30 Aug 2014

Flashback: 25-31 Aug 2013

A year later and still worth reading...

29 Aug 2014

Friday party!

Now THIS is a drop! (Skip the first 30 sec if you're in a hurry :)

Do we have a RIGHT to use too much water?

After my radio interview with (libertarian) talk show host Bob Zadek (57 min), I got this email:
Are you aware of this document? Looks like the end game of the UN Environmentalists is 26 gallons per person per day worldwide, in the name of “sustainable development” and “smart growth”.
I replied:
I don't read it as you do,* but I agree with its principles. In places where water is scarce (i.e., NOT Chicago or Seattle), then it's a good idea to limit withdrawals for lawns (100 liters is PLENTY for indoor use) because of the environmental benefits to everyone.

Current water consumption is not, btw, a "property right" as the right to use is determined by public policy. That can (and should) switch to rebalance back from the over-consumption that was policy in the "water running to the sea is wasted" era. We know now that "ecosystem services" keep fisheries alive, clean water, prevent floods and balance droughts. We can replace those services, but at 10x the cost, so it's efficient to "reduce waste" IF you want a high quality of life.
I interpret her subsequent silence as agreement ;)
* Action 19: Develop policies to increase adequate access to safe drinking water, aiming at access for all by 2015. For cities with potable water consumption greater than 100 liters per capita per day, adopt and implement policies to reduce consumption by ten per cent by 2015

28 Aug 2014

Anything but water

"Green" festivals with discarded reusables are not
  1. Truth: "You show me a polluter, I'll show you a subsidy; I'll show you a fat cat who's using political clout to escape the discipline of the free market and force the public to pay his production costs. That's what all pollution is -- it is always a subsidy." --Robert F. Kennedy Jr.

  2. I talk about "reality" quite often but Mike Munger has expressed it elegantly, as the quest for Unicorn Governance, i.e., "people who favor expansion of government imagine a State different from the one possible in the physical world"

  3. The New Yorker takes apart Vandana Shiva for her irrational opposition to the GMOs, i.e., "She is a demagogue who opposes the universal values of the Enlightenment."

  4. An overview of the legality and use of drugs (marijuana) in Amsterdam

  5. Increasing gas prices to grow the economy, by changing relative prices and incomes

27 Aug 2014

Writing versus winning

I've used peer review/grading in several of my classes because I think it gives students a different perspective (from mine) on their work.

I think the process leads students to...
  • write differently -- and perhaps more carefully
  • get more written feedback than I can provide
  • learn from their peers' writing and perspectives
  • improve their skills when critiquing others' work
These benefits bring some additional costs. The most obvious is the extra paperwork and sorting that I need to do, to move the process along. The most dangerous is students' perception that their peers are being unfair to them.

This is how the system used to work:
  1. Each author's essay is given to three peers
  2. Each peer ranks the three different essays they get as A, B or C
  3. Peers then give written feedback to accompany their ranks
  4. Authors then rank the quality of the peers' feedback as A, B or C
This system ensures that the "average" essay gets a B at the same time as it removes the problem of subjective awarding of points (one student would give A, A and B; another B, C and C).

Although I worried about students who complained to me that their peers were being unfair (or even sabotaging them, to help themselves in a roundabout way), I told them that three grades from peers should help reduce bias, on average.

But I also underestimated two problems. The first was a propensity for authors to give bad ranks to peers in exchange for bad ranks. We reduced this problem by separating ranks from the written critiques. The second was the potential for a peer to write a review that justified their rank.* Such an action would lead to flowery reports for the A essay and brutal reports for the C essay.** Indeed, I had seen examples of terrible comments given to essays that didn't deserve them.

Luckily for my students, LUC's policy forbids peer grading, which forced me to rethink and reform the process into a better structure. What's interesting is that it's nearly the same as the system peer-reviewed journals use: A paper goes to three peers, who write anonymous critiques that the editor uses to decide whether to accept or reject the paper.***

I will therefore use a peer-review process that's modified in three ways. First, I'll ask peers to give constructive criticism (e.g., "what did they miss, how can they improve, what did you learn?"). Second, I will grade peers on the quality of their critiques (journals do not do this, formally). Third, I will end the process with the Author's grade, rather than another revision.

Bottom Line: Students will help each other more if they are graded on the quality of the help rather than their rationalization for a grade they may not even want to give.

* Cornelia pointed this out, and it's obvious in hindsight. I assumed students would read and critique and THEN rank, but the need to give A, B or C meant that students would rank first, justify later.
** Psychologists have shown that people are clever in rationalizing pretty much any involuntary situation as the outcome of free choice.
*** The most common move is in-between, i.e., "revise and resubmit" for potential acceptance or rejection.

26 Aug 2014

Sadly appropriate

Do water subsidies help SMALL farmers?

MH emails:
I have a question that has come up in my conversations with a friend (who is actually a libertarian, but I guess not on this issue) about water.

He claims that subsidized water in California is necessary for small farmers to make a profit. If the price of water increases, it will only hurt the small farmers and not big agribusiness. I tried to explain that someone has to absorb the cost of water (infrastructure, transportation, negative externalities etc.) but he kept returning to the idea that without these subsidies for small farmers, it would put an entire sector of the economy out of work, while raising prices for fresh produce.

My response was if you are growing a crop that is not profitable without government subsidies (say rice), you should stop growing it. Though, to me, this seems logical, it also seems heartless, especially towards small farmers. My friend works for a small, organic, sustainable farm and knows from experience the value of cheap water for their survival.

What say you on this dilemma?
In response, I wrote:
I disagree with your friend.
  1. Subsidies goto people who are organized enough to GET them, via paperwork, political lobbying, etc. Small farmers are often too busy to "get subsidies"
  2. Assuming EVERYONE has access to "cheap" water, larger farmers will see a greater share of their costs in water, since they've minimized capital costs, management costs, etc. per ton of production. That means a 20% increase in water prices will raise total costs by a larger share than it would for a small farmer who is less efficient and/or has a larger share of costs from other inputs.
  3. Small farmers are better able to adjust (different crop mix) than larger farmers with big fixed operations (think almond orchard), which gives them more flexibility.
Now I agree that some organic farms struggle and that "they need all the help they can get," but I think cheap water helps the COMPETITION stay in business, which lowers prices to small farmers.

So, I'd predict that expensive water would hurt large farmers and help small farmers.
What do you think?

25 Aug 2014

Monday funnies

CM sent this great PSA, which will get through to the people who need more "awareness." For the rest,* I suggest higher prices.




* I use the term "20/80 rule" to separate the 20 percent who want to do the right thing from the 80 percent who don't care, but who WILL pay attention to higher prices

Speed blogging

  1. "David Zetland, a water policy analyst and author, says this [California farmers' claim to use less than 50 percent of water] is a distortion of facts"

  2. Here's the 57 min MP4 or MP3 and PDF for my AWRA webinar on "The Emergence of Wastewater as a New Supply"

  3. Tabletop water filters (e.g., Brita) are probably useless and may even make you sick

  4. Los Angeles sends out more water cops waste communications officers instead of fixing its lawn-subsidizing, people-penalizing tariffs. FAIL

  5. NOAA has published the State of the Climate 2013 and scientists have linked "the pause" in warming to changing deep-sea dynamics

  6. Will Christians help restore the Jordan River?
H/Ts to DL and RM

23 Aug 2014

Flashback: 18--24 Aug 2013

A year later and still worth reading...

22 Aug 2014

Friday party!

The IJHallen fleamarket is this weekend. We made this GoPro "high speed" video when going last month. It gives you a little idea of a 25 min bike ride in Amsterdam


Friends, strangers and progress

Small [unoriginal] thoughts on a big topic:*

People in communities tend to cooperate because they are in a "repeated game" in which trust is reciprocated, cheating is punished and a shared existence leads to "compassionate" tolerance.

People who meet "in the agora" (market) do not necessarily know or trust each other, but they can benefit from trade. The greatest gains from trade come from the greatest differences (one man's trash is another's treasure), which explains the emergence of "commercial" tolerance.

These differences explain small town conservatism and urban radicalism. They also explain how you can build trust among strangers (put them in a repeated game) and tolerance in small towns (reduce co-dependence). Those innovations may be difficult to introduce when the equilibrium status quo tends to reinforce the opposite dynamics.

Bottom Line: Human cooperation tends to fit the local context, but it can be improved with the careful addition of familiar dynamics from other situations.

* Read, e.g., this fascinating 1977 perspective on China's struggle between creative openness (individualism) and monolithic isolation. Today's China combines these characteristics in unexpected ways.

21 Aug 2014

Droughts don't cause shortages -- people do

XKCD illustrates the depth of California's drought:


...but these statistics ignore the obvious:


I've been talking with a lot of reporters who are asking "how bad is this?" and related questions. I tell them that farmers have screwed themselves into a corner (planting too many acres of trees, overdrafting their groundwater, spraying alfalfa fields in the desert) while urbanites would have no problems "surviving" if they just used water indoors.

Bottom Line: Californians have shot themselves in the feet, but you cannot tell because of the tall, irrigated grass.

H/Ts to RM and MV

Anything but water

Does it feel better if you recycle it TWICE?
  1. Ivy-league schools are overrated... if you want your kids to think. (That's why I'm teaching at a liberal arts college)

  2. More downsides from fracking (i.e., earthquakes and methane emissions) mean it's getting closer to "ethanol" status

  3. An interesting essay on ADD, social-media pushiness, silent retreats and how we might restore the calm that enables thinking (against the wishes of governments and corporations). Related: You're not entitled to your [wrong] opinion and how to be useless on Facebook

  4. Not from the Onion but definitely from America: Alabama claims that God gave them the coal to burn and the lack of racial diversity in environmental groups (probably because whites work cheap when "it's a good cause")

  5. An examination of how countries can prevent coups d'etat (rule of law plus competent balance of power) and a great travel blog post with insights on Nigeria

20 Aug 2014

Urban water pricing in Israel

I admire most water policies in Israel,* and asked Yoav Kislev if water is "priced for scarcity, to discourage demand."

He replied:
I am not sure about discouraging demand. I think prices should reflect opportunity cost including scarcity rent. Indeed, water providers in Israel are charged extraction levy that is supposed to to be equal to opportunity cost in their locality.

However, Mekorot [the national grid operator] does not pay the levy. Mekorot purchases desal water and the price urban utilities pay Mekorot covers the full cost of desalination.

Consequently, the price urban consumers pay for water is close the the price they would have paid if Mekorot were charged the extraction levy. Urban prices are now $2.7 per cubic meter for the first block and $4.14 for the second.** These charges cover cost of water, local provision and sewage service.
I asked for further elaboration on the number of blocks and whether price covers "cost," to which he replied:
The first block is 3 cubic meters per person per month. Anything over this goes in the second block.

Payments cover cost; hence prices are average costs. Consequently first price is below cost and second price above it.

You may want to read my book, The Water Economy of Israel [PDF]
After noting that "cost" in Israel includes opportunity cost (i.e., running out of water or buying desalted water), I asked about the mix of fixed and variable costs. Yoav replied:
Approved costs include depreciation charges, labor, and other fixed items. There used to be a "connection charge" calculated to cover investment in network, but it is supposed to be absorbed into the per unit price. The issue has not settled yet.

The question of fixed vs. variable cost will come to the fore pretty soon; the desalination plants are operating this year in less than full capacity [due to rain]; they were promised coverage of fixed costs. We still have to see how the regulator will set the prices in this situation.
[DZ's] Bottom Line: Israel has a two tier system of prices that (1) recovers costs, (2) reflects "scarcity" in terms of getting more water from desalination and (3) sets a "human right" price for some water but charges more for use in excess of 98 liters (26 gallons) per person per day.**

* Israel's water relations with Palestine are not good. Read this, this, this, this or this

** That's $7.70/ccf. Water in Las Vegas is $0.87/ccf, which may explain why they are having a hard time reducing consumption to 199 gallons/person/day.  

Speaking of Vegas, I just listened to this interview with John Entsminger, Pat Mulroy's replacement at the Southern Nevada Water Authority. John is a lawyer who has worked his entire career at SNWA. He says "there's no water conservation that we haven't tried," which leads me to fear that (1) he hasn't heard of water prices and (2) Vegas will continue Mulroy's expensive and unsustainable pro-growth policies in the hope that other Colorado River diverters will "share the pain" in subsidizing Vegas's gluttony.

Fun fact: The Strip "only consumes" 3 percent of Vegas water because its wastewater is captured, cleaned, and reused. Where is the other 97 percent consumed? I'd guess that at least half evaporates from all those lawns in the desert. Why do people grow lawns in the desert? It only costs $0.87 for 748 gallons of water!

19 Aug 2014

Webinar on wastewater tomorrow!

I'm doing a webinar -- "The Emergence of Wastewater as a New Supply" -- for the American Water Resources Association tomorrow at 1pm EDT. It's free for AWRA members and $25 for non-members. (I'm not paid :)

IB-NET's Bluebook on utility performance is available!

This book is by far the most useful publication relating to utility performance. Anyone at a utility in any country should buy it to understand how to measure performance and to see the rankings from utilities in 100+ countries. It's a bargain ($27 paper/$10 Kindle) when you consider the quality of its organized, analyzed and quantified data. You can learn even more from IB-NET's free online data bases.

Here's the publisher's blurb:
The International Benchmarking Network for Water and Sanitation Utilities of the World Bank’s Water and Sanitation Program (IBNET) has been involved in water sector monitoring since 1997. It has set a global standard for performance assessment of utilities, with information from more than 4,400 utilities from 135 countries. This edition of the Blue Book summarizes the water sector status from 2006 to 2011. It adopts the "IBNET Apgar" consolidated scoring system, which assesses a utility’s health based on indicators that reflect the utility’s operational, financial, and social performance, and a Water Utility Vulnerability Index (WUVI), a dynamic version of Apgar. Performance indicators of over 100 countries are featured in a statistical appendix. Since 2006, municipal water performance has improved despite accelerated urbanization and the impacts of the fuel, food, and financial crises. Overall coverage has increased, and piped water supply and wastewater services has become accessible to more people. Many operational and financial indicators have also shown improvements. An increasing number of utilities are operating in a corporate manner, and are actively handling water billing, collection, and water management through metering. Yet, since the financial crisis, coverage has not kept up with population growth due to a deceleration of investment in the sector. At the same time, labor and energy’s share in total costs has increased, suggesting that the decline in investment has been accompanied by delays in maintenance. The results show that rapid economic growth can have a positive effect on utilities’ performance, while improvements remain vulnerable to economic developments such as the fuel and financial crises.
Bottom Line: I give this book FIVE STARS. The World Bank should support more projects like IB-NET.

Speed blogging

  1. "Western-style" irrigation -- reservoirs and canals diverting "excess" water from rivers -- is growing in popularity in the eastern US. I'd say that's the result of depleting groundwater. I'd also say it's a sign that farmers will be depleting environmental water flows and screwing up ecosystems

  2. Here's the video [mp4] of my AWRA webinar ("Pricing Drinking Water for Conservation & Fiscal Stability". You can also listen to the audio [mp3] and read the slides [pdf], as the video omitted my talking head. I'm doing another one ("The Emergence of Wastewater as a New Supply") tomorrow. Speaking of which, this Texas community is using wetlands to filter its wastewater

  3. Christopher Gasson (Global Water Intelligence) destroys the new ISO standard on footprinting. Let's stick with IWRM, people

  4. I didn't know that Governor Cuomo bought out a bunch of coastal landowners, to "save the government money in the future." Good move

  5. An interesting analysis of China's water governance complications

  6. Rivers recover when dams are removed. I suggest a dam cap and trade: any new dam (or dam that wants its operating license renewed) should remove the equivalent (in water storage?) volume of outdated dams
H/Ts to BB and RM

18 Aug 2014

Monday funnies

About right.


Some thoughts on giving away my book

Downloads surged on 14 Aug
"Why didn't I do this earlier?"

Well, it took me four months of selling at $5 before I stood back to rethink my objectives. After all, I've often said that I want to maximize people's exposure to "aguanomic" ideas, but that goal was blocked by concerns that (a) people value stuff they pay for and (b) my work deserves a non-zero price.

It turns out that those concerns were insignificant compared to the price barrier -- not because my work is not valuable but because a price barrier doesn't work in a world of free ideas.1

Indeed, people are much more likely to lack attention than money these days, so I should have instead decided to (a) put my ideas into a concise form, so people do not "waste their time" to read them2 and (b) give away the book so people do not have to worry about "wasting their money" when exploring it.3

So now I've caught up to reality, and it's much easier to work with.

I also realized, as a real open access author, that it's much easier to just send a link to people than ask them for their name and email. The only thing I got out of registration was an email list and download count, but the former betrayed the real meaning of free,4 and the latter doesn't really mean anything.

Indeed, what is the difference between knowing that 923 people have the book or that 900+ people have it?5 All I care about is that people can use these ideas to accomplish change, and there's no linear relationship between sales and change. You need to get the right ideas to the right people, and that often depends more on luck or circumstances than marketing or revenues.

That's why I'm happy to say that at least 900 people have downloaded the book in the past few days. That's triple the number who bought copies in the past four months. It seems that many people want to understand water scarcity, but few people have an idea of the value of that knowledge. Perhaps reading will help them get a better idea.

Bottom Line: My book is free, but your time is not. Check it out, then tell me if it helps you understand water issues and help your community.

  1. As in speech, i.e., "free beer" worries blocked free speech.
  2. Also the reason many of my posts end with a "Bottom Line."
  3. Yes, it's ironic that there will be no shortage of a "free" book that discusses how we get shortages of "free" water. Read pages 7-8 to understand how my PDF can be managed as a public good while private water cannot :)
  4. According to Maimonides's rubric of charity giving, I went from Level 5 generosity (giver and givee know each other) to Level 4 (I do not know who has the PDF). I can't really get to Level 2 (since it's clear that I'm giving my book to everyone), but perhaps I will accomplish Level 1 giving, by helping others to learn and help themselves (hear that, Vegas?)
  5. The first 100 downloads maxed out my PDF-provider. Then I posted the PDF on my main web-server for people to download (see figure). Based on above-trend bandwidth use, I estimate ~800 downloads on Thursday, Friday and Saturday. These data omit forwarded copies of the PDF, etc.

16 Aug 2014

Flashback: 11--17 Aug 2013

A year later and still worth reading...

Teaching versus lecturing -- timely thoughts, given my new job

15 Aug 2014

Friday party!

This 2010 video recreates (in my limited knowledge) the feel of a 90s underground rave. Today's raves (in my larger knowledge) have a similar feel, in terms of the energy.



The director just released this POWERFUL video of a "dystopian future" community, but I've felt it the ex-Warsaw Pact, except that I've never gotten that close to junkies. Take care.

How should your community manage its water?

MB asked one last question after my AWRA seminar:
You said that each location should decide which system/structure they think is best for their context, but in the places you’ve traveled or studied, have you witnessed any significant effects of culture on selection or implementation of water pricing structures? This could be a "culture of consumption” that certainly exists in many places, but also legacy and tradition of property rights systems, governance/authority, equity? I suppose these could be “negative” or “positive” as we might define them, but I just wanted to cash in on your two cents!
This is a great question, as it focuses on the impact of local politics in determining how to allocate water.

The first question is whether local people face (or realize they face) a problem with over-consumption of water relative to sustainable supplies. In some places, it appears that people have decided that it's ok to use too much water, either because they plan to leave the area, have faith in divine intervention, or plan to take water from some other place or people. In others, people agree to set a limit on water use, to ensure their ongoing, independent existence.

The next question is how to allocate water and costs. In some places, people pursue "from each according to his ability, to each according to his need" policies, i.e., the rich pay for the cost of water services that others use (e.g., Riyadh, Saudi Arabia). In others, people have decided to charge water users much more than the cost of service, i.e., unit water prices exceed the unit cost of service. Both of these systems are problematic. The former relies too much on outside funding while failing to discourage wasteful use of resources. The latter ends up destabilizing utility finances and encouraging extra use.*

My favorite system aligns system costs with billing charges to customers (with the addition of a surcharge if/when scarcity dictates) to protect reliability. I recommend direct income support to poor people in places where people want to help, since "cheap water" is an inefficient way to help the poor.

Bottom Line: Communities manage their water so they should discuss and understand the tradeoffs (to efficiency, sustainability and fairness) in their decisions.

* This may seem paradoxical, but low unit prices mean that people do not pay much attention to how much water they use. Water managers, OTOH, definitely notice aggregate revenues, which they do not want to fall, so they have little reason to discourage consumption.

14 Aug 2014

Here's a link to Living with Water Scarcity FREE

http://livingwithwaterscarcity.com/LwWS_Free_Final.pdf

I've eliminated the stamp of your name and email.

Feel free to forward the PDF to anyone.

Sorry for complicating "free" :)

Back story: It's my present to you on MY birthday, where I said: 
Bottom Line: Everyone needs to do their part when it comes to managing our water, so I am giving my book to you for free. Your job is to use its ideas to inspire local action and help your community.

Wait a second! Downloads maxed out!

There's a 100/day download limit on my PDF manager (e-junkie) that I just bumped up.

Please be patient and try to download again tomorrow now [pdf]

Happy birthday to me -- here's a gift for you!

A refreshing bath in Canadian snowmelt
It's my 45th birthday today, and life in Amsterdam is good. Cornelia is going to get a masters in Urban and Regional Planning. I've just started as an assistant professor of economics at Leiden University College, a new school affiliated with the 400+ year-old university that is different better for me due to its emphasis on teaching over research.

I'm sure you'll learn more in the coming year(s), but let's get to the exciting part -- your gift!

A few months ago, I was going back and forth on pricing Living with Water Scarcity, i.e., finding a balance between cheap (more sales) and expensive (more revenue). That debate was complicated by the (real or imaged) ideas that higher prices mean more value or a greater obligation to read for some people at the same time as non-zero prices create a barrier for people who lack credit cards, doubt the book's value, or have plenty of "free" stuff to read.

I've been thinking over these issues over the past few months, and I've decided to lower the PDF price from $5 to free because revenues to me are not as important as getting this book into people's hands and its ideas into their heads.

To get your copy, click here

I hope that people who download the book will read it, recommend it to others, and review it on Amazon, their blogs, facebook, and other websites. More important, I hope that my book helps readers and leaders engage in fruitful debates that improve water policies in their communities

Bottom Line: Everyone needs to do their part when it comes to managing our water, so I am giving my book to you for free. Your job is to use its ideas to inspire local action and help your community.

13 Aug 2014

The future of academic discourse

...will take place via blogs, in my opinion, which is why I was pleased that the Future of Food Journal accepted my suggestion that all journal articles be accompanied by summary blog posts that will help the public understand and debate the papers. Check it out.

Speed blogging

  1. California is "thinking about" legislation to regulate groundwater. Policymakers want to respect "local control," and I agree. The state should set targets (e.g., maintaining average water levels over the course of a year) while allowing locals to find ways to meet those targets. Speaking of groundwater, Aquadoc explains the difference between changes in stocks (storage) and flows (use). Instructive

  2. PWC put out a very nice summary of water in the GCC (Saudi, Dubai et al.) without addressing the problem (no political support for sustainability)

  3. "Water is already burnt"

  4. This paper discusses potential economic tools for balancing between hydropower production and river morphology (the need for ebb and flood)

  5. A nice summary of why politicians avoid mandatory water rationing, which would not be necessary if water prices rose (fell) in scarcity (abundance)

12 Aug 2014

Videos worth watching

Bookmark this post if you don't have time to watch these now.
  1. "Holland's Barriers to the Sea" -- over the top American-style narration but informative

  2. "The Art of Asking" -- a musician's TED talk on how she gave to the fans, and they gave back

  3. "The danger of a single story" -- an "African" writer explains how important it is to understand the multiple dimensions of people and cultures

  4. Steven Colbert gives excellent advice on love and dating to young women

  5. "The Sea Chair" turns plastic from pollution into resource
H/Ts to RM and DW

Anything but water

Does this monkey own the copyright to its selfie?
  1. Ed Dolan analyzes the potential failure (due to government over-regulation) of legalizing marijuana and open secrets connects the dots between industries that will lose from legalization (alcohol, prisons) and campaign donations bribery

  2. Cargill promises not to buy "unsustainable" palm oil, which will require good supply-chain monitoring. That's hard in Indonesia and Malaysia -- and nearly impossible with corruption. Related: the Straight Dope says GMOs are expanding fast without too much harm. (I worry about the damages -- on many fronts -- from any kind of industrial ag)

  3. Naor Delanu has good ideas on how to reform the government, with a "reality check" that offers insights to political viability

  4. How to get rich in "scholarly publishing":
    1. Get people to create content they need for career advancement, for free
    2. ??? Sell it back to them at outrageous prices
    3. Profit!

  5. If big business (and FDR's government) "stole" the four hour work day, then that may explain why we have no idea of how to turn leisure into personal happiness instead of mindless consumption
H/T to RM

11 Aug 2014

Monday funnies

We're so lucky Google is NOT a guy :)


More thoughts on pricing water

There were too many questions from attendees at my AWRA webinar ("Pricing Drinking Water for Conservation & Fiscal Stability") last week, so here some extra questions and my answers:
  1. In the complex web of CA water regulation, and many water utilities, who actually makes the decisions on how water pricing is set? You mentioned LA, San Diego, Santa Cruz, and Metro Water District - who makes the decision? Is it the city council? Does it have to be voted on? or does it differ from municipality to municipality?

    Generally speaking, the municipal city council sets prices when they run a water utility and the public utilities commission sets prices for investor-owned operations. There are many variations that will depend on local laws, state regulations, and other governance factors. This book examines "special districts" in the US, which include utilities, flood control districts, etc. Remember that there are "countless" (~3,000) bodies managing water in California and over 50,000 in the US (drinking water only).

  2. What do you think about pricing water at long run marginal cost and using general funds derived from taxes to cope with the high fixed costs?

    So you're suggesting that taxpayers cover fixed costs and users pay long run marginal cost (LRMC). These ideas are mutually exclusive, I think.

    After outright grant funding, taxpayer funding is the oldest way of paying for water services (many places in England and Wales still pay for water via property taxes). Taxes were replaced by charges linked to house size or charges linked to metered use.* The system of charges often depends on politics (i.e., social funding versus user fees) that I discuss in a paper I need to revise.

    Pricing based on LRMC, on the other hand, really means charging for the cost of acquiring new water. Economists define LRMC to include fixed costs, since ALL costs are marginal if you make the long run long enough.

    So you're faced with backwards- or forwards-facing choices. Payment by taxes means users can use as much water as they want from expensive systems that others pay for. Payment linked to LRMC incentivizes conservation, since the charges reflect to (usually much higher) cost of getting more water. LRMC is better from that standpoint of efficiency (and it's done in Israel, as I will explain later this week), but it's politically unpalatable because revenues will be much greater than actual costs and -- more relevant -- it interferes with the "cheap water" rhetoric that politicians and real estate developers love.

    Addendum: This post explains why LRMC must also consider risk (variability), which implies higher prices now and a smaller chance of needing to spend $$ on new supplies sooner.

  3. Can a scarcity charge be assessed in periods of abundance so that scarcity is negated in the future. Coupled with weather, it seems that the lack of a scarcity charge, or low cost, can encourage overuse and contribute to scarcity.

    This is a little similar to the last question (i.e., charge LRMC so people don't stress the resource), but I'd modify it with a counter-cyclical charge. This means raising prices when water is scarce (drought) and lowering them when it's abundant. That depends on climate cycles, but it can also be used with seasonal pricing (higher prices in summer), which I support.

  4. What about public/private joint ventures?

    Most water utilities mix private and public business models. At a minimum, they may buy pumps from private manufactures, but municipal utilities also outsource everything from major construction projects to payroll. The key -- to me -- is to use competition where possible (tenders for treatment plants) while keeping a very close eye on the monopolistic dimensions (setting prices). Some people underestimate the benefits of private competition and dangers of ignored public monopolies (I discuss those topics at length in my books, but this paper covers related themes).

  5. Can't inclining block charge block sizes be based on family size?

    They can. As I mentioned in my talk, Santa Cruz is using a version of this while Los Angeles is entirely retarded in giving more cheap blocks to larger lots and increasing that allocation in summer People are less important than lawns in LA, it seems). I think that uniform pricing is better when headcount is unknown or people have enough money to afford water (most developed countries), since IBRs are so complex.

  6. If revenue drops due to rainfall, couldn't that be handled by a rate stabilization fund?

    Yes, but you need to remember that managers have an incentive to sell more water if most revenues are arriving from water sales. It's easier -- to me -- to free utilities from that uncertainty so they are agnostic on the weather :)

The next webinar, on 20 Aug, will be on "The Emergence of Wastewater as a New Supply". I'm hoping to do one on agricultural water (groundwater, irrigation, markets, environmental impacts, etc.) and another on social and global water flows (environmental flows, water pollution, virtual water, water grabs, etc.) in the future.

* AFAIK, water meters were introduced in the 1940s. I'd LOVE to get a brief history of their implementation. Anyone?

9 Aug 2014

Flashback: 4--10 Aug 2013

A year later and still worth reading...

8 Aug 2014

Friday party!

These ganstas be rollin!


Anything but water

Intentionally ugly
  1. Real estate development in Saudi Arabia is often "greenfield" (i.e., on bare land) rather than the "brownfield" type that replaces an existing building on land closer to the city center. This pattern results in sprawl as well as blight, as the city stretches further out for new locations while leaving behind abandoned or decaying properties near the center. Who wins from this pattern? Real estate developers who own empty land. Who loses? Citizens facing an ugly, sprawling city AND owners who could sell their property based on its development value instead of its decaying economic prospects. This policy probably suits Saudi rulers, who own a lot of land. The same pattern appears in many American cities but not as often in the Netherlands, where land is too valuable to abandon to ruins

  2. This paper [pdf] argues that the British government's LACK of control helped railroads develop. On a related note, I see that the University of California has "rescinded the policy that prohibited the University from investing directly in companies commercializing technology based on UC research." This is a terrible idea, as it moves the university into the venture capital, which has nothing to do with its central roles of research and (sometimes!) education

  3. This post on slow food service (as a result of people talking/playing/imaging with their mobile phones) may be made up in terms of data, but NOT in terms of our changing social relations. Put the phones down, people. Talk to each other. That reminds me of a recent presentation I saw on redeveloping an old Dutch navy base into a park. The best angle, to me, was jamming electronic devices in the park to ensure that people there are THERE. (I was surprised to see that people were much more social when I was at embassy parties in Saudi Arabia. Yes, they were drinking, but their phones were also left behind at security)

  4. Some guy claims that libertarians "must deny climate change" to prevent a challenge to their "property rights everywhere" views. This is unrepresentative and naive. As a semi-libertarian, I am happy to protect rights to private property, but I acknowledge the existence and benefit of property in the commons. That property can and should be protected --- for the benefit of libertarians and heretics alike :)

  5. Read this brutal pre-mortem describing just how broken the United States is -- and how Rs and Ds are just working for the oligarchs. I'm not sure if Americans are not caught in a Russian-scale web of lies
H/Ts to BB and RM

7 Aug 2014

Canadian regulators sleep while industry pollutes

That's toxic waste going into your river
As I predicted, a levee failed in British Columbia, releasing 5 million tons of contaminated water into local rivers and threatening downstream aquifers, people and ecosystems.*

How did I "predict" this? By looking at the weak penalties and enforcement by the BC government. Mine operators knew three years ago that the levees were weak, but they did not act to prevent a breach. Will they pay 100 percent of the damages? I doubt it.

What's to be done? Read this post from last September -- the solution is to impose an insurance requirement that will risk real money if a spill occurs.

Bottom Line: Spills will happen "too often" as long as low spill penalties do not impact profits.

* I started tracking this phenomenon five years ago when (you guessed it!) a TVA levee broke and released tons of toxic waste into local rivers...

6 Aug 2014

Speed blogging

  1. Managing (and trading groundwater rights in) the High Plains Aquifer (KS, NE, TX) and how the French decentralized groundwater management

  2. Utilities can "increase their supply" by plugging network leaks. Why don't they do it more often? It's usually cheaper to take more water -- even by desalination -- than repair a leaking network

  3. California's regulation requiring water metering within irrigation districts (IDs) increases costs. This ID will sell water to pay those costs. Why should we care about WHO uses water within an ID, as long as its total diversion/use is tracked?

  4. Tracy Mehan's review of a book on public finance [pdf] points out the obvious (the gov't is broke) and a solution (more reliance on debt markets) for those who want to invest in water and environmental projects with cash flow. That's a good idea, given that 2/3rds of US utilities cannot even afford to maintain their systems

  5. Should government own water? No. Should government regulate water allocations? No. If you disagree, then please explain why government MUST intervene in these stages, as opposed to establishing regulations for in-stream flows, etc.
H/Ts to JC, SC and RM

Webinar today!

I'm doing a webinar -- "Pricing Drinking Water for Conservation & Fiscal Stability" -- for the American Water Resources Association today at 1pm EDT. It's free for AWRA members and $25 for non-members.

(I'm not getting paid. I'll try to post an archive of the webinar here later.)

Santa Cruz sets prices the right way

DM sent this article on the impact of Santa Cruz's new tariff scheme, which charges a family of four $3/ccf for 10 ccf (28 m3) per month but raises that price to $25/ccf for a 10 percent overage (i.e., 11 ccf/mo) and $50/ccf for use beyond that volume.[1]

The city targeted a 25 percent reduction in water demand under this scheme, and use has fallen by 26 percent since it went into place in May.

So, higher prices reduce use,[2] but what about larger families and excess revenue?

Larger families complicate these schemes in the US, due to cultural (not legal) barriers to counting the number of people at a residence. The city gets around this by assuming all residences have four people. Larger families can ask for 2ccf per extra person. Households with fewer than four people do not have to use less, but they are encouraged to.*

The second concerns "excess revenue" from customers who are paying $50 for water that may cost $2 to deliver, resulting in "profits." In an email, a SC Water staffer wrote:
The goal of our penalties was to incentivize water rationing, not to raise revenues. Accordingly, we hope not to receive any penalty revenue and in actuality, haven’t received much. We do allow our customers to attend “water School” once and have their penalties forgiven but this is a one-time offer.
So it sounds like "we don't plan to sell water at that price" is a reasonable justification for setting a price to discourage use.

It's not the most logical way of setting rules, but this is Santa Cruz :)

Bottom Line: Santa Cruz has taken a major step to use prices to fairly and efficiently ration water among its citizens.[4] Other cities should pay attention, as they will face similar problems in the future.

  1. This program resembles the tariffs used in Santa Barbara in the early 1990s (read this post, which links to a paper) when higher prices (and other demand shifters) dropped total demand by 46 percent. Low prices for the first 8 ccf later dropped to the first 4 ccf, but there did not seem to be an adjustment for headcount.
  2. The city was already urging people to use less water. Higher prices -- as with Santa Barbara -- reinforce this message.[3] Years ago, I said that California could hit hit its "20 [percent reduction] by 2020" by raising prices. This is mostly because so much water is used for outdoor irrigation. SC's "basic needs allocation" works out to 230 liters/person/day, which is easily Amsterdam's double per capita consumption.
  3. NM sent this great piece on the arrival of water meters to Ireland, where the message is "don't let money run down the drain." The same message applies everywhere people are conscious of the volumetric price of water.
  4. I still think that a single volumetric charge is the best way to recover costs and price scarcity, but this two-step system is acceptable for taking headcount into consideration. It's better to have this system in place (headcount flaws and all) than see (uniform) higher prices defeated by people arguing that people are entitled to cheap water as a human right.

* The City of Santa Cruz website is down. I will add some links when it's live again.

5 Aug 2014

Groundwater governance -- carrots or sticks?

MGC copied me on an an email he sent to a student:
With 150 million farmers and around 25 million groundwater wells distributed all over in the nook and corner [in India], any policy recommendation should have low transaction cost of implementation. If the transaction cost exceeds the tax revenue from pricing water or electricity, it is an unviable policy.

Carrots work more effectively in India than sticks. In addition, incentives for those who adopt or who eat carrots and no incentives (not disincentives) for those who do not eat carrots, will also work. However, sticks don't since transaction cost of administering sticks is heavy and goes negative. Capacity building, awareness, incentives for those who adopt, linking benefits from developmental programs with those who have adopted efficiency measures, will and can work, but not sticks. This is my stand. It is left to you to reject. I do not insist that you should agree to this.
I agree that it's difficult to make sticks work, but I'm more skeptical about the effectiveness of carrots that are designed or applied by outsiders. Instead, I'd leave groundwater management to locals sharing an aquifer, so they can find their own governance model. The stick is their failed future, should they not control use.

The nexus has no clothes!

In response to this post, IO emailed:
I am interested in reading a little more about the critique of the water-energy-food nexus framework that has been on the research agenda lately. I have read your August 1st post on it and would appreciate if you could direct me towards a literature in the area.
to which I replied:
There's a huge industry of consultants, bureaucrats, funders and academics devoted to "studying" the nexus.

I am in an extreme minority that says the topic is too complex to understand -- and therefore not worth studying or "managing."

The literature supporting my perspective would say "we do not understand," but those pieces are very rarely published. One example I'd recommend is a little book of philosophy called The Emperor's New Clothes*
Bottom Line: It's hard to tell people that the best action is no action at all.**

* Note the parallels with "swindlers."

** I don't say ignore water or energy. I say "price it right" so that people make choices that aggregate (as if guided by an invisible hand) into a total demand that does not deplete water... or energy or iPhones or cereals. We're talking about commodity (private) water here, btw, not communal (public) water.

4 Aug 2014

Monday funnies

Aquadoc takes apart this "scientistic" BS

American politicians sacrifice citizens for ethanol

I've opposed subsidies to corn production and ethanol blending mandates for many years (see this and this argument) as these programs destroy the environment, destabilize agricultural commodity markets, and raise the price of food for the world's poorest.
Bottom Line: America's Congress, in its quest to send extra money to Big Agribusiness, is responsible for undrinkable water, farm poverty, and sick citizens. Fail.

2 Aug 2014

Flashback: 28 Jul -- 3 Aug 2013

A year later and still worth reading...

1 Aug 2014

Friday party!

This guy is just fantastic.



Another flaw in energy-water nexus thinking

I've said that the energy-water nexus needs the same amount of management as the donut-coffee nexus (i.e., none) because each system can -- and should -- be managed separately for sustainability. This is relatively easy when the nexus refers to commodity ("private good") uses of both resources.

In other words, there wouldn't be a nexus if water companies paid scarcity and externality-adjusted prices for energy --- as they often do --- and energy companies paid scarcity and externality-adjusted prices for water, which they often do not.

...but I just thought of another reason to avoid "nexus" thinking: a tendency to focus too much on what's in the nexus and ignore what's not. Pundits have tried to counter this problem by expanding to the "food-energy-water-climate change" nexus, but they forgot fishing, environment, forests, etc.

It's just a fact that people use water in endless ways that may be too difficult to track, let alone understand or manage. Don't try to understand. Just find a way to limit total demand.

Bottom Line: Studying the energy-water nexus as a means of rationalizing the use of both in society is like studying the goalie-striker nexus as a means of explaining how football games are won.* You end up with data, diagrams... and no clue of how the system works.

* Americans: Like the pitcher-batter nexus...