19 Jul 2009

Questions from Mr. T

Mr. T wrote in an interesting email:
  1. Here's a good example of a public agency that cut corners to cut costs and harmed their customers.

  2. The public (and therefore political) perception is wrong about water: Water agencies are not seen as providing a service, rather they are seen as charging for something that is "free." I think that needs to be addressed before politicians will be willing to raise rates. We can insist they raise rates as the professionals, but that usually gets your commissioner voted off the board and they know that.

    DZ: That's true, and that's why I say that higher prices are justified as the cost of reliable water (demand less than supply). It's also why I compare water to gas all the time...

  3. Currently, water is managed in such an ad-hoc way from supply to tap that it is hard to properly distribute funds. A city's water supply/infrastructure might be managed by the city, a regional board, a statewide board, a watershed group, and even international groups. This is sort of akin to America before the federal Interstate system. I believe a federal organization needs to be created that can actually fund drinking water infrastructure improvements in a similar way to how interstates are funded. As you mentioned with a recent article a large infrastructure improvement might be two or three agencies removed from the real rate structure. The net effect is that the end party doesn't have the political will to raise rates because their immediate needs are not satisfied by raising rates.

    DZ: The trouble here is that water is managed with a bureaucratic accounting system that may reflect neither costs nor benefits. If prices were accurate (arms-length, competitive, etc.), then attribution of costs would be less-controversial AND simpler. Just think about how a dollar spent on a gallon of gas is distributed among the parties that bring it from the field to the refinery to the station to you...

  4. By far the largest users in cities are industrial processes. Because of the politics involved in raising rates on business for fear of losing jobs the average citizen gets to shoulder the burden of most tiered rate structures.

    DZ: Yes, the "cheap water for jobs" mantra is popular -- and false. First, there are few businesses that will relocate ONLY to get cheap water. Second, those cities that do offer cheap water are more likely to run out later (since prices are unsustainably low...), which is REALLY bad for business!

  5. Maintenance instead of main breaks. We need to provide our utilities with the funds necessary to rehabilitate and perform maintenance on their system rather than reacting to main breaks and disasters.

    DZ: A weld in time, saves... lots of water and money. I'd say that many utilities are starved of funds for capital maintenance. I'd also say that their managers are doing a poor job in communicating this need. It's not easy to get an adequate maintenance fund when you are bragging about how cheap your water is!

  6. Your recent post on the B&V report may be warranted but your position as being neutral could be challenged as well -- aren't you solely promoting your (economic) method for alleviating water issues?

    DZ: Yes, I am solely promoting sound management of water as a scarce commodity. Yep, economics :)