An Economic Evaluation of the Rural Drinking Water Fee Using the System Dynamics Method

Abstract

In this research, the system dynamics method was applied to investigate the effect of technical and economic parameters on the water fee and provide a solution to find the actual price of water. To assess the performance of the simulated model, the financial balance and explanatory notes of the Rural Water and Wastewater Company of Hamedan province were used from 2011 to 2016. Comparing the simulation results and observational data, the correlation coefficient and normalized root mean square error indexes were obtained at 0.99% and 4%, respectively. The results indicated that despite raising the water fee in recent years, the company’s financial balance was negative, the balance diagram further declined over time, and the company losses increased. Sensitivity analysis showed that the fund balance of the company was more water fee-sensitive and its sensitivity to the time had an increasing trend. However, an increase in the water fee has no remarkable effect on the customer’s willingness to pay for the water. In addition, Powell’s optimization algorithm suggested the lowest water fee to prevent a negative fund balance in the company.