the increments were adjusted.

Choices appeared to be driven almost solely by either price or Stage 4 restrictions. The

design was subsequently constrained so that in some questions the levels for Stage 3 and

Stage 4 restrictions were equal across alternatives (to force trading on lower levels of

restrictions). The prior coefficient for Stage 4 used in generating the choice design was

increased so that changes in the number of years at Stage 4 would tend to be associated

with larger bill differences in the design.

Part of the reason for the focus on Stage 4 appeared to be an association with the risk of

running out of water altogether. To isolate the WTP to avoid Stage 4 restrictions from the

WTP to avoid this risk of supply exhaustion, a ‘State of emergency’ attribute was included in

choice questions, taking only a zero level.

Colour coding in the graphical representations of the restriction attribute levels and in the

summary of the restrictions regime appeared to be causing an emotional response in some

participants. The colour coding was subsequently removed.

Some participants expressed the view that there was too much information provided below

the choice questions. The table summarising the restrictions regime was subsequently made

available via a link rather than included on the page itself.

The sessions also helped to identify the need to:

make the recruitment screening questions more specific about which types of renters can be

included in the study;

give assurances that accessed past billing records would be used only for this study;

revise the income question to include annual income amounts as well as weekly amounts;

adjust the ordering of instructions for answering choice questions and to include more

headings and dot points in those instructions; and

include questions that will help us to understand how restrictions affected each respondent.

2.3 Expert peer review The final stage of the process of constructing the water survey instrument was to subject the

instrument to expert peer review by Professor Riccardo Scarpa in the week commencing 8 August

2011. The main revisions arising from the advice provided by Professor Scarpa were as follows.

Use of a three-alternative choice format comprising a status quo option fixed across the

design for each respondent to clearly define a reference point that acts as a pivot between

the other two alternatives – a deterioration scenario (offered at a bill discount) and an

improvement scenario (offered at a bill increase). To increase variability, two status quo

scenarios were defined and randomly allocated to respondents.


Defining the monetary attribute as the absolute dollar change in annual bill. This was

preferred to showing the total bill amount due to potential framing effects. Absolute dollar

changes, rather than dollar changes calculated as a function of a respondent’s current bill,

were preferred, despite a loss of design efficiency, due to concerns over endogeneity

potentially created by the correlation between bill amounts and WTP.

Inclusion of a “cheap talk” script to mitigate any hypothetical bias. A “cheap talk” script is a

short paragraph in the questionnaire instructing respondents to answer the hypothetical

questions as though they were real situations.

Increasing the range of bill levels used in the design to cover the WTP level (implied by the

mean of the Bayesian coefficients in the prior utility function) for the largest service

improvement possible in the design.

2.4 The instrument used in the main survey The questionnaire and choice designs used in the survey are set out in Appendix C and Appendix D.

The questionnaire commenced with a letter from the researchers, before providing information on

the purpose of the survey, water restrictions in the ACT, and the trade-offs that exist not only

between cost and time spent in restrictions, but also between the levels of restrictions themselves.

For a split sample of respondents, the questionnaire then provided information establishing a policy

context in which households would be able to choose between tariff options, so that both price and

restrictions imposed may vary across households. Further details of the reasons for this split sample

treatment are provided on page 13. Instructions for answering the choice questions were provided,

including an example choice question, before six choice questions drawn from the choice design

were presented in turn. Several questions were included in the questionnaire to help us to

understand how respondents answered the choice questions, including attribute attendance,

strategic behaviour, consequentiality, plausibility, protest response and attendance to the policy

context. Respondents were then asked questions about the cost of restrictions on government

water use relative to restrictions on household water use and a dozen Likert scale questions relating

to tariff options, externalities and social interactions associated with water use, knowledge of

restrictions, and water pricing. The questionnaire concluded with questions about household water

use and socio-demographic characteristics.

The choice design, which was revised twice during the survey period, comprised 48 choice questions

– 24 using status quo version 1 and 24 using status quo version 2. Each set of 24 questions was

grouped into four blocks of six questions, giving eight blocks overall. Each respondent was assigned

to one of these eight blocks and the questions were presented to the respondent in a randomised

order.

Design revisions focussed on updating the combinations of attribute levels to maximise design

efficiency and on the available levels for the low level restrictions attributes and, particularly, the bill

attribute. The bill attribute levels were adjusted to ensure that they covered the WTP implied by

models run on data collected to that point for the best and worst possible combinations of service

attribute levels in the design. The most significant diversion between the prior utility function used

to develop the initial design and the models run on early survey responses was the strength of

preference for lower level restrictions over an absence of restrictions. As expected, it appeared that


this preference was more prevalent where options were presented as community-wide options (as

opposed to where they were presented as tariff options). To capture the trade-offs necessary to

assess whether WTP for lower level restrictions was indeed positive, while at the same time

maintaining plausible budget and high-security tariff options in most questions, a small number of

bill decreases or lower level restriction increases were included in the improvement options, and

conversely for deterioration options.

2.4.1 Attributes and levels

The attributes and levels in the choice design used in the survey are presented in Table 2. Some

attribute levels listed in the table were presented to respondents more often than others over the

course of the survey. This imbalance was partly due to changes in the attribute levels as part of the

adaptive design process and partly due to some levels being intentionally assigned infrequently; for

example, the positive bill changes in the deterioration options and the negative cost changes in the

improvement options were used only in a few choice questions as a means of testing the result

implied by pilot data analysis that households on average would be willing to pay more to have

water conservation measures or Stage 1 restrictions in place rather than no restrictions at all.


Table 2: Attributes and associated levels used in water survey instrument

Attribute Status quo version 1 Deterioration option Improvement option



restrictions over the next

20 years:

Water conservation

measures

14 Remainder (range 2 to 15) 2, 8, 14

Stage 1 2 0, 2, 4, 6, 8 0, 1, 2, 4

Stage 2 2 0, 2, 4, 6, 8 0, 1, 2, 4

Stage 3 2 0, 2, 3, 4, 6 0, 1, 2, 4

Stage 4 0 0, 1, 2 0

State of emergency 0 0 0

Your ongoing annual water and sewerage bill (dollar

increase in your current bill)

0 50, 0, -50, -100, -150, -200, -250, -300,

-350, -400

-100, -50, 0, 50, 100, 150, 200, 250

Attribute Status quo version 2 Deterioration option Improvement option



restrictions over the next

20 years:

Water conservation

measures

9 Remainder (range 2 to 17) 3, 6, 9, 12

Stage 1 4 0, 2, 4, 6, 8 0, 2, 4, 6

Stage 2 4 0, 2, 4, 6, 8 0, 2, 4, 6

Stage 3 2 0, 2, 3, 4, 6 0, 2, 4

Stage 4 1 1, 2 0, 1

State of emergency 0 0 0

Your ongoing annual water and sewerage bill (dollar

increase in your current bill)

0 50, 0, -50, -100, -150, -200, -250 -100, -50, 0, 50, 100, 150, 200, 250,

300, 350, 400


An example of a choice question is presented in Figure 4 along with the graphs that were provided

to assist respondents in comparing the options and the table summarising the restriction regime,

which could be accessed in a pop-up window via a link on the choice question pages of the

questionnaire.

Figure 4: Example of a choice question in the water survey instrument

CURRENT

PACKAGEPACKAGE A PACKAGE B

RESTRICTIONS ON HOUSEHOLD WATER USE

No restrictions 0 0 3

Water conservation measures 9 8 9

Stage 1 4 4 4

Stage 2 4 4 4

Stage 3 2 2 0

Stage 4 1 2 0

State of Emergency 0 0 0

THE COST TO YOUR HOUSEHOLD

$0 $100 $350

If Package A and Package B were the only two options available

to you, which option would you choose?

more than your

current bill




years:

Your ongoing annual water and sewerage bill

If these were the only three options available to you, which option

would you choose?

less than your

current bill

more than your

current bill

0 10 20

State of Emergency

Stage 4

Stage 3

Stage 2

Stage 1

Water conservation

measures

No restrictions

Expected number of years in restrictions

over next 20 years

Current Package

0 10 20

State of Emergency

Stage 4

Stage 3

Stage 2

Stage 1

Water conservation

measures

No restrictions


over next 20 years

Package A

0 10 20

State of Emergency

Stage 4

Stage 3

Stage 2

Stage 1

Water conservation

measures

No restrictions


over next 20 years

Package B

SprinklersHand-held hose, bucket, or

watering canSwimming pools Vehicles

Target annual

reduction in water

use

Water Conservation

Measures

Permitted before 9am or after

6pm every dayPermitted at any time

Pools may be filled or topped

up using hose. Larger pools

must be covered when not in

use.

May be washed using a

bucket, watering can, or hand-

held hose with trigger nozzle

13%

Stage 1

Permitted for 3 hours in

morning and evening every

second day

Permitted at any time

Existing pools may be topped

up using hose. Written

exemption required to fill or

refill

May be washed no more than

once per week using a



22%

Stage 2

Only dripper systems

permitted for 3 hours in


second day



second day


up for 3 hours in morning and

evening every second day

using hose if covered when

not in use. Written exemption

required to fill or refill





35%

Stage 3 Not permitted



second day

Written exemption required

for fill, refill, or top up

Permitted only at complying

commercial car wash43%

Stage 4 Not permitted Not permittedWritten exemption required

for fill, refill, or top upNot permitted 61%

State of Emergency Emergency water use only


2.4.2 Investigating externalities and the effects of social interaction

Social interaction is an important consideration when attempting to understand preferences

towards water restrictions. A component of household utility is likely to be related to social status,

which may be adversely affected by selecting a tariff option that is unpopular with other households

in an egalitarian society. Focus group participants suggested that households opting for high-security

tariffs may be perceived as selfish or lacking concern for the community and, as a result, face a

backlash from the community. Utility may also be affected by externalities such as visual amenity

from other households avoiding restrictions and benefits derived from preventing other households

from using water in ways that are perceived to be wasteful.

A number of elements of the questionnaire were included for the purpose of developing a better

understanding of these externalities. First, we used a split sample treatment of policy context, with

some respondents told they were voting on scenarios to apply across the whole community and

others told they were choosing tariff options for their household only, with other households

potentially facing different price-restriction tariff options. Second, we included several questions

relating to the perceived popularity of alternatives, the strength of social utility, and the extent to

which households care about amenity from green gardens and disutility from other households

using water without restriction.

2.4.3 Controls

The survey was carefully prepared to enable accurate estimation of WTP. The costs of restrictions on

households and restrictions on government water use were dealt with separately and this was made

explicit to respondents. A cheap talk script was included to mitigate hypothetical bias. Questions

were included to assess:

attendance to each attribute;

whether respondents were treating the risk of restrictions as equal over time (as asked) or

whether they anticipated the risk of restrictions increasing over time;

whether respondents were expecting to move away from Canberra within five years;

whether respondents found the choice scenarios plausible and, if they did not, whether they

suspended their disbelief or answered as though the levels were different;

the reasoning of respondents who chose the status quo alternative in every choice question;

whether respondents may have acted strategically to keep tariff options under consideration

knowing the choice is not binding;

whether respondents paid attention to the policy context described in the survey;

whether respondents thought the survey results would influence ACTEW policy;

respondents’ knowledge and experience of restrictions;

respondents’ knowledge of their water bills; and

socio-demographic and water use characteristics of respondents.


The impacts of restrictions on government use were measured by asking households to equate the

impacts with those of restrictions on households. We included a question to gauge the extent to

which altruism influenced respondents’ views on the impact of restrictions on government use.

Responses to this question will help disentangle the disutility from adverse impacts on a

respondent’s own use of public assets and the disutility from seeing adverse impacts on others.


3 Survey fieldwork

3.1 Recruitment The majority of participants were recruited by Taverner Research using computer-assisted telephone

interview (CATI) between 19 September and 5 October 2011. Telephone numbers were selected by

random number dialling, subject to known Canberra telephone number prefixes. The script used for

these recruitment calls is set out in Appendix A. Some 1409 households were eligible for at least one

of the three questionnaires conducted as part of this research project (water, electricity, and gas),

indicated that they would be willing to participate in the research, and provided an email address for

the purpose of receiving links to the online questionnaires. The interviews were used to screen out

any households that did not face both the costs (via utilities bills) and benefits (via living in the

residence) of changes in the balance between cost and standards of utility services. Households

were only deemed eligible for the water survey if they:

1. receive water and sewerage bills for the residence in which they live; or

2. pay a regular, specific charge for water to a landlord or body corporate and the landlord of

body corporate always provides a copy of their ActewAGL bill to demonstrate the amounts

that are being passed through.

Property owners that reside elsewhere and renters whose payments for water are not a direct pass-

through of ActewAGL charges were excluded.

The interviews were also used to collect information on location (suburb and postcode), dwelling

type (separate house; semi-detached, row/terrace house, or townhouse; or flat, unit or apartment),

and tenure type (fully owned, being purchased, rented). As far as possible, the sample was selected

to be representative of the population with respect to these characteristics. Details of the

characteristics of the sample of participants who followed through and completed at least one

questionnaire are discussed in the following section of this report.

A cash prize draw was offered as an incentive to participate to increase the response rate and to

mitigate sample selection bias. The prizes were $2000 for first place and $500 for each of four

runners-up. Participants qualified for the prize draw once they had completed one of the online

questionnaires. Participants completing a second online questionnaire were entered twice more into

the draw. The winners were drawn on 19 October 2011 by Taverner Research.

An additional 223 participants had been recruited as part of a survey on water conservation

measures undertaken by ACTEW earlier in 2011. In that survey, respondents were asked if they

would be willing to provide their email address for the purpose of receiving an invitation to

participate in a related survey later in the year. Of the respondents answering in the affirmative, 110

had been recruited to that survey by a market research firm, while the remaining 113 had accessed

the survey via a link on ACTEW’s website.

All 1632 of the participants discussed above (1409 recruited by Taverner Research plus 223 recruited

in the earlier ACTEW survey) were sent an email inviting them to complete up to two questionnaires

as part of the study (see Appendix B). The email briefly reiterated the reason for the research and


described how the results were likely to be used, with published results in a grouped, anonymous

format, before providing links to two of the three questionnaires. The questionnaires were selected

based on eligibility and the target number of responses to each of the three surveys. Participants

recruited through the earlier ACTEW survey were invited to complete the water and electricity

questionnaires, since there households’ eligibility for the gas survey was unknown. The email

invitation was sent within 24 hours of the telephone interview, with reminder emails sent towards

the end of the survey period to those who had not yet completed a questionnaire. The online

questionnaires, which were implemented by SurveyHelp, were open from 19 September to 14

October 2011. During that time, 1349 questionnaires were completed by 776 respondents across the

water, electricity, and gas surveys.

Table 3: Recruitment and completion statistics

Recruitment Taverner CATI 1409

ACTEW PWCM survey

Recruited sample 110

Open access 113

Total

1632

Online participation Did not complete a questionnaire 856

Completed one questionnaire 203

Completed two questionnaires 573

Total

1632

Questionnaires completed Water 667

Electricity 408

Gas

274

Total

1349

3.2 Sample characteristics Table 4 shows that participants for the water survey were selected from across all postcodes in the

ACT in proportions representative of the number of dwellings in each postcode area (as counted by

the Australian Bureau of Statistics 2006 census).


Table 4: Survey completions by postcode (per cent)

Postal area Dwellings (2006) Survey completions McNair and Ward 2012

2600 2.5 2.6

2601 0.4 0.5

2602 9.3 12

2603 2.7 2.7

2604 3.4 2.9

2605 3.6 3.6

2606 2.9 3.8

2607 4.3 3.9

2611 7.1 7.7

2612 4.7 5.1

2614 6.1 4.6

2615 11.9 11.5

2617 7.4 8.9

2900 0.5 0.3

2902 4.6 4.8

2903 2.8 2.6

2904 3.6 3.1

2905 7.9 7.2

2906 4.8 3.4

2912 1.9 1.9

2913 6.2 6.2

2914 0.8 0.7

Recruiting a sample representative of dwelling and tenure type proved difficult. Renters (see Table

5) and higher-density dwellings (see Table 6) were under-sampled relative to the population. Advice

from market research practitioners suggests that recruiting renters to research via telephone is

becoming increasingly difficult because the move away from fixed, landline telephones is particularly

prevalent amongst this group. Our recruiters found it particularly difficult to find renters receiving

transparent pass-through of ActewAGL water bill amounts from their landlords. Some of the focus

group participants suggested that it is commonplace for property management agents to pass

through water consumption charges only if they exceed a certain threshold. Although the tenure

type characteristics of the sample are not representative of the full population of dwellings in the

ACT, they may be representative of the population of households paying the relevant utility bills for

the residence in which they live. However, care should be taken when aggregating WTP estimates

over the ACT population.

Table 5: Water survey completions by tenure type (per cent)

Tenure type Dwellings (2006) Survey completions

McNair and Ward 2012

Fully owned 30.4 50.4

Being purchased 39.1 45.8

Rented 30.5 3.8


Table 6: Water survey completions by dwelling type (per cent)

Tenure type Dwellings (2006) Survey completions

Flat, unit or apartment 12.0 4.5

Semi-detached, row/terrace house, townhouse 13.8 7.8

Separate house 74.1 87.8

The characteristics of survey respondents in terms of age, education, and income are presented in

Table 7. The population being drawn from is the set of household members responsible for paying

utility bills (who are then asked to respond on behalf of their household). The characteristics of this

population are unknown because the Australian Bureau of Statistics cannot provide data relating to

Person #1 on the census forms.

Table 7: Survey completions by age, education, and income (per cent)6

Survey completions

Age

Under 25 1

25-39 14

40-54 34

55-64 32

65+ 19

Highest level of education

Less than year 10 1

Year 10 4

Year 12 10

Diploma or certificate 22

Undergraduate degree 32

Postgraduate degree 31

6 Personal income ranges were set to be consistent with the equivalent question in the NERA and ACNielsen

study in 2003, adjusted for inflation. Households income ranges were set to be consistent with ABS census

questions.


Survey completions

Personal income ($A 2011)

Less than $25,000 10

$25,000 - $44,999 18

$45,000 - $64,999 18

$65,000 - $129,999 43

$130,000 - $189,999 8

$190,000 - $249,999 2

$250,000 - $320,000 1

Over $320,000 0

Household income ($A 2011)

$1-$12,999 0

$13,000-$25,999 2

$26,000-$41,999 6

$42,000-$61,999 7

$62,000-$87,999 16

$88,000-$129,999 21

$130,000-$181,999 22

$182,000 or more 18


4 Results This section sets out the main results from the survey, focussing on estimation of households’ WTP

for changes in supply security. While these estimates are of interest on their own, the primary

benefits to be gained from the study are in the comparison of these estimates with the marginal

costs (or cost savings) from changing supply security. ACTEW may find it useful to use these results

in cost-benefit analysis as they have with past WTP studies to assess whether the balance between

cost and supply security could be altered to better suit customers’ preferences.

4.1 Estimates of willingness to pay

4.1.1 Overview

Choice modelling is a developing field that has seen several important advances in econometric

methods for choice data analysis over the past decade. Results can vary significantly over candidate

choice models and debate continues over the merits of various econometric specifications. In this

study, the research team estimated a considerable number of models to identify the findings that

are robust to changes in econometric specification. The models presented in this report are

examples of the models that have been estimated that are consistent with the following findings,

which arose consistently across different models.

On average, households are very averse to Stage 4 restrictions and are willing to pay significant amounts to reduce the likelihood that they will occur.

On average, households prefer water conservation measures to a situation with no restrictions.

There is considerable variation across households in WTP to avoid water restrictions.

On average, the preference for low-level water restrictions is greater when they are applied to the whole community as opposed to the respondent’s own household (via tariff options).

On average, the WTP to avoid high-level restrictions is greater when they are applied to the whole community as opposed to the respondent’s own household (via tariff options).

4.1.2 Selecting the sample for estimation

Overall, 243 (or 39 per cent of) respondents from the recruited sample7 were omitted from the WTP

models to ensure that responses used to estimate the models were given on the basis of the

attribute levels presented and with an understanding of the policy context. This exclusion rate is

relatively high due to the controls carefully and intentionally included in the questionnaire, the

somewhat controversial topic of the survey, and the cognitively demanding nature of the

questionnaire. Specific reasons for the exclusions are as follows.

Some 49 water survey respondents were recruited via an earlier ACTEW survey and accessed that

survey via the open link on www.actew.com.au as opposed to being recruited by a market research

company. These respondents were omitted from the choice analysis due to concerns over selection

bias in the way they were recruited. It was judged that open access participants were more likely to

have strong views on restrictions and would not be representative of the wider population.

7 Excludes respondents that were recruited via the earlier ACTEW survey and accessed that survey via the open

link at www.actew.com.au (as opposed to those recruited by ORIMA Research).

http://www.actew.com.au/

http://www.actew.com.au/


A number of data observations were omitted from models used to estimate WTP to ensure that the

data consisted only of responses to the questions being asked. The status quo options, despite not

being based on ACTEW’s most recent forecasts, were considered reasonably realistic by 90 per cent

of respondents. Two thirds of those that did not find the status quo scenario realistic indicated that

they suspended their disbelief when answering the choice questions. The remaining 22 respondents,

who indicated that they answered as though the attribute levels were different, were omitted from

the WTP models. Similarly, the majority of respondents found the alternative packages realistic.

Some 34 respondents who found at least one package unrealistic and answered the question as

though the levels were different were omitted from the WTP models.

Around 18 per cent of respondents chose the status quo option in all six choice questions. This

choice pattern can indicate serial non-participation; that is, a decision process that is not related to

the attribute levels presented in the alternatives. Around 14 per cent of respondents gave reasons

for this choice pattern that were judged to be consistent with serial non-participation and were

omitted from the WTP models. Of these reasons, the most frequently given was “I disagree with the

notion of people paying to avoid water restrictions” (46 per cent), followed by “I disagree with the

notion of offering people money to face more water restrictions” (26 per cent), and “I expect ACTEW

would implement service reductions without delivering the associated bill decreases” (22 per cent).

The other reasons that were considered indications of non-participation were “I didn’t have enough

time to properly evaluate the options”, “I didn’t have enough information to be confident choosing

the options”, and “I expect ACTEW would implement the bill increases shown without delivering the

associated service improvements”.

Around 9 per cent of respondents indicated that they thought the results of the survey would not

influence ACTEW policy and another 22 per cent indicated a perceived policy context for the study

that differed from what was described in the instructions on the questionnaire (see Table 8). The

latter group were omitted from our models so as not to taint the assessment of the impact of policy

context on responses.

Table 8: Attendance to policy context

“What is your understanding of the way in which the results of this

survey will be used to inform ACTEW policy?”

Policy framing

Community-wide

Tariff options

To inform a decision on a package to apply to the whole community 230 (69%) 69 (21%)

To inform a decision on a set of packages from which households would be able to choose a package to suit their needs and budget

81 (24%) 229 (69%)

The results of this survey will not influence ACTEW policy 24 (7%) 34 (10%)

Finally, 15 respondents completing the questionnaire in less than ten minutes were also excluded

because it was judged that their responses may have been, at best, poorly considered and, at worst,

given randomly purely as a means of qualifying for the prize draw.

The comparison of characteristics of those included and excluded in Table 9 shows that the two

groups are statistically equivalent at the 0.05 level in terms of age, type of dwelling, estimated bill

amounts, household size, and the proportion of undergraduate degrees. Equivalised household


income and the proportion of postgraduate degrees are higher in the included group. Some

differences in attitudes also appear to exist between the groups. Respondents in the included group

are less likely to think poorly of those paying to avoid restrictions and less likely to expect others to

think poorly of them for doing so. They are more likely to get enjoyment from green gardens when

restrictions are in place and they are more likely to think that Stage 3 restrictions or above will be

required at some point over the next 20 years.

Table 9: Characteristics of included and excluded samples

Included Excluded t or χ

2

p-value

Equivalised household income (mean $’000s per annum) 60.32 55.63 0.05

Age (mean years) 53.77 53.60 0.87

Semi-detached or flats (proportion) 0.11 0.12 0.59

Undergraduate degree (proportion) 0.33 0.29 0.35

Postgraduate degree (proportion) 0.35 0.26 0.02

Bill estimate (mean dollars per annum) 937.09 913.69 0.62

Household size (mean persons) 2.86 2.83 0.82 Likert Scale questions (mean rating out of 5, where 5=strongly agree)

Households should be able to buy exemptions from water restrictions, with the raised funds given as rebates to households that do face restrictions.

2.45 2.35 0.30

Others in my neighbourhood would think poorly of me if I wasn’t facing restrictions and they were.

3.86 3.70 0.05

It would mostly be people with a lack of concern for the community that would pay to avoid water restrictions.

3.33 3.51 0.05

When water restrictions are not in place, I get enjoyment from seeing green gardens and lawns in my neighbourhood.

4.32 4.20 0.07

When water restrictions are in place, I get enjoyment from seeing green gardens and lawns in my neighbourhood.

3.22 3.03 0.04

Water conservation measures should apply permanently to stop households from wasting water, even when the dams are full.

3.67 3.68 0.87

I avoid some desired uses of water because I am worried about what my neighbours will think.

2.46 2.58 0.15

I feel a sense of community spirit with my fellow Canberrans when we all pull together to conserve water.

3.95 3.85 0.18

Stage 3 restrictions (or above) will not be required at any time over the next 20 years.

2.33 2.57 0.00

Before answering this questionnaire, I was familiar with the restrictions on water use associated with each ‘stage’ of water restrictions in the ACT.

3.91 3.83 0.20


4.1.3 Choice models

Panel mixed multinomial logit models of household choice estimated in WTP-space using Biogeme

(Bierlaire 2003) are shown in Table 10.8 Separate models are estimated on data from the

community-wide and tariff option policy contexts. Externalities and social interactions that would

cause differences in preferences under the two policy contexts include the following:

the loss of amenity from other households facing restrictions (present in the community-

wide context, but not the tariff options context);

the benefit gained from preventing other households from using water in ways that are

perceived to be wasteful (present in the community-wide context, but not the tariff options

context);

the loss of social status from choosing options (most likely high-security options) that are

considered by others to indicate a lack of concern for the community (present in the tariff

options context, but not in the community-wide context); and

the benefit of community spirit or camaraderie when all households are ‘pulling together’

to conserve water (present in the community-wide context, but not the tariff options

context).

For the purpose of this report, we provide choice models and estimates of WTP under the two policy

contexts, but we do not attempt to disentangle the effects listed above. Developing an

understanding of the difference in responses across the two policy contexts will be an objective of

further research by the research team.

The relative order of the coefficients on restriction attributes accords with a priori expectations and

the large t-statistics suggest that respondents gave considered responses to the choice questions on

the basis of the service attributes presented. Respondents exhibited a status quo bias in the sense

that the alternative (non-status-quo) packages were chosen only when the value placed by

respondents on the package attributes was at least $100 per annum higher than the value placed on

the status quo attributes, on average. Status quo bias is a phenomenon common not only in stated

preference surveys, but also in real markets. In this case it could be caused by one or more of several

factors, including non-constant marginal utility and perceived uncertainty over outcomes from

implementing new scenarios. We focus on reporting the average WTP, but it is important to

recognise there is considerable heterogeneity in household preferences as evidenced by the

diagonal elements of the Cholesky matrix, which represent the standard deviations of normal

distributions around the mean WTP estimates after accounting for correlation between the random

parameter distributions.

8 Models allowing for asymmetric valuation of gains and losses were tested, but no consistent asymmetry was

found.


Table 10: Models of household choice between water supply security scenarios

Community-wide

policy context Tariff options policy context

Coef. Robust

t-test Coef. Robust

t-test

Random parameters: means (Average WTP) Alternative-specific constant: status quo 129.0 64.44 108.0 51.77

Water conservation measures (number of years in 20) 18.6 11.46 10.5 28.35

Stage 1 restrictions (number of years in 20) 15.6 8.72 0.9 2.55

Stage 2 restrictions (number of years in 20) -0.8 -0.42 -6.9 -9.52



Random parameters: diagonal elements of Cholesky matrix (Standard deviation in WTP)

Alternative-specific constant: status quo 239.0 54.51 83.6 15.75 Water conservation measures (number of years in 20) 6.1 16.87 16.4 42.98





Random parameters: below-diagonal elements of Cholesky matrix (Correlations)

ASC: WCM -0.9 -2.80 -24.2 -55.88

ASC: Stage 1 18.7 16.22 -35.4 -29.46

ASC: Stage 2 18.2 17.87 -74.8 -116.94

ASC: Stage 3 105.0 56.37 -100.0 -55.91

ASC: Stage 4 286.0 13.00 -224.0 -96.51

WCM: Stage 1 -43.7 -25.15 -18.6 -49.41

WCM: Stage 2 -16.1 -21.54 3.5 23.20

WCM: Stage 3 -12.2 -33.16 -3.6 -10.60

WCM: Stage 4 2.3 7.66 1.7 9.50

Stage 1: Stage 2 -19.3 -27.43 18.1 79.04

Stage 1: Stage 3 -12.5 -8.29 0.9 1.62

Stage 1: Stage 4 -47.5 -14.89 -74.7 -56.14

Stage 2: Stage 3 -67.5 -69.99 -6.3 -13.17

Stage 2: Stage 4 -71.2 -29.85 -83.0 -49.61

Stage 3: Stage 4 -92.4 -20.03 -74.9 -70.87

Scale (Extent to which responses are deterministic) Mean -4.7 -22.45 -3.4 -12.09

Scale x sequence position 3, 4, or 5 1.2 2.58

Scale x Sequence position 2

-0.1 -0.34


-0.2 -0.17


-0.6 -1.35


0.3 0.75


0.1 0.20

Standard deviation 2.3 4.28 2.3 10.02


Community-wide

policy context Tariff options policy context

Coef. Robust

t-test Coef. Robust

t-test

Model fit Choice observations 1134

1116

Individuals 189

186 Final log likelihood -984

-984

Note: Estimated in WTP-space where cost variable is change in ongoing annual water and sewerage bill

4.1.4 Willingness to pay

Estimates of WTP to avoid an increase of one year in 20 (a five percentage point increase in

likelihood) derived from these models are shown in Table 11 and Figure 5. Consistent with the focus

group findings, the aversion to Stage 4 restrictions is marked, with the models suggesting

households would be willing to pay $185 per annum on average to reduce the risk of community-

wide Stage 4 restrictions by five percentage points. This aversion was less pronounced under the

tariff options policy context (than under the community-wide policy context), with households

willing to pay $116 to reduce the risk of Stage 4 restrictions by five percentage points. This

difference (between $180 and $116) is consistent with the existence of social stigma from choosing

unpopular high-security tariff options as well as improved visual amenity from other households not

facing Stage 4 restrictions.

In the community-wide policy context, both water conservation measures and Stage 1 restrictions

are preferred to a situation with no restrictions. Households are actually willing to pay $19 and $16

per annum to increase time spent in water conservation measures and Stage 1 restrictions,

respectively, by five percentage points (with a corresponding decrease in time spent without

restrictions). In the tariff options policy context, the WTP for water conservation measures is

approximately halved, while the preference for Stage 1 restrictions disappears altogether. This result

would suggest that households obtain some benefit from preventing other households from using

water in ways that they perceive to be wasteful.

Table 11: Average willingness to pay to avoid a five percentage point increase in likelihood of restrictions

(dollars per annum)

Community-wide

policy context

Tariff options

policy context

WCM -19 -11

Stage 1 -16 -1

Stage 2 1 7

Stage 3 54 22

Stage 4 185 116

When interpreting these results, there are a couple of points that are important to bear in mind.

First, these values represent only the cost of restrictions on households, since respondents were


instructed to set aside the impact of restrictions on government water use as this would be

addressed by separate questions. Second, some 36 per cent of respondents indicated that they

thought of restrictions as being less likely at the start of the 20 year period (compared to the later

part of the period). As a result, it is likely that these respondents discounted the impact of

restrictions to some extent, while cost is even over time. This discounting will mean that estimated

WTP does not relate to the likelihood of restrictions presented in the question, but some other,

slightly lower, likelihood. In other words, discounting by these 36 per cent of respondents will result

in a conservative estimate of WTP to avoid restrictions, all else held constant.


(dollars per annum)

The results discussed above use a situation with no restrictions as the baseline against which the

cost of restrictions is measured. However, the results themselves suggest that the community should

never be in such a situation, since water conservation measures are preferred to a complete absence

of restrictions even before taking their water security benefits into account. Our results suggest the

appropriate baseline for measuring the benefits of investing in supply security is water conservation

measures, since this is the optimal level of water use regulation when water supply security is at its

highest. This approach is also consistent with the current ACT Government policy of permanent

water conservation measures (PWCM). The costs of each level of temporary restrictions (Stage 1 to

Stage 4) measured against this baseline are presented in Table 12 and Figure 6. Of the estimates

presented in this report, these are likely to be most useful to ACTEW for the purposes of cost-benefit

analysis, noting the points on interpretation discussed above.

-50

0

50

100

150

200

WCM Stage 1 Stage 2 Stage 3 Stage 4



Table 12: Average willingness to pay to avoid a five percentage point increase in likelihood of restrictions


Community-wide

policy context

Tariff options

policy context

Stage 1 3 10

Stage 2 19 17

Stage 3 73 32

Stage 4 204 127



Figure 7 demonstrates how these WTP estimates can be used to calculate consumer surplus from

policy scenarios and help ACTEW to understand households’ preferred balance between cost and

supply security.9 The status quo and alternative service scenarios presented in the figure are

9 We have excluded status quo bias from these estimates. The decision processes underlying the status quo

bias in the data are unknown. Some potential components of status quo bias, such as those driven by

uncertainty over the outcomes of implementation, the complexity of the choice task, and conservative

response on behalf of the community, ought to be excluded from welfare estimates. Some other component

may represent a bona fide behavioural phenomenon also observed in real markets and should be included in

welfare estimates. It is not possible to disentangle these components in this data set. The effect of making the

alternative assumption to include the status quo bias in welfare estimates would be a $129 decrease in the

consumer surplus from each ‘change’ scenario. We note this would not change the sign or the ordering of the

consumer surplus estimates across the scenarios in the example.

0

50

100

150

200

250

Stage 1 Stage 2 Stage 3 Stage 4



approximately representative of the estimated cost of improving supply security during the recent

drought.10 All of the scenarios considered in the figure result in positive consumer surplus, indicating

that households would be made better off by investment in improved supply security. The optimal

level of supply security from the perspective of households is the level at which their consumer

surplus is maximised. In this indicative example, consumer surplus is highest when time spent in

restrictions is reduced by 85 per cent, with annual household bills increasing by $85 on average.

However, this example excludes information required for a full social cost-benefit analysis, such as

the preferences of non-residential consumers and the effects of restrictions on government water

use. ACTEW may find it useful to incorporate the household WTP estimates in their existing cost-

benefit analysis framework using scenarios that accord with up-to-date estimates of the likelihood of

restrictions and the costs of investments in supply security. What we can conclude from this

example is that Canberra households want an increase in supply security (over the levels forecast

during the drought) and they are willing to pay for it.

Figure 7: Average consumer surplus from community-wide policy scenarios (excluding status quo bias)

(dollars per annum)

Note: Assumes “do nothing” time spent in restrictions is 14% in Stage 1, 17% in Stage 2, 6% in Stage 3, 7%

in Stage 4 and remainder in Water Conservation Measures.

The WTP estimates in this study could also be used to revise the operating rules that govern when

the various stages of restrictions will be introduced and removed. For example, if Stage 4 restrictions

10 Approximate reductions in the risk of restrictions were drawn from the July 2007 document - Future Water

Options Review: Water Security Program. Approximate costs were drawn from the 2008 document – Water

Security for the ACT and Region: Progress Report and Recommendations to ACT Government.

0

50

100

150

200

250

300

350

Reduce risk of restrictions by

60%, with $35 premium on annual bill

Reduce risk of restrictions by 85%, with $85 premium on annual bill

Reduce risk of restrictions by

92%, with $130 premium on annual bill

Reduce risk of restrictions by 95%, with $165 premium on annual bill


are more costly than previously thought, there may be merit in delaying the introduction of Stage 4

restrictions by bringing forward the introduction of lower stages of restrictions.

4.1.5 Comparison with NERA and ACNielsen 2003

NERA and ACNielsen found in 2003 that households were unwilling to pay to avoid low level

restrictions. We also found a lack of WTP to avoid low-level restrictions, and, in fact, found evidence

of WTP for water conservation measures and Stage 1 restrictions. In relation to higher-level

restrictions, NERA and ACNielsen found that residential customers were willing to pay $237 on

average to avoid a year in restrictions at Stage 2 (called Stage 3 at the time) or higher ($302 after

adjusting for inflation). In order to compare the 2003 result with the present study, we need to

convert the 2003 WTP estimate from a measure of WTP to avoid a year in restrictions for certain to a

measure of WTP to avoid an increase in the likelihood of time spent in restrictions. In order to do so,

we need to make an assumption about risk aversion. The most basic analysis would assume no risk

aversion; that is, where utility is linear in probability, U = β1.SQ + β2.prob(wcm) + … + β6.prob(stage4)

+ λ.ΔBill. In this case, the $302 per annum WTP figure would be multiplied by 0.05 to give a WTP

estimate of $15 per annum for a five percentage point reduction in the likelihood of higher-level

restrictions. It is lower than our equivalent estimates of $19, $73, and $204 for Stage 2, Stage 3, and

Stage 4 restrictions. Introducing an assumption of risk aversion would increase the 2003 estimate

above $15. For example, in a case where U = β1.SQ + β2.prob(wcm)1/2 + … + β6.prob(stage4) 1/2 +

λ.ΔBill, the estimate for a decrease in likelihood from 15 per cent to 10 per cent would be $28.11

While plausible risk aversion levels increase the converted 2003 estimate above the $19 we have

estimated for Stage 2 restrictions, it seems certain the converted estimate would remain well below

our estimates of the costs of Stage 3 and Stage 4 restrictions, even at quite extreme levels of risk

aversion.

In summary, since 2003, households have developed a preference for low-level restrictions over a

situation with no restrictions. However, they are now more opposed to higher-level restrictions and

are willing to pay more to avoid them.

It would appear that the effect of experiencing drought water restrictions over the intervening

period has been an increase in households’ aversion to severe restrictions despite considerable

investment by households in measures to reduce the impact of restrictions, such as re-landscaping

and installing water tanks and grey-water reuse systems (see Figure 12 on page 34).

4.2 Preferences for government water use Respondents were presented with six types of restrictions on government use and asked at which

stage of household restrictions the government restrictions should be introduced. Figure 8 shows

that the median preferences are as follows.

Half of ovals, sports grounds, parks and public spaces should be allowed to brown off with

Stage 2 restrictions.

The remaining half should be allowed to brown off with Stage 3 restrictions.

11 We ran four risk aversion models with probabilities raised to the power 0.2, 0.4, 0.6, and 0.8. None of the

four models resulted in an improvement on the model fit of the risk-neutral model.


Stage 3 restrictions should also coincide with 5 per cent of street trees being allowed to die

each year due to drought.

Further restrictions on watering of street trees so that 10 per cent die each year due to

drought would be acceptable when households are facing Stage 4 restrictions.

Figure 8: Preferences for restrictions on government water use (n=667)

4.3 Attitudes towards water restrictions and pricing The social interactions associated with water restrictions are emphasised by the following findings

(see Figure 9).

Only around one quarter of households agreed that households should be able to purchase

exemptions from restrictions, with raised funds given as rebates to households that do face

restrictions.

Most households agreed that others would think poorly of them if they were facing

restrictions and their neighbours weren’t.

The majority of households believe that “it would mostly be people with a lack of concern

for the community that would pay to avoid water restrictions.”

While almost all households enjoy seeing green gardens in their neighbourhoods when

restrictions are not in place, less than half get this enjoyment when restrictions are in place.

Most households think water conservation measures should apply permanently, even when

dams are full.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Half of ovals and sports

grounds are allowed to brown off

All ovals and sports grounds are allowed to

brown off

Half of parks and public spaces are allowed to brown off

All parks and public spaces are allowed to

brown off

5% of street trees are

allowed to die each year due

to drought

10% of street trees are

allowed to die each year due

to drought

After Stage 4

With Stage 4

With Stage 3

With Stage 2

With Stage 1

With water conservation measures

Before water conservation measures


A quarter of households indicated that they avoided some water uses because they are

worried about what their neighbour would think.

A majority of households felt a sense of community spirit as a result of community-wide

water restrictions.

In relation to past and future water restrictions:

The vast majority of households indicated a familiarity with the water restrictions scheme in

the ACT.

Most households thought that Stage 3 restrictions or higher would be required at some

point over the next 20 years.

With respect to pricing:

Households are evenly split on the issue of whether prices should vary inversely with supply

availability.12

On average, households are slightly in favour of an inclining block tariff.

12 This result is in contrast to the focus group finding that most participants were in favour of price varying

inversely with supply availability.


Figure 9: Attitudes towards water restrictions and pricing (n=667)

Households generally have little or no knowledge of the details on their water and sewerage bills.

Around 40 per cent of households indicated that they did not recall any amounts from their most

recent bill. Another 50 per cent felt they could recall the total bill amount. Only around one in ten

households indicated more detailed recollections of their most recent bill.

0% 20% 40% 60% 80% 100%

Households should be able to buy exemptions from water

restrictions, with the raised funds given as rebates to households that do face restrictions.

Others in my neighbourhood would think poorly of me if I

wasn’t facing restrictions and they were.

It would mostly be people with a lack of concern for the

community that would pay to avoid water restrictions.

When water restrictions are not in place, I get enjoyment

from seeing green gardens and lawns in my neighbourhood.

When water restrictions are in place, I get enjoyment from

seeing green gardens and lawns in my neighbourhood.

Water conservation measures should apply permanently to stop households from wasting water, even when the dams

are full.




Before answering this questionnaire, I was familiar with the

restrictions on water use associated with each ‘stage’ of water restrictions in the ACT.

The ‘per kilolitre’ price of water should be lower when the dams are full and higher during water shortages.

The ‘per kilolitre’ price of water should jump up once a

certain level of water use has been reached by a household each quarter.

Strongly disagree Disagree Don't know / unsure Agree Strongly agree


Figure 10: Knowledge of bill details (n=667)

Households were asked to give a range within which they are reasonably sure their annual water

and sewerage bill amount would lie. Half of all households were confident enough in their estimate

to give a range less than $200.

Figure 11: Range in lower and upper bounds on respondent estimates of annual water and sewerage bill

(cumulative proportion of respondents, n=667)

The most common actions taken during the drought were the purchase of equipment for more

efficient outdoor water use, re-landscaping of gardens, and installing a water efficient appliance

0% 20% 40% 60% 80% 100%

Prior to completing this questionnaire, to what level of detail would you have been able to recall amounts on your most recent water and sewerage bill (without looking back at your actual bill)?

I don’t recall any amounts

The total bill amount

The water and sewerage components of the bill

The sewerage supply charge, water supply charge, and total water consumption charges

The sewerage supply charge, water supply charge, my consumption in kilolitres, and the price of water in dollars per kilolitre

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0 100 200 300 400 500 600 700 800


indoors. Only one in ten households indicated they had not taken any of the actions listed in the

question.

Figure 12: Actions already taken in response to drought and restrictions (n=667)

Similarly, almost all households have been impacted by restrictions in some way. More than half of

households saw their lawn and some plants die, spent more time watering their garden by hand, and

allowed their car to be dirty more often.

Figure 13: Impact of recent restrictions (n=667)

0%

10%

20%

30%

40%

50%

60%

70%

Purchased equipment for more efficient outside water

use

Installed low-flow inside plumbing

equipment

Re-landscaped your garden to use less water

Removed an irrigation

system

Bought or installed a

water efficient appliance inside the

house

Installed permanent system for

capturing grey water

Installed a rain water tank

Removed a swimming

pool

None of these

Please indicate whether you have taken each of the following actions at any time over the past

eight years.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

My lawn died Some plants in my garden died

Many plants in my garden died

I spent more time watering my garden by

hand

My car was dirty more often

I spent less leisure time

outdoors

I stopped using my swimming

pool

None of these

Please indicate how the recent period of water restrictions affected your household.


Appendix A: Telephone interview screener

RECRUITMENT SCREENER

Project No.: 4076 Project Name: ANU Utilities Survey

Recruit Start Time: Recruit Finish Time:

NOTE TO RECRUITER:

TEXT IN CAPITALS ARE INSTRUCTIONS

Text in sentence case is the script, which should be read exactly as written.

SECTION A: MANDATORY REQUIREMENTS

INTRODUCTION

Good morning/afternoon/evening. My name is [RECRUITER] and I’m calling from Taverner Research on behalf of the Australian National University.

We are conducting a research project funded by ACTEW and ActewAGL looking

at household views on potential changes to water, electricity, and gas services in the ACT. In particular, we need to talk to the person who pays the bills in your

household. Are you that person, or is there someone else we should talk to?

IF SAY THEY ARE NOT ACT RESIDENT OR ACTEW/ACTEWAGL CUSTOMER – THANK AND TERMINATE.

IF EQUAL RESPONSIBILITY, TARGET QUALIFIES

WHEN CORRECT PERSON ON LINE, RE-INTRODUCE IF NECESSARY The research will involve a short 3 to 5 minute telephone survey now to see if

you qualify and then filling out one to two questionnaires on the internet. Each questionnaire takes about 15 to 20 minutes to complete.


Participation is purely voluntary. However, a prize draw is being offered as a ‘thank you’ for participating. First prize is $2000 and four runners up receive

$500 each.

IF FURTHER QUESTIONS ASKED ABOUT PRIZE DRAW:

A maximum of 1620 households will be invited to participate. You will be entered into the draw once you have completed and submitted one

questionnaire. If you choose to complete a second questionnaire, you will be given two more entries into the draw (to triple your chances of winning).

Full terms and conditions for the draws will be sent to you via email if you agree to participate.

If you choose to participate, the information and opinions you provide will be kept completely confidential and used only for research purposes.

IF CALL WILL BE RECORDED, MONITORED OR OBSERVED: I would also like to make you aware that

before we begin, this call may be [recorded/monitored/observed] for quality assurance and/or

training purposes.

Q1. Are you interested in participating in this research? DO NOT READ

1. Yes

2. No

IF 2 IN Q1, ABORT

SECTION B: INDIVIDUAL PROJECT REQUIREMENTS

Let me ask a few questions to check that you are one of the people we need for the survey.

S1. Could you please tell me if you, or anyone you know well, are employed

by…READ OUT


1. ACTEW or ActewAGL?

2. a company or organisation that offers products or services relating to the use of water,

electricity, or natural gas?

3. a market research company?

95. None of the above

IF 1, 2, OR 3 IN Q2, ABORT

S2. In which suburb do you live? CHECK POSTCODE QUOTAS. DO NOT READ

1. Acton 2. Ainslie 3. Amaroo 4. Aranda 5. Banks 6. Barton 7. Belconnen 8. Bonner 9. Bonython 10. Braddon 11. Bruce 12. Calwell 13. Campbell 14. Chapman 15. Charnwood 16. Chifley 17. Chisholm 18. City 19. Conder 20. Cook 21. Curtin 22. Deakin 23. Dickson 24. Downer 25. Duffy 26. Dunlop 27. Evatt 28. Fadden 29. Farrer 30. Fisher 31. Florey


32. Flynn 33. Forrest 34. Franklin 35. Fraser 36. Fyshwick 37. Garran 38. Gilmore 39. Giralang 40. Gordon 41. Gowrie 42. Greenway 43. Griffith 44. Gungahlin 45. Hackett 46. Hall 47. Harrison 48. Hawker 49. Higgins 50. Holder 51. Holt 52. Hughes 53. Hume 54. Isaacs 55. Isabella Plains 56. Kaleen 57. Kambah 58. Kingston 59. Latham 60. Lawson 61. Lyneham 62. Lyons 63. Macarthur 64. Macgregor 65. Macquarie 66. Mawson 67. McKellar 68. Melba 69. Mitchell 70. Monash 71. Narrabundah 72. Ngunnawal 73. Nicholls 74. O'Connor 75. O'Malley 76. Oaks Estate 77. Oxley 78. Page 79. Palmerston 80. Parkes 81. Pearce 82. Phillip


83. Pialligo 84. Red Hill 85. Reid 86. Richardson 87. Rivett 88. Russell 89. Scullin 90. Spence 91. Stirling 92. Symonston 93. Tharwa 94. Theodore 95. Torrens 96. Turner 97. Wanniassa 98. Waramanga 99. Watson 100. Weetangera 101. Weston 102. Yarralumla 103. Other - TERMINATE

S3. Is your residence... READ OUT

1. Owned outright 2. Owned with a mortgage or being purchased under a rent/buy scheme

3. Being rented or occupied rent-free 4. Other

CHECK QUOTAS

‘OWNED OUTRIGHT’ MEANS THAT NO MONEY IS OWED ON THIS DWELLING.

‘OWNED WITH A MORTGAGE’ REFERS TO HOUSEHOLDS CURRENTLY MAKING REPAYMENTS ON ANY

TYPE OF MORTGAGE OR LOAN SECURED AGAINST THE DWELLING.

‘BEING PURCHASED UNDER A RENT/BUY SCHEME’ REFERS TO HOUSEHOLDS WHO ARE BOTH

PURCHASING SOME EQUITY IN THE DWELLING, AND PAYING RENT FOR THE REMAINDER.

‘BEING OCCUPIED RENT–FREE’ REFERS TO SITUATIONS WHERE THE MEMBERS OF THE HOUSEHOLD

DO NOT PAY ANY RENT, OR WHERE RENT IS PAID FOR THE DWELLING BY SOMEONE ELSE OUTSIDE

THE HOUSEHOLD.

OTHER INCLUDES ‘BEING OCCUPIED UNDER A LIFE TENURE SCHEME’, WHICH REFERS TO

HOUSEHOLDS OR INDIVIDUALS WHO HAVE A ‘LIFE TENURE’ CONTRACT TO LIVE IN THE DWELLING

BUT USUALLY DO NOT HAVE ANY EQUITY IN THE DWELLING. THIS IS A COMMON ARRANGEMENT IN

RETIREMENT VILLAGES.


S4. Is your residence a... READ OUT

1. Separate house 2. Semi-detached, row or terrace house, or a townhouse

3. Flat, unit, or apartment 4. Other

CHECK QUOTAS

Q2. Do you have access to the internet and a current email address? DO NOT READ

1. Yes

2. No

IF 2 in Q2, ABORT: “Unfortunately you won’t be able to participate in the study. Thank you for your interest in the research though.”

Q3. Do you receive electricity bills from ActewAGL for the residence you live in? DO NOT READ

1. Yes

2. No

IF NO in Q3 Q4. Do you receive electricity bills from some other electricity retail company for the residence you live in? DO NOT READ

1. Yes

2. No

Q5. Do you receive natural gas bills from ActewAGL for the residence you live in? DO NOT READ

1. Yes


2. No

IF NO in Q5 Q6. Do you receive gas bills from some other gas retail company for the residence you live in? DO NOT READ

1. Yes

2. No

Q7. Do you receive water and sewerage bills from ActewAGL for the residence you live in? DO NOT READ

1. Yes

2. No

IF NO in Q7

Q8. Do you pay a regular, specific charge to a landlord or body corporate for water? DO NOT READ

1. Yes

2. No

IF YES in Q8

Q9. When paying this charge, does your landlord or body corporate always provide a copy of their

ActewAGL bill to demonstrate the amounts they are passing through? DO NOT READ

1. Yes

2. No

IF NO in Q4, Q6 AND Q8, OR

IF NO in Q4, Q6 AND Q9, ABORT: “I’m sorry, we are looking for people who pay utilities bills.

Thank you for your interest in the research though.”


RESPONDENT IS ELIGIBLE FOR ELECTRICITY IF YES IN Q3 or Q4

RESPONDENT IS ELIGIBLE FOR GAS IF YES IN Q5 or Q6

RESPONDENT IS ELIGIBLE FOR WATER IF YES IN Q7 or Q9

CHECK ELIGIBILITY QUOTAS

Q11. We will be inviting you to fill out questionnaires on the internet. Is there

anything that will hinder your ability to do this? DO NOT READ

1. Yes

2. No

IF 1 IN Q11, ABORT

SECTION C: MANDATORY REQUIREMENTS

IF UNSUCCESSFUL

Thank you for your patience in answering these questions. Unfortunately, we do not need you to participate in our research this time, but we sincerely appreciate

your time and assistance today.

IF SUCCESSFUL

Thank you for completing the telephone part of the survey. The next step is the internet questionnaires. We will need some details from you in order for you to

complete this next step.

Q13. Please may I confirm your name?

(INSERT FULL NAME)

Q14. Please may I confirm your best telephone contact number?

(INSERT NUMBER)


Q15. We will need to email you a link to the internet questionnaires. Could you please provide an email address that you check regularly? Your email

address will be used only for this research project, and we will not provide your email address to ActewAGL, so your survey responses will be anonymous.

(RECORD EMAIL ADDRESS AND VERIFY)

We will not send you the email straight away. It will be sent within the next two days. The email will have the subject heading <ANU ActewAGL Utilities Survey>

and the sender will be [email protected]. If you need to change your email address in the meantime please call us on XX XXXX XXXX. Thank you for

your time.

IF RESPONDENT QUESTIONS AUTHENTICITY:

To verify that Taverner Research is a genuine market research company, you can call the Australian Market and Social Research Society’s Survey Line on 1300

364 830. If you would like to verify this research with ActewAGL, you can phone them on

13 14 93.


FINAL CLOSE/TERMINATION (ALL CONTACTS)

Thank you for your cooperation in answering these questions.

INTERVIEWER’S DECLARATION

I certify that this is a true, accurate and complete interview, conducted in accordance with industry

standards and the AMSRS Code of Professional Behaviour (ICC/ESOMAR). I will not disclose to any other

person the content of this questionnaire or any other information relating to this project

Interviewer Name:

Interviewer Signature:

Date:


Appendix B: Email invitation

EMAIL SUBJECT: ANU Utilities Survey

Dear <First Name>,

Re: Household preferences for water, electricity and gas services

Recently you were telephoned and invited to participate in an online survey about water, electricity and gas services in Canberra. Thank you for agreeing to participate in this research process.

What is this project about?

We are interested in understanding how different types of water restrictions and electricity and gas supply interruptions affect your household. Investments made by ACTEW can reduce the amount of time spent in water restrictions in the future. Similarly, investments made by ActewAGL can reduce the number of electricity and gas supply interruptions you experience in the future. However, these investments come at a cost that must be recovered from households over time. We are interested in your views on this “trade off” between standards of service and the cost to your household.

This research is being conducted by researchers at the Australian National University. The project is being funded by ACTEW and ActewAGL through an endowment and through in-kind salary contribution of a research team member. Taverner Research is assisting with the survey process.

Why were you invited to participate in the research?

You have been invited because you are responsible for paying utility bills for a household in Canberra. Participation in this survey is purely voluntary and you are free to withdraw at any stage.

How will the research results by used?

The results of this study will be reported to ACTEW and ActewAGL and used to improve management of water, electricity and gas network infrastructure in Canberra. Results may be published in academic journals. However, published results will only report on survey responses in a grouped format. Individuals’ responses will be de-identified in any publication. We will not reveal your identity to ACTEW or ActewAGL unless you give us permission to do so.

How to complete the questionnaires

We invite you to complete up to two online questionnaires.

Please click on the link below to access the first questionnaire.

<insert URL here>

Please click on the link below to access the second questionnaire.

<insert URL here>

The average time taken to complete each questionnaire is 15-20 minutes.

Once you have completed and submitted the first questionnaire, you will be entered into a prize draw. First prize is $2000 and four runners up receive $500 each.

If you complete both questionnaires, you be given two more entries into the prize draw (to triple your chances of winning).


A maximum of 1620 respondents will be invited to participate. Full terms and conditions for the draws are included below.

Who to contact for information or clarification

If you have any technical problems accessing the questionnaire, please contact SurveyHelp by email at [email protected].

If you have any enquiries about the content of the questionnaire, please contact Ben McNair at the ANU by email at [email protected].

If you have any concerns regarding the way in which this survey was conducted, please contact the ANU Human Research Ethics Committee on (02) 6125 3427 or by email at [email protected].

Yours sincerely,

<name>

<email signature>

Competition terms and conditions ACT TP 11/03415: Win up to

$2000 by completing online questionnaires

1. To be eligible to enter and win up to $2000 participants must complete and submit at least one online questionnaire, comprising up to 50 questions per questionnaire. Links to two questionnaires will be sent by email by Taverner Research to persons who have agreed to participate in a research survey conducted on behalf of the promoter.

2. Participants that have completed and submitted one online questionnaire will be automatically entered once into the prize draw. Participants that go on to complete a second online questionnaire will be automatically entered twice more into the prize draw. The online questionnaires must be fully completed and submitted between 9:00am 29 August 2011 and 5:00pm 7 October 2011. Incomplete questionnaires cannot be submitted and will not be entered into the draw.

3. The prizes are

1st prize: $2000

Runners up (x4): $500

Total prizes: $4,000 including GST.

4. Each prize will be in the form of a cheque made out to the named prize winner. The cheque will be posted to the named prize winner via registered post within two days of the prize being claimed.

5. The prize draw will involve the generation of a random number by computer for each entry. Respondents with multiple entries will be assigned the lowest of the numbers generated for their entries. 1st prize will be awarded to the respondent with the lowest number. Runners up prizes will be awarded to the respondents with the four next lowest numbers.

6. The winners will be drawn on 19 October 2011 at 10am at the Taverner Research offices, Level 2, 88 Foveaux Street, Surrey Hills NSW 2010.

mailto:[email protected]



7. Prize winners will be notified by email two days after the draw and published in the public notice section of the Canberra Times on Saturday 22 October 2011. The email and notice will include Taverner Research’s contact details for winners to claim their prize.

8. In the case of an ineligible participant being drawn as the winner, a re-draw will take place immediately.

9. Except as expressly provided by these terms and conditions, the prize is not transferable, not exchangeable and cannot be redeemed as cash.

10. In the event that a prize is unclaimed, a redraw will take place at 10am on 14 December at the Taverner Research offices, Level 2, 88 Foveaux Street, Surrey Hills NSW 2010.

11. The promoter is The Australian National University ABN 52 234 063 906 and is being administered by Tobumo Pty Ltd trading as Taverner Research Company, ABN 93 003 080 500.


Appendix C: Water questionnaire

Dear respondent, Thank you for participating in this survey, which is being run by the Australian National University (ANU) in partnership with ACTEW and ActewAGL. As a household in Canberra, you are affected by decisions made by ACTEW and ActewAGL in relation to water restrictions and electricity and gas supply interruptions. Responses to this survey will be used, in a grouped, anonymous format, so that your specific responses cannot be traced back to your household. We will use them to inform decisions on investment in, and management of, water, electricity and gas services in the ACT. The ANU abides by the Privacy Act and a privacy statement can be accessed <here>. We invite you to complete up to two questionnaires on behalf of your household. The average time taken to complete each questionnaire is 15-20 minutes. Once you have completed the first questionnaire, you will be entered into the draw to win $2000 cash for 1st prize and $500 cash for four runners up. If you complete a second questionnaire, you will be entered twice more into the prize draw (to triple your chances of winning). Full terms and conditions for the prize draw can be accessed <here>. If you have any technical problems accessing the questionnaire, please contact <survey service provider> on <phone number> or by email at <email address>. If you have any enquiries about the content of the questionnaire, please contact me by email at [email protected]. If you have any concerns regarding the way in which this survey was conducted, please contact the ANU Human Research Ethics Committee on (02) 6125 7945 or by e-mail at [email protected]. Yours sincerely, Dr Ben McNair Crawford School of Economics and Government The Australian National University Canberra ACT 0200


The reason for this survey For much of the past decade, restrictions have been placed on the ways in which Canberra households are allowed to use water. The amount of time that water restrictions will need to be imposed in the future can be reduced by ACTEW and ACT Government decisions, such as:

investing in dams and other infrastructure;

investing in water recycling projects;

providing rebates for water-efficient household appliances; and

purchasing water from New South Wales via releases from the Tantangara Reservoir. However, these investments come at a cost, which must be recovered through water bills over time. We would like to know your views on this “trade-off” between lower water bills and more time spent in restrictions.


Water restrictions in the ACT The purpose of water restrictions is to reduce the risk of water supplies being exhausted as dam storage levels dropped over the course of a drought. The restriction regime applied in Canberra is based on ‘stages’ that increase in severity as dam storage levels fall. A summary of the restrictions on water use associated with each stage is provided in the following table.

Over the past eight years, households in Canberra have experienced all stages of restrictions, except Stage 4, which would involve a total ban on using potable water outdoors. Currently, households are subject to water conservation measures.

Managing water shortages When a water shortage does occur, there are different ways of managing water use. ACTEW is faced with decisions such as whether to introduce Stage 1 restrictions sooner in order to reduce the likelihood that more severe restrictions will be required later. We are interested in your views on these trade-offs between time spent in different levels (or stages) of restrictions.

SprinklersHand-held hose, bucket, or

watering canSwimming pools Vehicles

Target annual

reduction in water

use

Water Conservation

Measures

Permitted before 9am or after

6pm every dayPermitted at any time

Pools may be filled or topped

up using hose. Larger pools

must be covered when not in

use.

May be washed using a



13%

Stage 1



second day

Permitted at any time


up using hose. Written

exemption required to fill or

refill





22%

Stage 2

Only dripper systems

permitted for 3 hours in


second day



second day


up for 3 hours in morning and

evening every second day

using hose if covered when

not in use. Written exemption

required to fill or refill





35%

Stage 3 Not permitted



second day

Written exemption required

for fill, refill, or top up

Permitted only at complying

commercial car wash43%

Stage 4 Not permitted Not permittedWritten exemption required

for fill, refill, or top upNot permitted 61%

State of Emergency Emergency water use only


Your input In the first part of the survey, you will be asked questions about a series of six choice situations. In each choice situation, you will be presented with three water supply packages at specified cost and asked to indicate which package you prefer. You will then be asked some questions about your views on government water use, water restrictions and water pricing. Lastly, you will be asked some questions about the characteristics of your household.


SPLIT SAMPLE B ONLY

Choosing water supply packages Currently, all households in the ACT pay the same price for water and are subject to the same restrictions on water use during water shortages. That is, ACTEW offers only one ‘package’. In this survey, we would like you to consider a situation in which ACTEW offers three packages to enable households to choose a package that suits their needs and budgets. For example, ACTEW might offer a default package, a high-security package and a budget package. Households opting for the budget package would pay a lower price and face more severe water restrictions sooner than other households. Households opting for the high-security package would pay a higher price and face less severe water restrictions later than other households. The total amount of water conserved would remain the same. The increase in water use by households choosing the high-security package would be offset by decreases in water use by households choosing the budget package. ACTEW revenue would also remain the same. The extra revenue generated by high-security water would be used to lower water bills for households choosing the budget package. For the purpose of this survey, assume that households would not be able to switch between packages when water restrictions are in place. The ACTEW Water Conservation Office would police restrictions using electronic maps indicating the package option selected by each parcel of land.


Instructions for answering the choice questions Expected time in restrictions In each choice situation, three water supply packages are described by the expected time spent at each level of restrictions over the next 20 years. The amount of time actually spent in restrictions will depend on the climate, which is uncertain. However, ACTEW decisions can influence the average outcome. It is this average or expected time in restrictions that is described in the choice situations. The timing of the restrictions within the 20 year period is not specified. Please assume that the likelihood of each level of restrictions is even over time. For example, if Stage 3 restrictions are expected to apply in 2 of the next 20 years, then you should assume that the likelihood of Stage 3 restrictions in each year is 2 in 20 (that is, 10 per cent). Example of a choice situation An example of the sort of choice situation you will be asked about in this survey is presented below. Please take a moment to consider which package you would choose.

Information to assist you in making your choice A table summarising the restrictions on use associated with each ‘stage’ can be viewed by hovering your mouse pointer over the list of restriction stages in each choice question.

CURRENT

PACKAGEPACKAGE A PACKAGE B

RESTRICTIONS ON HOUSEHOLD WATER USE

No restrictions 0 0 3

Water conservation measures 9 8 9

Stage 1 4 4 4

Stage 2 4 4 4

Stage 3 2 2 0

Stage 4 1 2 0

State of Emergency 0 0 0

THE COST TO YOUR HOUSEHOLD

$0 $100 $350

If Package A and Package B were the only two options available

to you, which option would you choose?

more than your

current bill




years:

Your ongoing annual water and sewerage bill

If these were the only three options available to you, which option

would you choose?

less than your

current bill

more than your

current bill


A graphical representation of the expected time in restrictions in the three packages will be provided below each choice situation.

What to assume about government water use During water shortages, the government can reduce its own water use by allowing the grass in parks, ovals and sports grounds, and other public spaces to ‘brown off’ or die. The government can also reduce their watering of street trees, which may result in some street trees dying and requiring replacement with younger, smaller trees. For the purpose of the choice situations, assume that these public assets are not impacted by restrictions. Your views on the impacts of reduced government water use will be recorded using separate questions later in the survey. Answering questions about hypothetical situations Experience from other studies has shown that people tend to respond differently to hypothetical situations than they would in real life situations. This is most likely because they don’t actually have to follow through with their choices in hypothetical situations. Although the situations presented in this survey are hypothetical, your responses will influence decisions about Canberra’s water supply, which may affect the amount of time spent in water restrictions and also the size of your bill. Therefore, please answer the questions as if you were really facing these decisions. Please answer the questions on behalf of your own household only. We will survey other households on their views.

0 10 20

State of Emergency

Stage 4

Stage 3

Stage 2

Stage 1

Water conservation

measures

No restrictions


over next 20 years

Current Package

0 10 20

State of Emergency

Stage 4

Stage 3

Stage 2

Stage 1

Water conservation

measures

No restrictions


over next 20 years

Package A

0 10 20

State of Emergency

Stage 4

Stage 3

Stage 2

Stage 1

Water conservation

measures

No restrictions


over next 20 years

Package B


Choice situation 1 of 6 SPLIT SAMPLE A ONLY All households in the ACT will face the same package. Your answers will inform ACTEW as to what that package should be. SPLIT SAMPLE B ONLY When making your choice, bear in mind that the chosen package would apply to your household, but not necessarily to other households. For a summary of the restrictions associated with each stage, hover your mouse pointer over the list of restriction stages in the table below. <choice situation drawn from design> Graphical representation of expected time in restrictions <graphs associated with choice situation above> Approximately what percentage of other households in Canberra do you think would have chosen the same package as you did when asked to choose between the three packages? Very few households (~5%) Some households (~25%) About half of households (~50%) Most households (~75%) Almost all households (~95%)


Questions about how you answered the choice questions When answering the choice tasks, did you think of restrictions as being less likely at the start of the 20 year period (compared to the later part of the period)? Yes No

What would you say is the likelihood you will move away from Canberra in the next 5 years? Very likely Likely Neither likely nor unlikely Unlikely Very unlikely

Did you think that the “current package” presented in each choice situation was reasonably realistic? Yes No

IF ‘NO’ ABOVE How did you go about answering the questions given you found the “current package” to be unrealistic? I suspended my disbelief and answered the question as though the “current package” was

realistic I answered the question as though the “current package” was a different, more realistic

package Did you think that any of the packages presented would be impossible for ACTEW to deliver? Yes No

IF ‘YES’ ABOVE How did you go about answering the question(s) with unrealistic packages? I suspended my disbelief and answered the question as though ACTEW would be able to

deliver the package I answered the question as though ACTEW would deliver a different, more realistic package

IF SELECTED ‘CURRENT PACKAGE’ IN EVERY CHOICE QUESTION Why did you select the current package in every choice situation? (tick as many as apply)

Other people in my neighbourhood would think poorly of me if I chose the other options

I didn’t have enough time to properly evaluate the options

I didn’t have enough information to be confident choosing the options

I disagree with the notion of people paying to avoid water restrictions

I disagree with the notion of offering people money to face more water restrictions

I expect ACTEW would implement the bill increases shown without delivering the associated service improvements

I expect ACTEW would implement service reductions without delivering the associated bill decreases

Other


IF NEVER SELECTED ‘CURRENT PACKAGE’ Why did you always select Package A or Package B and never the “current package”? (tick as many as apply)

I didn’t think I was allowed to choose the “current package”

I want to keep different options under ACTEW consideration so that I will have more choice in the future

Other How do you think your preferences compare to those of other households in Canberra? Most other households would have similar preferences to mine Most other households would be willing to pay more than I would to avoid restrictions Few households would be willing to pay as much as I would to avoid restrictions

What is your understanding of the way in which the results of this survey will be used to inform ACTEW policy?

To inform a decision on a package to apply to the whole community

To inform a decision on a set of packages from which households would be able to choose a package to suit their needs and budget

The results of this survey will not influence ACTEW policy


Questions about government water use During water shortages, the government can reduce its own water use by allowing the grass in parks, ovals and sports grounds, and other public spaces to ‘brown off’ or die. The sooner these reductions in government water use take place during a drought, the less severe are the restrictions required on households. We are interested in your views on this trade-off between restrictions on household and government water use. In your view, when should each of the following measures be introduced? (Please tick one box in each row) Measure B

efore w

ater

con

servation

m

easures

With

water

con

servation

m

easures

With

Stage 1

With

Stage 2

With

Stage 3

With

Stage 4

After Stage 4

Half of ovals and sports grounds are allowed to brown off

□ □ □ □ □ □ □

All ovals and sports grounds are allowed to brown off

□ □ □ □ □ □ □

Half of parks and public spaces are allowed to brown off

□ □ □ □ □ □ □

All parks and public spaces are allowed to brown off

□ □ □ □ □ □ □

5% of street trees are allowed to die each year due to drought

□ □ □ □ □ □ □

10% of street trees are allowed to die each year due to drought

□ □ □ □ □ □ □

When answering the questions above, did you consider the effects of the measures on:

My household only

Mainly my household, but also other households

Mainly other households, but also my household

Other households only


Your views on water Please indicate the extent to which you agree or disagree with each of the following statements: Stro

ngly

disagre

e

Disagree

Do

n’t kn

ow

/

un

sure

Agree

Stron

gly

agree

Households should be able to buy exemptions from water restrictions, with the raised funds given as rebates to households that do face restrictions.

□ □ □ □ □

Others in my neighbourhood would think poorly of me if I wasn’t facing restrictions and they were.

□ □ □ □ □

It would mostly be people with a lack of concern for the community that would pay to avoid water restrictions.

□ □ □ □ □

When water restrictions are not in place, I get enjoyment from seeing green gardens and lawns in my neighbourhood.

□ □ □ □ □

When water restrictions are in place, I get enjoyment from seeing green gardens and lawns in my neighbourhood.

□ □ □ □ □

Water conservation measures should apply permanently to stop households from wasting water, even when the dams are full.

□ □ □ □ □


□ □ □ □ □


□ □ □ □ □


□ □ □ □ □

Before answering this questionnaire, I was familiar with the restrictions on water use associated with each ‘stage’ of water restrictions in the ACT.

□ □ □ □ □

The ‘per kilolitre’ price of water should be lower when the dams are full and higher during water shortages.

□ □ □ □ □

The ‘per kilolitre’ price of water should jump up once a certain level of water use has been reached by a household each quarter.

□ □ □ □ □


Questions about your water service Please approximate the total of your water and sewerage bills over the past 12 months by providing a range within which you are reasonably confident the total would lie. There is no need to look back at your actual bills. I estimate the total of my water and sewerage bills over the past 12 months would be between

and

Please tick if you did look back at your actual bills Prior to completing this questionnaire, to what level of detail would you have been able to recall amounts on your most recent water and sewerage bill (without looking back at your actual bill)?

I don’t recall any amounts

The total bill amount

The water and sewerage components of the bill

The sewerage supply charge, water supply charge, and total water consumption charges

The sewerage supply charge, water supply charge, my consumption in kilolitres, and the price of water in dollars per kilolitre

Please indicate whether you have taken each of the following actions at any time over the past eight years (tick as many boxes as apply):

Purchased equipment for more efficient outside water use

Installed low-flow inside plumbing equipment

Re-landscaped your garden to use less water

Removed an irrigation system

Bought or installed a water efficient appliance inside the house

Installed permanent system for capturing grey water

Installed a rain water tank

Removed a swimming pool Please indicate how the recent period of water restrictions affected your household (tick as many boxes as apply):

My lawn died

Some plants in my garden died

Many plants in my garden died

I spent more time watering my garden by hand

My car was dirty more often

I spent less leisure time outdoors

I stopped using my swimming pool


ON FIRST QUESTIONNAIRE COMPLETED BY EACH RESPONDENT

Questions about your household In which year were you born?

What is your gender? Male Female

How many persons live in your household?

How many of those persons are under the age of 15? What is the highest level of education you have obtained (so far)? Less than year 10 Year 10 Year 12 Diploma or certificate Undergraduate/bachelor degree Postgraduate degree Please approximate your annual personal income from all sources before tax. All answers in this survey are strictly confidential. Less than $25,000 $25,000 - $44,999 $45,000 - $64,999 $65,000 - $129,999 $130,000 - $189,999 $190,000 - $249,999 $250,000 - $320,000 Over $320,000 I refuse to provide this information Please approximate your annual household income from all sources before tax. All answers in this survey are strictly confidential. $1-$12,999 $13,000-$25,999 $26,000-$41,999 $42,000-$61,999 $62,000-$87,999 $88,000-$129,999 $130,000-$181,999 $182,000 or more I refuse to provide this information It would be very helpful to know the details of your residence; for example, it would allow us to match survey responses to usage patterns. This information would be used for this specific research


project only and would be analysed in a grouped, anonymous format, so that your specific responses cannot be traced back to your household. Please confirm your street address details:

NUMBER _____ STREET __________________________

SUBURB _____________________ POSTCODE _______

Do you consent to being contacted by email regarding other ANU research surveys in the future? Yes No

If yes, please provide your email address:

Thank you Thank you for participating in this survey. Your opinions are very important. To submit your responses and be automatically entered into the cash prize draw, please click the ‘submit’ button below. You will then have an opportunity to complete a second questionnaire on a different topic for two more entries into the prize draw. <submit button> ON SECOND QUESTIONNAIRE COMPLETED BY EACH RESPONDENT

Thank you Thank you for participating in this survey. Your opinions are very important. To submit your responses and be automatically entered twice more into the cash prize draw, please click the ‘submit’ button below. <submit button>


ON FIRST QUESTIONNAIRE COMPLETED BY EACH RESPONDENT

Thank you You have been automatically entered into the prize draw (ACT TP XX/XXXXX). The prizes are: 1st prize: $2000 4 runners up: $500 Prize winners will be notified by email on XX/XX/2011 and published in the public notice section of the Canberra Times on Saturday XX/XX/2011. The email and notice will include <service provider> contact details for winners to claim their prize. Each prize will be in the form of a cheque made out to the named prize winner. The cheque will be posted to the named prize winner via registered post within two days of the prize being claimed. Full terms and conditions are attached to the email from <service provider> inviting you to participate in this survey.

Would you be willing to complete another questionnaire? If you complete another questionnaire on a different topic, you will be entered twice more into the prize draw (to triple your chances of winning). To be directed to a second questionnaire, please click on the link below. <link to second questionnaire> ON SECOND QUESTIONNAIRE COMPLETED BY EACH RESPONDENT

Thank you You have been automatically entered twice more into the prize draw (ACT TP XX/XXXXX). The prizes are: 1st prize: $2000 4 runners up: $500 Prize winners will be notified by email on XX/XX/2011 and published in the public notice section of the Canberra Times on Saturday XX/XX/2011. The email and notice will include <service provider> contact details for winners to claim their prize. Each prize will be in the form of a cheque made out to the named prize winner. The cheque will be posted to the named prize winner via registered post within two days of the prize being claimed. Full terms and conditions are attached to the email from <service provider> inviting you to participate in this survey.


Appendix D: Water experimental designs

Key

Version Experimental design version

s Question ID

j Alternative ID

WCM Number of year in water conservation measures per 20 years

Stage 1 Number of years in Stage 1 restrictions per 20 years




Bill Change in ongoing annual water and sewerage bill

Version s j WCM Stage1 Stage2 Stage3 Stage4 Bill

1 1 1 14 2 2 2 0 0

1 1 2 6 4 6 2 2 -50

1 1 3 8 2 2 0 0 200

1 2 1 14 2 2 2 0 0

1 2 2 7 4 6 2 1 -400

1 2 3 2 0 0 0 0 150

1 3 1 14 2 2 2 0 0

1 3 2 8 6 2 4 0 -150

1 3 3 14 0 1 0 0 200

1 4 1 14 2 2 2 0 0

1 4 2 12 2 2 2 2 -250

1 4 3 2 1 2 2 0 100

1 5 1 14 2 2 2 0 0

1 5 2 12 2 2 3 1 -200

1 5 3 8 0 0 1 0 100

1 6 1 14 2 2 2 0 0

1 6 2 6 6 6 2 0 -100

1 6 3 14 0 1 1 0 150

1 7 1 14 2 2 2 0 0

1 7 2 6 4 4 4 2 -150

1 7 3 14 1 2 1 0 150

1 8 1 14 2 2 2 0 0

1 8 2 8 6 2 4 0 -150

1 8 3 8 1 1 2 0 200

1 9 1 14 2 2 2 0 0

1 9 2 8 4 4 3 1 -150

1 9 3 2 1 1 2 0 150

1 10 1 14 2 2 2 0 0

1 10 2 9 4 4 3 0 -100

1 10 3 2 2 1 0 0 100

1 11 1 14 2 2 2 0 0

1 11 2 2 6 6 4 2 -300

1 11 3 14 2 0 2 0 200

1 12 1 14 2 2 2 0 0

1 12 2 9 2 6 2 1 -350

1 12 3 14 0 1 2 0 50

1 13 1 14 2 2 2 0 0

1 13 2 9 2 4 3 2 -100

1 13 3 2 2 0 2 0 100



1 14 1 14 2 2 2 0 0

1 14 2 9 6 2 2 1 -200

1 14 3 8 2 0 0 0 100

1 15 1 14 2 2 2 0 0

1 15 2 8 6 4 2 0 -350

1 15 3 2 0 2 1 0 100

1 16 1 14 2 2 2 0 0

1 16 2 12 2 2 4 0 -100

1 16 3 14 1 2 1 0 200

1 17 1 14 2 2 2 0 0

1 17 2 6 4 6 3 1 -300

1 17 3 8 0 1 2 0 100

1 18 1 14 2 2 2 0 0

1 18 2 9 4 2 4 1 -250

1 18 3 8 2 0 1 0 150

1 19 1 14 2 2 2 0 0

1 19 2 5 6 4 3 2 -400

1 19 3 8 2 2 0 0 150

1 20 1 14 2 2 2 0 0

1 20 2 10 2 4 4 0 -50

1 20 3 14 1 0 1 0 200

1 21 1 14 2 2 2 0 0

1 21 2 7 2 6 3 2 -250

1 21 3 2 1 2 0 0 50

1 22 1 14 2 2 2 0 0

1 22 2 10 2 6 2 0 -50

1 22 3 2 2 1 2 0 50

1 23 1 14 2 2 2 0 0

1 23 2 8 8 2 2 0 -100

1 23 3 14 0 2 2 0 100

1 24 1 14 2 2 2 0 0

1 24 2 4 6 8 2 0 -150

1 24 3 8 1 0 2 0 50

1 25 1 9 4 4 2 1 0

1 25 2 6 4 6 2 2 -200

1 25 3 3 0 4 2 1 100

1 26 1 9 4 4 2 1 0

1 26 2 3 6 6 4 1 -50

1 26 3 3 4 2 2 1 250

1 27 1 9 4 4 2 1 0

1 27 2 6 6 4 3 1 -100

1 27 3 6 0 0 2 0 400

1 28 1 9 4 4 2 1 0

1 28 2 5 4 6 4 1 -200

1 28 3 3 2 0 0 1 350

1 29 1 9 4 4 2 1 0

1 29 2 4 6 6 2 2 -100

1 29 3 9 4 4 2 0 200

1 30 1 9 4 4 2 1 0

1 30 2 6 4 4 4 2 -200

1 30 3 3 4 4 0 1 400

1 31 1 9 4 4 2 1 0

1 31 2 4 6 4 4 2 -150

1 31 3 6 0 2 2 0 200

1 32 1 9 4 4 2 1 0

1 32 2 7 4 4 3 2 -100

1 32 3 6 2 4 2 0 300

1 33 1 9 4 4 2 1 0

1 33 2 6 4 4 4 2 -150

1 33 3 3 2 0 0 0 300



1 34 1 9 4 4 2 1 0

1 34 2 4 6 6 3 1 -100

1 34 3 9 4 2 0 1 350

1 35 1 9 4 4 2 1 0

1 35 2 7 4 4 4 1 -100

1 35 3 9 0 4 0 0 50

1 36 1 9 4 4 2 1 0

1 36 2 3 6 6 3 2 -100

1 36 3 9 4 0 0 1 50

1 37 1 9 4 4 2 1 0

1 37 2 7 6 4 2 1 -150

1 37 3 3 0 0 0 1 150

1 38 1 9 4 4 2 1 0

1 38 2 8 4 4 2 2 -150

1 38 3 6 4 4 0 0 300

1 39 1 9 4 4 2 1 0

1 39 2 8 4 4 2 2 -100

1 39 3 9 4 4 0 0 350

1 40 1 9 4 4 2 1 0

1 40 2 4 6 6 2 2 -150

1 40 3 3 0 2 2 0 50

1 41 1 9 4 4 2 1 0

1 41 2 6 4 6 3 1 -200

1 41 3 9 2 2 0 0 150

1 42 1 9 4 4 2 1 0

1 42 2 6 6 4 3 1 -150

1 42 3 6 0 0 0 1 350

1 43 1 9 4 4 2 1 0

1 43 2 3 6 6 4 1 -50

1 43 3 9 2 0 2 1 100

1 44 1 9 4 4 2 1 0

1 44 2 6 4 6 3 1 -150

1 44 3 6 2 2 2 0 100

1 45 1 9 4 4 2 1 0

1 45 2 8 4 4 2 2 -150

1 45 3 6 2 2 2 1 150

1 46 1 9 4 4 2 1 0

1 46 2 5 8 4 2 1 -50

1 46 3 6 0 4 2 1 50

1 47 1 9 4 4 2 1 0

1 47 2 3 6 8 2 1 -50

1 47 3 9 4 0 2 1 100

1 48 1 9 4 4 2 1 0

1 48 2 7 4 6 2 1 -100

1 48 3 3 2 2 2 1 150

2 1 1 14 2 2 2 0 0

2 1 2 10 6 4 0 0 -50

2 1 3 8 0 0 2 0 100

2 2 1 14 2 2 2 0 0

2 2 2 14 4 2 0 0 100

2 2 3 12 2 2 4 0 -150

2 3 1 14 2 2 2 0 0

2 3 2 10 2 6 0 2 -200

2 3 3 8 0 2 0 0 150

2 4 1 14 2 2 2 0 0

2 4 2 8 0 0 2 0 250

2 4 3 9 2 6 2 1 -350

2 5 1 14 2 2 2 0 0

2 5 2 15 0 4 0 1 -250

2 5 3 8 0 2 0 0 250



2 6 1 14 2 2 2 0 0

2 6 2 14 2 0 0 0 100

2 6 3 6 6 4 4 0 0

2 7 1 14 2 2 2 0 0

2 7 2 4 4 6 4 2 -150

2 7 3 2 2 2 0 0 0

2 8 1 14 2 2 2 0 0

2 8 2 2 2 2 0 0 150

2 8 3 8 6 2 2 2 -100

2 9 1 14 2 2 2 0 0

2 9 2 8 2 6 4 0 -350

2 9 3 14 0 0 2 0 100

2 10 1 14 2 2 2 0 0

2 10 2 2 2 4 2 0 0

2 10 3 10 4 2 4 0 -200

2 11 1 14 2 2 2 0 0

2 11 2 10 4 2 2 2 -100

2 11 3 14 0 0 0 0 50

2 12 1 14 2 2 2 0 0

2 12 2 8 2 0 0 0 0

2 12 3 12 0 4 4 0 -150

2 13 1 14 2 2 2 0 0

2 13 2 12 2 4 2 0 -250

2 13 3 8 0 0 2 0 250

2 14 1 14 2 2 2 0 0

2 14 2 2 0 0 0 0 50

2 14 3 8 6 0 4 2 0

2 15 1 14 2 2 2 0 0

2 15 2 9 6 0 4 1 -350

2 15 3 14 0 0 2 0 50

2 16 1 14 2 2 2 0 0

2 16 2 2 2 2 2 0 50

2 16 3 12 0 4 2 2 0

2 17 1 14 2 2 2 0 0

2 17 2 7 4 6 2 1 -250

2 17 3 14 0 2 0 0 100

2 18 1 14 2 2 2 0 0

2 18 2 14 2 2 2 0 50

2 18 3 9 6 0 4 1 -200

2 19 1 14 2 2 2 0 0

2 19 2 11 4 2 2 1 -50

2 19 3 2 2 2 2 0 50

2 20 1 14 2 2 2 0 0

2 20 2 8 2 2 2 0 100

2 20 3 8 2 6 2 2 -50

2 21 1 14 2 2 2 0 0

2 21 2 11 4 2 2 1 -100

2 21 3 2 2 0 4 0 150

2 22 1 14 2 2 2 0 0

2 22 2 14 4 0 2 0 50

2 22 3 14 0 4 2 0 -100

2 23 1 14 2 2 2 0 0

2 23 2 2 8 8 2 0 0

2 23 3 2 2 0 2 0 0

2 24 1 14 2 2 2 0 0

2 24 2 8 0 2 2 0 100

2 24 3 14 4 0 2 0 -50

2 25 1 9 4 4 2 1 0

2 25 2 4 6 4 4 2 0

2 25 3 6 4 4 0 0 100



2 26 1 9 4 4 2 1 0

2 26 2 6 0 4 0 1 50

2 26 3 6 6 4 2 2 -100

2 27 1 9 4 4 2 1 0

2 27 2 7 6 4 2 1 -100

2 27 3 9 6 2 0 0 200

2 28 1 9 4 4 2 1 0

2 28 2 12 4 2 2 0 300

2 28 3 13 4 2 0 1 -200

2 29 1 9 4 4 2 1 0

2 29 2 11 4 4 0 1 -100

2 29 3 12 2 4 2 0 300

2 30 1 9 4 4 2 1 0

2 30 2 9 0 6 0 1 0

2 30 3 9 4 4 2 1 -100

2 31 1 9 4 4 2 1 0

2 31 2 6 6 2 4 2 -50

2 31 3 6 0 6 0 0 0

2 32 1 9 4 4 2 1 0

2 32 2 9 2 0 2 1 300

2 32 3 4 4 6 4 2 -200

2 33 1 9 4 4 2 1 0

2 33 2 5 6 4 4 1 -50

2 33 3 3 0 4 2 1 0

2 34 1 9 4 4 2 1 0

2 34 2 3 6 4 2 0 400

2 34 3 6 4 6 2 2 0

2 35 1 9 4 4 2 1 0

2 35 2 5 4 6 4 1 -100

2 35 3 3 2 2 2 0 100

2 36 1 9 4 4 2 1 0

2 36 2 3 0 2 0 0 400

2 36 3 7 4 4 4 1 0

2 37 1 9 4 4 2 1 0

2 37 2 5 6 6 2 1 -100

2 37 3 9 4 0 0 0 200

2 38 1 9 4 4 2 1 0

2 38 2 3 4 2 2 0 50

2 38 3 6 6 6 0 2 -50

2 39 1 9 4 4 2 1 0

2 39 2 3 6 6 4 1 -50

2 39 3 6 2 0 2 1 150

2 40 1 9 4 4 2 1 0

2 40 2 9 4 0 0 1 50

2 40 3 10 2 4 2 2 0

2 41 1 9 4 4 2 1 0

2 41 2 6 2 6 4 2 -50

2 41 3 6 0 4 2 0 100

2 42 1 9 4 4 2 1 0

2 42 2 12 6 0 0 1 150

2 42 3 10 4 2 2 2 -200

2 43 1 9 4 4 2 1 0

2 43 2 5 6 6 2 1 0

2 43 3 9 2 0 4 1 200

2 44 1 9 4 4 2 1 0

2 44 2 6 2 6 0 1 400

2 44 3 8 2 4 4 2 0

2 45 1 9 4 4 2 1 0

2 45 2 6 4 6 2 2 -50

2 45 3 3 4 2 2 1 150



2 46 1 9 4 4 2 1 0

2 46 2 9 0 0 2 1 0

2 46 3 1 8 8 2 1 -50

2 47 1 9 4 4 2 1 0

2 47 2 17 0 0 2 1 -100

2 47 3 6 2 6 2 1 50

2 48 1 9 4 4 2 1 0

2 48 2 3 4 2 2 1 150

2 48 3 5 6 6 2 1 0

3 1 1 14 2 2 2 0 0

3 1 2 13 0 0 6 1 -150

3 1 3 8 0 0 0 0 100

3 2 1 14 2 2 2 0 0

3 2 2 16 0 2 2 0 100

3 2 3 6 4 6 4 0 -150

3 3 1 14 2 2 2 0 0

3 3 2 8 2 4 6 0 -200

3 3 3 8 0 0 0 0 0

3 4 1 14 2 2 2 0 0

3 4 2 14 2 2 0 0 100

3 4 3 10 0 6 4 0 -300

3 5 1 14 2 2 2 0 0

3 5 2 11 0 4 4 1 0

3 5 3 2 4 4 0 0 100

3 6 1 14 2 2 2 0 0

3 6 2 14 0 0 2 0 150

3 6 3 12 2 0 4 2 -100

3 7 1 14 2 2 2 0 0

3 7 2 2 4 6 6 2 50

3 7 3 2 0 2 2 0 50

3 8 1 14 2 2 2 0 0

3 8 2 14 2 2 0 0 100

3 8 3 13 2 0 4 1 -50

3 9 1 14 2 2 2 0 0

3 9 2 10 0 4 6 0 -400

3 9 3 14 2 4 0 0 50

3 10 1 14 2 2 2 0 0

3 10 2 2 2 0 2 0 50

3 10 3 14 0 4 0 2 -150

3 11 1 14 2 2 2 0 0

3 11 2 10 4 0 6 0 -100

3 11 3 2 4 0 0 0 100

3 12 1 14 2 2 2 0 0

3 12 2 2 2 4 0 0 100

3 12 3 6 2 6 6 0 -50

3 13 1 14 2 2 2 0 0

3 13 2 6 4 4 6 0 -50

3 13 3 8 4 0 0 0 100

3 14 1 14 2 2 2 0 0

3 14 2 14 4 0 2 0 50

3 14 3 8 0 6 4 2 -400

3 15 1 14 2 2 2 0 0

3 15 2 13 2 0 4 1 -300

3 15 3 8 4 2 0 0 -50

3 16 1 14 2 2 2 0 0

3 16 2 14 0 4 2 0 50

3 16 3 9 4 0 6 1 -200

3 17 1 14 2 2 2 0 0

3 17 2 5 4 6 4 1 -100

3 17 3 8 4 2 0 0 50



3 18 1 14 2 2 2 0 0

3 18 2 2 2 0 2 0 -100

3 18 3 12 0 0 6 2 -200

3 19 1 14 2 2 2 0 0

3 19 2 13 2 4 0 1 -300

3 19 3 8 4 0 0 0 50

3 20 1 14 2 2 2 0 0

3 20 2 8 0 2 2 0 50

3 20 3 12 2 4 0 2 -400

3 21 1 14 2 2 2 0 0

3 21 2 4 4 6 4 2 0

3 21 3 2 0 2 2 0 150

3 22 1 14 2 2 2 0 0

3 22 2 2 4 0 2 0 -50

3 22 3 8 4 6 2 0 0

3 23 1 14 2 2 2 0 0

3 23 2 14 0 4 2 0 -50

3 23 3 18 0 0 2 0 100

3 24 1 14 2 2 2 0 0

3 24 2 8 2 2 2 0 0

3 24 3 12 6 0 2 0 -100

3 25 1 9 4 4 2 1 0

3 25 2 10 2 0 6 2 -200

3 25 3 3 2 4 0 0 50

3 26 1 9 4 4 2 1 0

3 26 2 6 0 0 0 1 100

3 26 3 7 0 6 6 1 -150

3 27 1 9 4 4 2 1 0

3 27 2 8 0 6 4 2 -50

3 27 3 3 2 6 2 1 100

3 28 1 9 4 4 2 1 0

3 28 2 6 2 4 2 0 250

3 28 3 6 0 6 6 2 -50

3 29 1 9 4 4 2 1 0

3 29 2 9 2 4 4 1 -200

3 29 3 3 6 0 0 0 250

3 30 1 9 4 4 2 1 0

3 30 2 6 0 6 0 0 200

3 30 3 4 6 4 4 2 -200

3 31 1 9 4 4 2 1 0

3 31 2 14 0 0 4 2 -50

3 31 3 3 0 6 2 0 150

3 32 1 9 4 4 2 1 0

3 32 2 3 0 0 0 1 50

3 32 3 11 0 4 4 1 -100

3 33 1 9 4 4 2 1 0

3 33 2 12 6 0 0 2 -250

3 33 3 12 2 2 0 0 0

3 34 1 9 4 4 2 1 0

3 34 2 3 0 2 0 1 150

3 34 3 7 6 0 6 1 50

3 35 1 9 4 4 2 1 0

3 35 2 11 2 0 6 1 -100

3 35 3 9 0 4 2 1 200

3 36 1 9 4 4 2 1 0

3 36 2 12 2 0 2 0 200

3 36 3 5 2 6 6 1 -250

3 37 1 9 4 4 2 1 0

3 37 2 3 6 6 4 1 -150

3 37 3 9 6 4 0 0 150



3 38 1 9 4 4 2 1 0

3 38 2 9 2 0 2 1 50

3 38 3 11 2 6 0 1 0

3 39 1 9 4 4 2 1 0

3 39 2 2 6 6 4 2 0

3 39 3 6 0 0 2 0 100

3 40 1 9 4 4 2 1 0

3 40 2 9 0 4 0 1 -50

3 40 3 10 2 0 6 2 -100

3 41 1 9 4 4 2 1 0

3 41 2 8 6 4 0 2 -150

3 41 3 9 0 2 2 1 150

3 42 1 9 4 4 2 1 0

3 42 2 12 2 2 0 0 200

3 42 3 3 6 4 6 1 -200

3 43 1 9 4 4 2 1 0

3 43 2 8 2 4 4 2 -100

3 43 3 6 2 2 2 0 -100

3 44 1 9 4 4 2 1 0

3 44 2 9 6 2 0 1 100

3 44 3 9 0 4 6 1 -50

3 45 1 9 4 4 2 1 0

3 45 2 14 0 0 4 2 -150

3 45 3 6 2 4 2 1 50

3 46 1 9 4 4 2 1 0

3 46 2 3 6 2 2 1 0

3 46 3 3 6 8 2 1 -50

3 47 1 9 4 4 2 1 0

3 47 2 11 0 6 2 1 0

3 47 3 6 2 0 2 1 -100

3 48 1 9 4 4 2 1 0

3 48 2 9 0 6 2 1 -50

3 48 3 15 2 0 2 1 -100


Appendix E: Peer review

Professor Riccardo Scarpa

Department of Economics

Waikato Management School

University of Waikato, Hamilton,

New Zealand

Tel. +64-(0)7-838-4848

[email protected]

1 December, 2011

Peer Review of Willingness to Pay Research Project

To whom it may concern,

I write to communicate my involvement and professional assessment as an independent

expert peer reviewer of the study undertaken by the Australian National University in relation

to households’ willingness to pay (WTP) for changes in utilities services in the Australian

Capital Territory. I engaged in consultation and dialogue with Dr. Benjamin McNair and Dr.

Michael Ward at several stages in the conduction of this study. In particular, I reviewed the

technical details of all of the experimental designs. I found the resulting designs employed in

each survey to be well grounded in the theory and practice of experimental design for stated

choice data collection. I was also involved in evaluating the various model estimation

procedures. In that context I was able to independently replicate the initial models from

which, after an adequate specification search, the more advanced models used to obtain WTP

estimates described in the report for ACTEW and ActewAGL were obtained. I reviewed the

congruence of the interpretation of the statistical model results for policy recommendation

and found it robust and coherent with my understanding of these models.

With the information in my possession I am satisfied that the report goes further than the state

of practice in commercial consultancy environments in non market valuation studies via

stated choice data. In fact, the techniques used in this study go beyond commonly established

practice and include approaches at the forefront of the discipline, which many, including

myself, would consider state of the art. Overall I am satisfied with the quality of the report

and the supporting data analysis and specification search.

Sincerely yours,

Riccardo Scarpa


Willingness to pay research project: draft report 79

Glossary

Cheap talk script A short paragraph in a questionnaire instructing respondents to answer the

hypothetical questions as though they were real situations.

Contingent valuation A stated preference survey technique in which respondents are asked to consider

how much they are willing to pay for a benefit (or how much they are willing to

accept as compensation for a cost).

Dichotomous choice A choice between two jointly exhaustive and mutually exclusive alternatives.

Endogeneity Correlation between a variable and the error term in an econometric model.

Heterogeneity Extent of variation; disparateness; diversity.

Likert scale A symmetric agree-disagree scale; for example, “strongly agree”, “agree”, “don’t

know”, “disagree”, “strongly disagree”.

WTA Willingness to accept

WTP Willingness to pay


References

Accent (2003). Expectations of electricity DNOs & WTP for improvements in service: stage 1 quantitative research findings, OFGEM. --- (2008). Expectations of DNOs & willingness to pay for improvements in service, OFGEM. Ajodhia, V. S. (2006). Regulating Beyond Price: Integrated Price-Quality Regulation for Electricity Distribution Networks. College voor Promoties. Amsterdam, Technische Universiteit Delft. elektrotechnisch ingenieur. Bierlaire, M. (2003). BIOGEME: A free package for the estimation of discrete choice models. Proceedings of the 3rd Swiss Transportation Research Conference, Ascona, Switzerland. Carlsson, F. and P. Martinsson (2008). "Does it matter when a power outage occurs? A choice experiment study on the WTP to avoid power outages." Energy Economics 30(3): 1232-1245. Carson, R. T. and T. Groves (2007). "Incentive and informational properties of preference questions." Environmental and Resource Economics 37: 181-210. Carson, R. T., T. Groves and J. List (2006). Probabilistic influence and supplemental benefits: a field test of the two key assumptions behind using stated preferences. Unpublished manuscript. Centre for International Economics (1997). A Study to Assess Environmental Values Associated with Water Supply Options, ACTEW. --- (2008). Technical document: Updated estimates of the cost of water restrictions in the ACT region, ActewAGL. Giannakis, D., T. Jamasb and M. Pollitt (2005). "Benchmarking and incentive regulation of quality of service: an application to the UK electricity distribution networks." Energy Policy 33: 2256-2271. Kelly, R. A. and M. Alford (2010). A Review of Customer Willingness to Pay for Service Standards, isNRM Pty Ltd and The Australian National University. KPMG (2003). Consumer preferences for electricity service standards, Essential Services Commission of South Australia. McNair, B. J., J. Bennett, D. A. Hensher and J. M. Rose (2011). "Households’ willingness to pay for overhead-to-underground conversion of electricity distribution networks." Energy Policy 39(5): 2560-2567. NERA Economic Consulting and ACNielsen (2003). Willingness to pay research study, ACTEW Corporation and ActewAGL. Netherlands Competition Authority (2006). Decision in relation to the method for determining the quality term. Method Decision 102282-21.

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Willis, K. G., R. Scarpa and M. Acutt (2005). "Assessing water company customer preferences and willingness to pay for service improvements: A stated choice analysis." Water Resources Research 41.

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