Question
A utility company is considering two cash rebate programs to encourage water conservation. Plan 1, which is expected to cost an average of $80 per
A utility company is considering two cash rebate programs to encourage water conservation. Plan 1, which is expected to cost an average of $80 per household, would involve a rebate of the purchase and installation costs of a two-stage flush system toilet. This program is projected to achieve an 8% reduction in overall household water use over a 5-year evaluation period. This will benefit the public to the extent of $2.25 per household per month. Plan 2 would involve grass re-placement with desert landscaping. This is expected to cost $500 per household, but it will result in reduced water cost at an estimated $10 per household per month (on average). At a discount rate of 0.5% per month, which program, if either, should the utility undertake? Use the conventional B/C method via AW (Do Nothing considered), and advise which program should be selected.
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