Limited dependent variable techniques are used to model the decision-making process in a dual-pricing household water system as employed in Brisbane, Australia. In this system, households could initially choose to remain on a standard rateable value principle of payment for water or move to a volumetric/user-pays system. Because of uncertainty associated with future household water demand, the option to remain on the existing system has value and is thereby incorporated into the appropriate decision-making model. A number of property/household characteristics are found to influence the choice of water charging system along with the value of the option. These include property size and rateable value, the number of household members, the type of garden vegetation, and the presence of various household appliances.