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Progressive pricing is an instrument to manage water demand and help reduce excessive water consumption through an economic dis-incentive. Progressive pricing means that water price rates per unit of volume increase, as the volume used increases. Thus the largest consumers of water pay higher rates for the volume of water consumed beyond a certain threshold.
Water consumption rates are usually divided into volumetric groups called blocks (e.g. block 1: 0 - 20 m3 /month, block 2: 20-50 m3 /month etc.). The first block is typically the lowest priced water volume range and often corresponds to volume estimated to be sufficient to meet the basic needs of an average household, and therefore has zero or relatively low price tariffs assigned to it. Tariffs per unit of consumption then increase step-wise - the higher the consumption rate (the block number), the higher the unit tariff. In this way, progressive pricing discourages wasting water and can provide a valuable source of revenue from the largest users, covering operational costs and supporting more equal access to water through cross-subsidization schemes.