21 Apr 2008

Conservation Rates 2

Last week, I posted on AB 2882, which has moved from the California Assembly to the Senate for consideration.

My earlier concerns still stand (voluntary compliance and price increases are too small). OTOH, there are a few nice features that I missed.

I talked to Alf Brandt (Principal Consultant, Assembly Committee on Water, Parks & Wildlife), who helped draft AB 2882. He says that the bill removes a barrier to increasing price, i.e., that water rates are a form of tax and raising them will require referenda, etc. Given the toxic nature of tax increases (not spending increases!) in California, I agree that this is a problem. The bill addresses it by allowing utilities to set a "Basic charge" that is "fair." After that:
A conservation charge is imposed for increments of water use in excess of the basic use allocation. The conservation charge for the increments shall, in the aggregate, provide revenue not to exceed conservation measure costs* and overuse costs**. The increments may be fixed or may be determined on a percentage or other basis, provided that the conservation charge for the highest-price increment is at least three times the basic charge.
Although "three times" the basic charge is a good minimum, they cannot be set higher than costs. I would set conservation charges much higher than costs and rebate excess revenue to water misers; see here.

The other thing that's nice in this bill (current text -- not approved!) is that "Factors used to determine the basic use allocation may include, but are not limited to, the number of occupants, the type or classification of use, the size of lot or irrigated area, and the local climate data for the billing period." The most aggressive (and fair) allocation would be based on the number of people. Type of use favors politically-powerful groups; lot size rewards golf course-sized lots; historic use rewards wasters; local climate rewards people for living in the desert (unless desert people are allotted less water!)

Bottom Line: This bill is much better than I thought it was. Differential prices are necessary for water conservation, and this is a vital first step. Let's hope that it passes and utilities implement steep price schedules that set a per capita base charge and steep prices for water wasters.

And then let's get some water markets.

* "Conservation measure costs" means expenses incurred for water conservation measures employed by the public entity to reduce the wasteful or unreasonable use of water, and may include conservation best management practices, conservation education, irrigation controls and other conservation devices, water system retrofitting for production and use of alternative water supplies including recycled water, energy costs related to water use, and securing dry-year supply arrangements.

** "Overuse costs" means costs incurred as a result of the wasteful or unreasonable use of water, and may include preventing, controlling, or treating the runoff of water wasted by irrigation and other outdoor uses, and procuring water supplies to satisfy increments of water use in excess of the basic use allocations for the customers of the public entity.


  1. By the way, I just read your post on AB 2882. Either you completely misunderstood Brandt, or he's got the law completely wrong.

    The statutory additions to the Water Code being proposed by AB 2882 are, by definition, subordinate to the California constitutional limitations on levying fees and charges set forth in Article XIIID. So AB 2882 cannot remove the constitutional barrier to changing rates.

    In addition, Article XIIID does NOT apply to water-related charges. See Art. XIIID, section 6(c), and Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4th 205).

    What AB 2882 appears to do is clarify that a particular rate structure is legal. As water agencies have tremendous discretion in setting rate structures already, I'd love to know what (and who) is really driving this bill.

    (It won't be the first time that a bill is proposed in response to litigation that does nothing to address the actual issue presented by the litigation.)

  2. Perhaps I misunderstood Brandt because I doubt he got anything wrong.

    "So AB 2882 cannot remove the constitutional barrier to changing rates."

    Since when is there a constitutional clause on water rates? Some people make the spurious claim that water rates are a form of taxation, which is contrary to common sense but no surprise to ways that laws sometimes get interpreted (e.g., "torture"). If water is being treated as an amenity to land, and increases in water rates are considered taxes, I can see that this State deserves its "nutz" reputation.

    Water prices should reflect the cost of getting the water there AND the scarcity cost of water. If the price stays low and we "run out" of water, what's to be done? /rant

    The clarifying role in AB 2882 is abundantly necessary, as attempts to raise water prices in SoCal are running into threats of lawsuits for "unconstitutional tax increases." I will blog on that tomorrow.

    I suppose that the real drivers of the bill are water utilities desperate to reduce demand for their scarce water supplies.

    As to actual issue presented by the litigation", what litigation are you talking about?


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