Commercial Water

DW asks me to discuss industrial and commercial water users.

Here are a few thoughts:

• These users are more interested in reliability than cheap water. Shutting down a business for lack of water is very expensive! (According to this 1991 study [PDF], the marginal acre-foot can be worth $500,000 [p. 5-24])
• They are prepared to invest significant money in water recycling if it will lower their water or sewer bill and/or increase reliability.
• Regulators may set rates as a form of social engineering, but politicians may set them in accordance to campaign contributions.
• C&I users often get price discounts based on "bulk" purchases (flat or decreasing block rates). This structure (currently true in, e.g., San Diego County and the City of San Diego) was the standard in the old days, when politicians wanted to encourage industrial expansion/relocation, cost accountants could justify cheaper rates due to high volumes ("we lose water on every unit but we make it up on volume."), and water utilities needed to move high volumes.
• OTOH, some water companies charge higher rates to businesses "because they can afford it," but I think that practice rarer in water than it is in, e.g., telephones. LADWP has increasing tiered rates, and regulators have told private water firms to charge increasing rates.
• Some C&I will relocate for cheaper water -- in the same way that farmers will grow water-intensive crops where they have access to a lot of water.

Bottom Line: Businesses are very sensitive to water prices. Their water should be priced to reflect scarcity and delivered with reliability.