06 October 2011

Customers? What customers?

RM writes:

Just thought I would offer some commentary from the perspective of an ordinary water consumer. Several months ago I purchased a foreclosed home in my neighborhood and am working to fix it up. A few days ago I got my first bill:
Water Service Charge $13.82
Current water $4.92
Sewer service charge $19.99
Current sewer $5.47
EPA consent decree surcharge $16.26
Current drainage bi-monthly $12.55
Total current charges $73.01

In my city, Louisville, KY, the Metropolitan Sewer District and the Louisville Water Company bill together. I don't know how common that is, however as far as customers are concerned, it's all "the water bill." We are billed bi-monthly, which to me means we don't get feedback very often about how much water we are using.

But here's what really gets me. I spent $4.92 to use, so the company says, 2000 gallons of water. I spent $5.47 on current sewer even though 95% of the water that was used was used to water new grass (drought tolerant, uses less water once started Open-mouth smile) that I put in over the area that had been dug up. So most of my bill has nothing to do with my water usage but feels more like a "thank you very much for letting us screw you" kind of thing.* Secondly, the EPA consent decree, which I feel was pretty bogus anyway, was in no way my fault. But fining the company does not penalize the company in any way because customers pay the whole thing.** It amounts to taxation by the EPA (and the state of KY, see this) of the residents of Louisville. Another reason to love the EPA, right? The reason I think the thing was bogus was not that I disagree that there was a problem, which was that the sewer district had too many accidental sewer overflows into the river, but that on average, the water is probably much cleaner leaving Louisville than coming in (we use the Ohio River as our water source) and that the decree doesn't seem to do much to address the real problem with the sewers.

But the real problem is this: The Louisville Water Company and the Louisville Metropolitan Sewer District operate as one monopoly. As long as this is the case, customers like me feel screwed because it seems that they just charge us whatever they want. If water companies charged market rates for water, which would usually be higher, but there is no competition for customers among the water companies, we'll just feel even more screwed.***

We must find ways to bring competition to these "utilities" or customers will not support paying market rates for water.

DZ comments: I agree that the water companies do what they want and charge what they want. That means we need to improve oversight (this means customers need to care), compare prices across utilities, and introduce incentives to punish poor performance/reward good performance.

* See this post on water tariffs in Southern California.

** This is indeed a bizarre result, since fines are passed along to customers. EPA judgements do require action by the utility (which is why Memphis saw the greatest percentage price increase of any of the 308 global cities in the GWI survey. I wonder if the general manager of "Memphis Water" (don't know the name) was fired.

*** * I think he means that market rates will reduce demand (no shortage), but that customers will not be happy with these rates if they do not know why they are so high.

2 comments:

The Outsider said...

RM might be a little over wrought, here. Sure, part of your bill is for the water you use. But mostly it's for the right to use water. It's not like your utility can find some other use for all the pipes and other infrastructure it installed just for you during the months you don't want any water.

The strongest argument for public utilities is that water service is an economy of scale. This means that average cost is always higher than marginal cost, which means they've got to recover their capital investment some way besides charging marginal cost.

Breaking it down the way they do probably has more to do with politics than anything else.

Hate your utility because they're a bureaucracy and a captured regulator. Hate them for social engineering your behavior. Hate them for inefficiency and union hand-holding. But don't hate them for remaining solvent.

Anonymous said...

I agree with David. MSD broke the rules and failed to properly maintain the sewer systems. This is a major problem in many areas of Louisville, which are flood-prone. MSD didn't do the right thing, so they signed a Consent Decree which punishes them.

I never signed a Consent Decree with EPA, why am I paying for their screw-up? BTW we've already paid for the maintenance they were supposed to have done years before EPA busted them. But regular maintenance just eats away at profits and senior management bonuses, doesn't it?

Also in the Consent Decree are several fines associated with MSD not delivering appropriate regulatory reports on time. These fines are included in the Consent Decree, as well as Attorney Fees. Class action suit material.