Tiered Water Rates:
Volumetric pricing is the minimum standard for urban water users. In 2006, 195 urban water agencies reported that 80 percent of their revenue was derived from volumetric charges (CUWCC, 2006). Black and Veatch (2006) report that volumetric pricing was used by 90.5 and 95.6 percent of respondents in 2001 and 2006, respectively.Did you get that? 95 percent of water districts charge you more if you use more, but only 43 percent charge you more per unit, the more units you use. (None that I know of use the conservation pricing that I advocate -- probably because they cannot figure out how to rebate revenue in excess of costs. Wait, that's not too hard to figure out. Ahh, lazy? political opposition?)
Tiered water pricing is increasing, but was still not used by most respondents. From 2001 to 2006, use of tiered rates increased from 38.4 to 43.3 percent of respondents. Tiered rates were used by most respondents in most Central Coast and most Bay Area counties, but uniform rates were still most common in most central valley, southern inland and in some south coast (Los Angeles) counties. In other south coast counties (Orange and San Diego), non-tier rates were still used by about half of respondents. In April 2008 Assembly Bill 2882, designed to encourage public agencies to adopt conservation rate structures, passed by a large margin (Woodland Daily Democrat 2008).
Did you also notice that the places that face water shortages (OC is recycling sewage; SD is building a desal plant) are the ones that do NOT use tiered pricing? Do I need to draw you a picture?
For pre-1914 appropriative rights, water transfers are subject only to a finding of no injury to other legal water users, and the injured person must bring court action to halt the transfer. For post-1914 rights, water transfers require an application to the SWRCB and the application can be protested by an injured water user. Any transfer of post-1914 rights also cannot have an unreasonable effect on fish and wildlife, and two laws that consider economic impacts may apply.So, despite what our lawyer friends tell us about how water markets "exist", they do not function because it's a pain to get approval from the multiple agencies that can veto a decision (tragedy of the anti-commons) -- even without considering how many people can oppose a transfer on somewhat nebulous grounds.
Water Code section 382 provides authority for transfers of surplus water by local or regional agencies. If an agency utilizes this code section then the SWRCB may approve the transfer if it does not “unreasonably affect the overall economy of the area from which the water is being transferred.” Water Code section 1810 permits any public agency that owns a water conveyance facility to utilize unused conveyance capacity for transfers provided the use of the conveyance facility does not injure any legal user of water, unreasonably affect fish, wildlife or other instream beneficial uses and does not unreasonably affect the overall economy or the environment of the county from which the water is being transferred.
A market cannot function if transactions costs eat up the gains from trade. That's why markets for water in CA (and elsewhere) are stillborn. The process needs to be streamlined (without disenfranchising too many people, of course).
Bottom Line: We have a long way to go before we achieve efficiency in water allocation like we have in the allocation of houses, gold, oil, etc. This analysis provides a useful checklist of issues to tackle.