In previous posts, I have said that rationing (as a response to water “shortage”) is extremely expensive to businesses. This World Bank paper brings numbers to that thought:

The current paper, using firm-level data collected by a business environment assessment survey in 26 countries in Europe and Central Asia, estimates the marginal impacts on firm costs of infrastructure quality. The results suggest that the reliability or continuity of services is important for business performance.

Firm costs significantly increase when electricity outages occur more frequently and the average outage duration becomes longer. Similarly, increased hours of water supply suspensions also reduce firms’ competitiveness.

In these countries, it is found that the total benefit for the economy from eliminating the existing electricity outages ranges from 0.5 to 6 percent of gross domestic product. If all water suspensions are removed, the economy could receive a gain of about 0.5 to 2 percent of gross domestic product. By contrast, the quality of telecommunications services seems to have no significant impact.

Bottom Line: Outages can be traced to two causes: insufficient revenue that impedes capital and operational spending, and/or prices that are too low to constrain demand to be less than supply. Fix these and prosper.