This detailed study of the use of water at different price levels by residential consumers in the Toronto-centred region from Hamilton to Oshawa challenges the basis of our present urban water supply policy. Adoption of the recommendations presented would mean higher prices to householders, but a considerable saving of hundreds of millions of tax dollars over the next three decades. The present policy uses a 'requirement approach' in which future water needs are calculated by extrapolation of past trends and an assumption that demand is inelastic. This leads to excessive levels of water use and over-investment in water supply, sewage collection, and treatment systems. The resultant misallocation of resources can be corrected by adoption of a demand/management approach in which investment policy is guided by consumer demand and alternative pricing arrangements are used as a management tool. Dr. Grima examines several alternative choices for management, such as metering, increasing marginal prices, sewerage charges, seasonal charges, and an increasing price block schedule, and describes the results of each. Water managers in Canada are strongly challenged to begin a fundamental rethinking of their basic policies. (Department of Geography Research Publication 7)