6 Sep 2008

California Water Bank

The California Water Bank is back:
The water bank, managed by the Department of Water Resources, will be prepared to move as much as 600,000 acre-feet of water from willing sellers in the north to buyers in the south.


Typically, water will be sold by farmers in the Sacramento Valley who can create a surplus, whether by idling crops or using groundwater instead of surface water. Prices will be established by the open market, but DWR will collect a charge for the cost of pumping the water to its destination.
So, is the bank going to act just like a market? No.
The agency will also rank buyers according to need. Cities with water-related health and safety problems will get first dibs, with farm crops a lower priority. To qualify, urban buyers must have a conservation program adopted to cut normal water use by 20 percent.
These restrictions are not a good sign, as they make trades more difficult.

Bottom Line: The 1992 Water Bank was not very efficient because DWR set prices at the wrong level (too low or too high). This time (apparently), they're screwing up the market by requiring that buyers pass a beauty contest. Too bad for those "ugly" buyers who are willing to pay for water.

Addendum: More here.

1 comment:

Damian said...

You'd think that DWR could at least try to let the market set the price rather than wasting time trying to guess it themselves, a hopelessly futile task.

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