26 May 2009

Justice for Water Hogs?

Amidst all the talk of drought and shortage, there has also been talk of raising prices. Prices are going up for two reasons:
  1. There is less water being sold, so the cost/unit has to rise to cover costs; see this post.
  2. Higher prices are a good way to encourage conservation; see this post.
I've got a lot of email and read several stories [this and this] on the controversy over the attempt to raise prices in the Helix Water District (HWD, down in San Diego county).

In a nutshell, here's the problem:
  • HWD sells a lot of water to people with large lots (1+ acres) that have animals, landscaping, and "irrigated lifestyle" features.
  • HWD proposed an increasing block rate structure per meter that would have added 40-50% to the water bills of people who used the most water -- regardless of lot size or number of residents.
  • A number of residents complained that it was "not fair" if they had to pay "wasteful" rates when they merely suffer from large lots. (Some people worried about "caregivers" -- an uncommon activity that's more emotional than "horseriders.")
HWD was going through the Prop218 process of notification and public hearing before raising rates from these prices:

Tier 1 (0-10 units) @ $1.70/unit.
Tier 2 (11-30 units) @ $2.35/unit. (up 38%)
Tier 3 (31-30 units) @ $3.12/unit. (up 33%)

to these ones:

Tier 1 (0-10 units) @ $2.04/unit.
Tier 2 (11-22 units) @ $2.72/unit. (up 33%)
Tier 3 (23-42 units) @ $3.40/unit. (up 25%)
Tier 4 (43+ units) @ $4.52/unit. (up 33%)

Note that these new prices were revised downward from this initial proposal:

Tier 4 (43-59 units) @ $5.10/unit. (up 50%)
Tier 5 (60+ units) @ $6.80/unit. (up 25%)

The rate increases were canceled in response to public outcry and what appear to be failures to comply with public notification guidelines.

The directors backed down, IMO, because they could not justify higher prices as either fair or efficient. The first mistake that they made was to set prices per meter instead per capita. Had they done that, the debate would have turned from "caregiving" to "urban ranching" -- with significantly-different moral implications. (HWD can find the number of people in a house through informal survey and audit mechanism; even though few of us are audited, most of us tell the truth to the IRS.)

The second mistake they made was to basically double rates on the highest (now eliminated) fifth tier. I would have suggested a lower increase and then a waiting period to see if demand was less than supply. If it was, the price would not change. If it was not, the directors could have called for another hearing, to raise prices on people using "more than their fair share" -- after all, humans come before landscaping, right?

In their defense, the directors did point out the inconsistency of charging increasing block rates to residents when irrigation/business/government users "enjoy" flat rates. Here's my suggestion of how to charge them increasing block rates.

The Helix directors will listen to public commments on a proposed price structure on June 3rd. I hope that they move to per capita prices, but they will probably move to water budgets -- an expensive-to-calculate, difficult-to-understand system that will lock in cheaper water for people with larger lots. AT least it seems to be what they are saying in their current proposal:
To help focus the revised rate study, the board directed staff to apply water conservation goals across all user classes equally, maintain the current three-tier system for the Domestic Class, raise the commodity charge by the same percentage across all user classes and all tiers, implement water budgets for the Irrigation Class, maintain a single unit cost of water for Commercial and Multi-Family classes (no tiering), and prohibit irrigation meter pricing on single-family lots. Within the Irrigation Class, Tier 1 pricing will be full cost recovery, and pricing exceeding the target water budgets will be used to offset conservation activities. The plan will allow single-family lots two meters if they wish to install them, but both will be billed at Domestic Class rates.
I disagree with water budgets and ongoing flat rates, but perhaps that's all that's politically feasible.

Too bad, since I'd hate to see HWD run out of water because people are irrigating in the desert (13 inches annual rainafall).

Bottom Line: Man-made water shortages will last until we get prices in line with supplies. The best way to set water prices is on a per capita basis. Urban water is for people, not lawns!

5 comments:

  1. WaterSource/WaterBank27 May, 2009 05:18

    Looks like a supply problem not a Water Hog dilemma:

    Less than 20% of their water is local runoff from winter rain and snow releases from Lake Cuyamaca and natural runoff into El Capitan Reservoir. The rest is a blend of water from the Colorado River and Northern California. This water is purchased from the San Diego County Water Authority, who in turn purchases its water from the Metropolitan Water District of Southern California.

    Lake Mead with a storage capacity of 28.5 million acre feet is 60% empty. Releases from Lake Mead could be made for the All American Canal. A real additional supply of a million acre feet a year should be investigated ...

    WaterSource/WaterBank waterrdw@yahoo.com

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  2. @David,

    When you get a chance, can you talk about the politics of your proposed water market?

    My quick thoughts suggest that the politics all work against what you want to accomplish.

    For instance, the campaign donors for lots of politic positions are the well off people with lawns. They are not so likely to support a candidate who will take their lawns away. They worked too hard, sometimes rising from a ghetto to get the lawns in the first place.

    On the per capita approach, it seems that I could buy a tenement building, fill it with lots of people especially people who do not actually live there very much, put one meter into the building so that no one knows who uses what water, deny tenants a standard amount of water, and sell the large excess in an all in auction to make a lot of money.

    For a different example, how much water does a 2,000 bed hotel in Las Vegas get. Their daily per capita is high but no one actually lives there.

    As you can see I am trying to convert broad brush policy into specific cases so that I can understand how the policy works each day.

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  3. David -- I'm puzzled by your comment on how easy it is to get information on the number of people using a water meter. When and where does the IRS ask that question? And if it does -- I'm pretty sure it does not -- how do you propose HWD gets people to turn over their tax returns?

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  4. @Ray: Always consider supply AND demand

    @Eric:
    1) I talk politics all over this blog! :)

    2) Donors/lawn folks may get behind higher prices if that delivers reliability. Note that donors are not as powerful when constituents are complaining about bills!

    3) The tenement example is illegal (with good reason). More important, you are conflating two ideas. Some for free; pay for more is for retail water. AiAuctions are for wholesale, e.g., an irrigation district.

    4) Hotels are businesses: http://aguanomics.com/2009/02/conservation-pricing-for-businesses.html

    @Anon: I am NOT saying that people should turn over tax returns! I am saying that the "count" can be gathered "in the same way" as IRS gathers SSNs on tax returns. I'd use a postcard in the water bill method.

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  5. Thanks for the clarification.

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