6 Apr 2009

Water Buffaloes

EF asks:
For a water company, either standalone or part of some municipality, where does their discretionary spending go? The underlying question is if a company's capital spending all goes to projects on the books, such as repair of existing equipment or pipelines, how do you get them to divert some of this spending to new products that could save them a lot of money or save the planet. The CYA approach seems to be to spend money on what you have always spent money on because, from the point of view of your own career, this spending is the 'safest.'
I think there are two questions here:
  1. Do water managers spend their budgets wisely or based on past spending?
  2. Do they change their budgets when new information arrives.
My general impression is that water managers are VERY good at spending money on what they know (e.g., pumps, pipes, etc.) and that they will embrace improvements on things they know (even been to a water trade show? engineer porn!)

Taking that as given, water managers have a hard time spending money on things they do not understand. They have a conservative culture because it's hard to make quick changes on investments that last 50-100 years. That means, IMO, that they are less-likely to consider new ideas -- especially if the ideas are not engineering ideas. That seems to be a big reason why my ideas (conservation pricing, all-in-auctions) are not being snapped up (or even considered on pilot project) -- because they use economics, not engineering.

That conservatism is why water managers are called "water buffaloes."

Such inertia is visible in managers' "response" to the drought/shortage -- do more of the same -- voluntary conservation, mandatory rationing, increase supply, etc.

Metropolitan, for example, is implementing the same penalty prices in 2009 that they used in 1977 and 1991, but they could easily be using all-in-auctions. Of course, they haven't even looked into a pilot of AiA that might cost $5k. :(

(I invite any water managers to PLEASE prove me wrong by inviting me for a presentation on business/residential rate restructuring or AiA!*)

This goes for updating their plans to reflect new information, but managers DO have one, small excuse: It's better to finish a project that's in process than leave it hanging.

Bottom Line: Water managers do not need to innovate or be efficient because they "manage" monopolies. If they make a mistake, the customers pay (reduced service/higher prices), and the managers keep their jobs
* For those who wonder why I am push Push PUSHING AiA, I'll tell you: It's an obviously better water to allocate scarce water. The way that free markets are obviously better than bureaucracies in allocating oil and gasoline!

1 comment:

  1. Sorry that this is probably a bit off-subject, but it is imperative that CA serious LOOK AT the devastation in Italy today from a 6.2 earthquake. CA should not scoff that it can withstand a 6.2 when it may receive a 8.2 ... that is 100 times more powerful !

    CA needs to wake-up and plan for such an occurance when it comes to their water supply. No one knows which system will be standing, but what does it cost not to investigate an additional system that can deliver a million acre feet of fresh wate without power and hold millions of acre feet in reserve in Lake Mead ? The answer is...LIVES...lots of lives.

    WaterSource waterrdw@yahoo.com


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