How Utilities Manage Water Demand During Drought
by Dr. Ahmed Rachid El-Khattabi
North Carolina is no stranger to drought. Each time it happens, though, it feels newly urgent. When water levels fall, water utilities are forced into making high-stakes decisions about how to stretch limited supplies.
That moment may be arriving again.
If you’ve been following recent conditions or the news, you’ve likely seen signs of declining reservoir levels, dry forecasts, concerns over “water bankruptcy,” and calls for conservation. Over the past week, several cities across the state have begun implementing mandatory water restrictions, signaling an effort to act early and avoid more severe measures later.
North Carolina has been here before. The droughts of 2002 and 2007–2008 pushed many utilities close to the brink, with some communities coming close to running out of water. To this day, images of Falls Lake at record lows remain a lasting reference point for water managers. Utilities expanded drought response plans, invested in supply diversification (including interconnections), and adopted a mix of strategies that focus on managing how end-users use water, i.e., demand-side management strategies.
Broadly, these demand-side management strategies fall into four categories: restrictions, price-based approaches, public messaging, and technology adoption. This post reviews these strategies.
The Demand-Side Management Toolkit
Restrictions
During severe droughts, utilities often respond by directly limiting how water can be used, particularly for outdoor purposes. Outdoor irrigation is typically the first target because it accounts for a large share of discretionary household demand and can be reduced relatively quickly without immediately affecting essential indoor needs.
These restrictions usually unfold in stages as conditions worsen, although what constitutes “Stage 1” or “Stage 2” restrictions can vary across utilities and change over time. Staging often begins with voluntary conservation requests, where utilities ask customers to reduce watering and be mindful of overall use. If drought conditions persist, these requests can escalate into mandatory limits such as restricting lawn and landscape irrigation to a certain number of days per week. For instance, a utility could start by restricting outdoor usage to a certain number of days per week and tighten even further if needed, reducing watering to a single day each week or even prohibiting altogether except for essential needs such as fire protection or public safety. In any of these options, utilities may specify which days or times outdoor watering is allowed. The various restriction stages are typically tied to reservoir levels or other supply indicators, becoming more stringent as conditions deteriorate. Enforcement approaches vary but can include warnings, fines, and, in more extreme cases, service restrictions or shutoffs. Restrictions can be quite effective at reducing consumption. Notwithstanding, their effectiveness can depend on how households interpret them. Some households treat them as hard limits while others respond primarily to the risk of fines or social pressure.
During the 2002 drought, for example, Orange Water and Sewer Authority (OWASA) implemented a tiered set of restrictions that escalated in response to worsening conditions. Stage 1 restrictions (three days per week) and Stage 2 restrictions (one day per week) resulted in modest reductions in water use, on the order of 1–2 percent among households most likely to irrigate. In contrast, Emergency restrictions (zero days per week) produced substantially larger effects, reducing consumption among high-irrigation households by roughly 37 percent over the approximately six-week period in which they were in effect.
Enforcing restrictions can be challenging and costly. It often requires “boots on the ground,” with staff physically monitoring neighborhoods to ensure compliance. While advanced metering infrastructure (AMI) and high-frequency usage data can support enforcement by identifying unusual consumption patterns, targeting outreach more precisely, and evaluating the effectiveness of restrictions in near real time, many utilities continue to rely on direct observation because it is more visible and less likely to be contested.
Utilities therefore also frequently encourage residents to report violations, effectively crowdsourcing part of the enforcement process. Complaint hotlines and online reporting tools tend to see increased use as restrictions tighten. This can introduce a layer of social pressure alongside formal enforcement. In some cases, it leads to what is informally referred to as “drought shaming,” where households perceived to be overusing water (e.g., watering lawns during restricted periods) face scrutiny from neighbors or the broader community. These social dynamics can be effective by reinforcing norms around conservation and signal that water use during drought is not just a private decision, but a collective responsibility.
Price-Based Strategies
Beyond restricting the use of water, utilities can also encourage people to use less by using pricing as a tool. This approach can be a powerful lever, especially when restrictions alone aren’t enough or when utilities want a more flexible, continuous way to curb demand.
Utilities can also use a temporary drought surcharge, which raises the cost of water without overhauling the entire pricing system. Unlike permanent rate increases, these are explicitly short-term adjustments tied to drought conditions. Utilities may add a fixed fee to monthly bills or increase the per-unit cost of water for the duration of the shortage. These surcharges serve two purposes. First, they send a clear price signal that water is scarce, and using more of it (especially for non-essential purposes) now comes at a higher cost. Second, they help stabilize utility finances. During droughts, conservation efforts can significantly reduce water sales, which in turn reduces revenue. If appropriately implemented, a temporary surcharge can offset these losses so utilities can continue operating and maintaining infrastructure even as consumption declines.
Aside from surcharges, utilities often adjust how water is priced rather than just how much it costs. Increasing block rates, for example, charge higher per-unit prices as consumption rises, meaning that heavier users (particularly those using water for outdoor irrigation) face steeper marginal prices. Seasonal pricing works in a similar way, with higher rates during peak demand periods when water is scarcest.
The goal isn’t to penalize basic use, but to make discretionary consumption more expensive at the margin. In that sense, pricing strategies complement restrictions. Instead of prohibiting certain uses outright, they nudge households to make different choices on their own.
Following the 2007–2008 drought, many utilities adopted more conservation-oriented pricing structures, including increasing block rates and irrigation-specific to more directly target discretionary demand.
Notwithstanding, using price as a tool could raise affordability concerns. The EFC rates dashboard is a particularly useful resource in this context, showing both a conservation dial (benchmarking the marginal price of water at 10,000 gallons) and an affordability dial (displaying the cost of water as a percentage of different income thresholds) to help utilities navigate this tradeoff.
Public Messaging and Outreach
Outside of restrictions or pricing, many utilities invest heavily in communication and outreach efforts to engage the local community. These efforts include public education campaigns, community engagement (such as events and farmers markets), and messaging that frames conservation as a shared responsibility. Though harder to measure, these efforts can reinforce other policies and can also help shift social norms around water use.
Appliance Efficiency
Rebate and incentive programs that encourage households to invest in water-efficient technologies are common in other states. These include rebates for low-flow toilets and appliances, or for replacing high-water-use turf with drought-tolerant landscaping.
In North Carolina, these programs can be more complex to implement. Utilities must navigate constitutional and statutory constraints on the use of public funds, particularly requirements that expenditures serve a clear public purpose and not primarily benefit private individuals. As a result, some utilities have been cautious about offering direct rebates for improvements on private property.
That said, viable pathways for encouraging technology adoption exist. Programs can be structured around demonstrated system benefits (such as avoided capacity costs or drought resilience), delivered through partnerships, or targeted toward customer classes where the public benefit is more clearly defined.
Concluding Thoughts
Moments like this also tend to be catalysts for innovation. Previous experience with drought in North Carolina shows that utilities learn, adapt, and innovate. Pricing structures have evolved, planning has improved, and systems are better connected than they were two decades ago. But the underlying challenge of balancing financial stability, affordability, and resource constraints as conditions change remains.
No single strategy solves drought. Restrictions can deliver immediate reductions but are blunt and can be difficult to enforce. Pricing can create more continuous incentives but may raise affordability concerns. Public messaging, formal enforcement, and informal social pressure also play an important role in shaping behavior in ways that pricing or restrictions alone may not fully achieve. In practice, effective drought response is about layering these tools. If current dry conditions continue, many of these tools will likely come back into focus. The question is not whether utilities will respond, but which combination of strategies they will rely on and what innovations will emerge.