Abstract Engineering, service and finance are three main tasks of Taiwan Water Corporation. Water rate is not only the main factor which determines the financial income, but also the significant managerial means which influence the efficiency of water resources allocation. Current water rate of Taiwan Water Corporation hasn¡¦t been adjusted for at least twelve years. During these years, price index raises and people are getting more and more demanding for water quality and stability of water supply. On the other hand, it costs increasingly to develop new water resources and increase the popularity rate, not to mention about replacing pipes and improving water quality. These entire efforts make operation cost rise enormously year by year. Because the water rate can¡¦t reflect its cost for so many years, Taiwan Water Corporation has been long term in debt. This affects not only the general operation. Meanwhile, Taiwan Water Corporation also has no finance to develop water resources and improve water supply system. So it is really critical that water rate should be adjusted right away to reflect the cost of water supply reasonably. It will help a lot to improve the operation of Taiwan Water Corporation and then it can continuously provide high quality of service. This study investigates (1) current operations of Taiwan Water Corporation (2) reasonable water rate structure and calculation (3) mechanism of water rate adjustment (4) proposal of exercising the income of the increase of water rates (5) complete sets of water rate adjustment. This study suggests that water rate should be reviewed once a year. Through this procedure, Taiwan Water Corporation would build up a reasonable water rate adjustment mechanism. Then we expect that it will improve the finance of Taiwan Water Corporation. Also by raising the water rate, people would start to realize that water is valuable and limited resources and promote to achieve the goal to utilize water resources efficiently. Key words¡GAverage ¡V Cost Pricing¡AMarginal ¡V Cost Pricing¡Aand Investment Return Rate