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Thirsty Colonias: Rate Regulation and the Provision of Water Service

Where the law does not mandate universal service, poor communities frequently are omitted from drinking water supply networks. A c-cording to conventional wisdom, lack of service is due primarily to the high cost of extending service to the poor, their low ability to pay, and their weak political influence. Through an empirical analysis of poor communities in Texas, this study assesses these and other economic and institutional determinants of drinking water service acquisition. The analysis reveals that rate regulation, intended to make water service affordable to all households, is also responsible, and may actually reduce service coverage among the poor. (JEL Q25)