Better Safe than Sorry? The cost of high standards for water system expansion.

This paper provides an economic assessment of the city of Guelph's (Ontario, Canada) water expansion plan for the period of 2013–2038. Using historical demand data we use a probabilistic approach to determine alternate expansion strategies. The empirical results identify the cost savings and reduction in idle capacity associated with alternative water system expansion strategies that maintain a negligible likelihood of a water capacity shortfall. We estimate cost savings of $24.5 to $35.7 million which is 64%–93% of the total costs the city currently plans to spend on water infrastructure. We identify the potential benefits of policy reforms that more effectively weigh the benefits and costs of high standards for water system expansion.