Do tiered water rates save water?

Do tiered water rates save water?


water meter - wikimediaIt must sound crazy in the middle of an epic California drought to say empirical studies show raising water rates to spur water conservation is not likely to result in water conservation.

But a study by of comparable water rates in Orange County indicates tiered water rates do not clearly result in demonstrably lower water usage. Similar studies in other states show the same thing.

The prevailing notion by water experts is that raising water rates increases conservation. For example, the Pacific Institute is dedicated to “sustainable communities.” A recent Need to Know fact sheet, made in a partnership with the Alliance for Water Efficiency, explained:

“Conservation pricing provides a price signal to customers to use water efficiently, and can be achieved through a variety of volumetric rate structures,” including “Tiered rates in which the volumetric rate increases as the quantity used increases.”

Tiered rates increase the cost of water with higher usage.

Higher rates — higher usage

A recent study of long-term water rates, “Urban Water Demand and Water Rates Structure Over Decades,” of the huge Edwards Aquifer in Texas, found charging more for water usage ironically resulted in higher water use over several decades:

“The adoption of water pricing structures alleged to promote water conservation (e.g., increasing block rates) does not lead to expected results as in our sample (13,447 observations) consumption increased by 5-6 percent (significant at the 1 percent level) after the change occurred… . The “more water conserving” … exert(s) a counterproductive effect and correspond(s) with higher average daily water consumption.”

Orange County

Different water rate methods in Orange County, Calif. also indicate that tiered water rates do not produce greater water conservation.

Let’s look at water rates and usage in three cities in Orange County with similar coastal climates: Tustin, Costa Mesa and Huntington Beach.

                    Comparison Water Usage by City: Tiered and Flat Water Rates

                                 Ranked by Water Use Per Person Per Day

Avg. monthly residential water bill/ 29,920 gal. Residential per capita water use /day, gal. Percent groundwater Percent multifamily structures Persons served per water hookup Rate
Tustin $46.02 115 77% 48.9% 4.70 Tiered Rates
Mesa Water District $54.60 95 75% 50.0% 5.26 Flat Rates
Huntington Beach $32.33  88 62% 39.9% 3.94 Flat Rates
Source: Orange County Water Suppliers Water Rates and Financial Information 2012 .

Tustin, with tiered rates, uses 115 gallons of water per person per day.

By contrast, the Mesa Water District (Costa Mesa) and Huntington Beach, with flat water rates, use 95 and 88 gallons per person per day, respectively.

Lower water use should result in a higher proportion of apartment units (which typically use less water).

Higher water usage should result from a higher percentage of cheap groundwater used (lower prices may induce higher use).

And higher water usage should result from a higher number of persons served per water meter hookup (from master metered apartment buildings).

Yet, considering all these factors, there is no clear evidence that tiered water rates conserve water.

Service or commodity?

At the core of the question of whether pegging higher water rates to greater use saves water is whether water is a service or a scarce commodity.

Those water districts that use punitive tiered water rates justify their higher rates by marketing their water-rate policy as bringing greater water conservation of a scarce commodity. Conservation is used as a marketing strategy to raise water rates, not necessarily as a real way to save water. A study by the UCLA Anderson School of Management in 2010 found that water conservation was due to social norms, not water rates.

Conversely, those water districts that use flat water rates tend to see themselves as providing a basic service at the lowest cost possible.


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  1. ECK
    ECK 10 October, 2014, 18:59

    Well, it’s no surprise to me that it doesn’t save much water. To the wealthier, water bills are a relatively small cost in their overall spending. An additional 50 to 200 a month isn’t going to be much of a hit. No big incentive to cut down. To the less-off, it’s a trade-off. If water is more important than (insert your own non-essential here), it probably has little affect. Maybe a little reduction for them.

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  2. LetitCollapse
    LetitCollapse 10 October, 2014, 23:51

    There’s a guy in my neighborhood who turned his front yard into a desert landscape. Actually, it looks pretty cool. Some pro landscapers did the job. When I was walking the pooch the other day he happened to be taking out the garbage containers for pick-up. I talked to him. He told me that the local water district paid him $2400 to remove his grass and turn his yard into a desert landscape. And his yard is only about 200 sq. feet (my estimate). I was shocked they paid him that much to conserve water. He told me it paid for everything except for the brickwork. And it doesn’t look cheesy. It would be a yard any owner would be proud of. Yet, he is the ONLY one in the neighborhood that took advantage of the water district subsidy. Urban grass yards do consume lots of water in the summer unless you let your property go to hell. Desert landscaping is a good alternative. Does anyone know why more homeowners don’t take advantage of these generous offers?

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  3. Jim Reardon
    Jim Reardon 11 October, 2014, 12:22

    These anecdotal observations are no more trustworthy to disprove claims of tiered-rate proponents than the claims made by those proponents themselves. The datasets being used are too small and they are subject to local influences.

    For example, in Costa Mesa, there are 25 percent more “people” on each water meter. This has a massive impact a tiered structure, yet it is not even mentioned in the text of this article. Comparing the impact of tiers with such differences in usage may result in getting the causality backward. Perhaps flat rates encourage larger households? Or do tiered rates discourage large households?

    If one is to achieve conservation through pricing, the cost of the FIRST UNIT and the NEXT UNIT of water have to be increased. Tiered rates do the opposite. They make the both prices “painless” — up to a point. Therefore, the vast majority of water users (> 80%) have no incentive to conserve their FIRST UNIT and their NEXT UNIT. The structure of these tiers is politically motivated — not conservation motivated.

    Take San Juan Capistrano. In July, our City Council raised water rates. Yet, at the same time, they increased the first tier allocation of water for each meter by 50 percent. So they perpetuated the FIRST UNIT incentive for all users (who are buying water below cost), and pushed the NEXT UNIT incentive out so far that most customers never really worry about the higher tier. Water consumption rose in August (year over year). Is anyone surprised?

    Meanwhile, the City Council is running around telling everyone to conserve, talking about “rain barrels”, and putting buckets in your shower. It is quite insincere. They are inviting a Stage 3 (or worse) emergency by this behavior.

    In contrast, a flat-rate increase would signal to every customer in San Juan Capistrano that the emergency was upon us. Opportunity lost. The political motivation: To hide an excessive cost structure from the majority of water customers who also happen to be voters.

    Without discarding the foregoing, the question of whether water is a “service” or a “commodity” is pointless. In California, we have law that defines it as a service, the rates for which must be based on the reasonable cost to provide the service. For any given cost structure, there is therefore a price (or rate). And that rate should apply to all users under all circumstances. Anything else is politically motivated, un-Constitutional, and therefore illegal.

    The fact that a majority of water agencies have chosen the illegal path with their rates is indicative of another problem — the disrespect for the rule of law among those in the water business. Why should we be surprised? It’s been the norm in this business to respect laws that benefit the water bureaucracy and to otherwise disregard other laws and especially private property rights. We should expect nothing less from a group of people who profess to be “experts”, and who are entrusted to provide a life giving and property value sustaining service.

    In other words, we’re all hostages to this crowd, and some people — perhaps the majority, seem to be afflicted with Stockholm Syndrome.

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  4. John Galt
    John Galt 15 October, 2014, 07:01

    Retail sales of water are typically inelastic … a 1.0% change (increase or decrease) in the own price of water results in a less than 1.0% change in volume usage (decrease or increase, respectively). Studies indicate own price elasticity runs 0.15 to 0.40. Since water utilities are monopolies, retail prices are required (in theory) to reflect actual costs at each level of usage for each customer class. That is why energy and water utilities historically used declining block rates … as usage increases fixed costs are collected and increasing usage needs to cover marginal wholesale commodity costs (production or purchases). Accordingly, switching from declining block rates to increasing, inverted, block rates jettisons the inherent equity and fairness of customers paying their fair share of actual costs at each point on the volume demand curve. This is typically only with residential rates. Usually small commercial and industrial rates are still designed as either flat rates or declining block rates. Since small commercial customer usage and cost-to-serve curves are very similar to residential, one can test how “out of whack” (overcharging) residential rates are at various levels on the demand curve by comparing small commercial to residential rates at various usage volumes. Since, in theory, utilities can only charge actual costs to serve each customer, on what legal grounds can public agency or private (CPUC regulated) water utilities over-collect from higher usage customers to subsidize low usage residential customers?

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  5. Peter Gleick
    Peter Gleick 15 October, 2014, 10:04

    Wow, what a bunch of misleading economic claims. Peer-reviewed assessments regularly and consistently show that higher prices for water lead to lower use, when other factors are corrected for, whereas the anecdotal examples given by Wayne FAIL to correct for these differences. Water uses of some kinds are inelastic, but not for the highest uses, where higher prices ARE effective. And while elasticities certainly vary, they are real.

    Moreover, the argument that higher water prices for higher water users is somehow inequitable also come, in my mind, from some alternate universe: we now live in a world where the marginal cost of water is higher than the average cost. In such a world, higher prices for those driving our search for marginal new supplies — the large volume users above and beyond basic needs — OUGHT to pay higher prices, which is exactly the purpose of tiered rates. Set basic rates at lower costs to meet basic needs; set higher unit prices for needs above and beyond these basic needs.

    If we don’t, then the opposite of what John Galt says actually happens: the lower usage customers are subsidizing higher usage customers. That’s a true inequity.

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    • Wayne Lusvardi
      Wayne Lusvardi 30 October, 2014, 07:17

      Dr. Borenstein

      Don’t blame the messenger for your so-called accusation that my reporting is MISLEADING.

      Take your argument up with Dr. Severin Borenstein of the U.C. Berkeley Energy Institute and with Dr. Koichiro Ito’s new research published in the top journal of the economics profession – the American Economic Review (peer reviewed).

      I would suggest readers consider Dr. Borenstein’s article in the Sept. 30, 2014 issue of The Energy Collective titled Rationalizing California’s Residential Electricity Rates and Dr. Ito’s research article “Do Consumer’s Respond to Marginal or Average Price? Evidence from Non-Linear Electricity Pricing in the American Economic Review, 2014.

      What Dr. Ito found was the electric customers don’t pay attention to the difference in price due to Increasing Block Rates (IBR) for electric power. Instead they respond to only the average monthly or bimonthly bill or the total bill. As Dr. Borenstein’s writes:

      “This isn’t surprising given that the vast majority of customers don’t even know we have tiered pricing and even for the electricity-obsessed it’s very hard to know what marginal price you will face at the end of the month. Ito demonstrates that when customers respond to average price, IBP (Increasing Block Rates) results in virtually no change in total consumption.”

      Same applies to water rates. Customers don’t respond to tiered rates as also shown in the survey I conducted of tiered and flat water rates in Orange County reported above.

      Tiered water rates are what sociologists call a professional social construction.

      Reply this comment
  6. Jim Reardon
    Jim Reardon 15 October, 2014, 19:55

    Well Peter, I’m buying only part of it.

    Anecdotal examples do lead to false conclusions. I agree that water use is price elastic, more so than most so-called “rate consultants” are willing to admit. The remainder of your points simply don’t add-up.

    First, your statement about marginal and average cost is based on artificial definitions of “cost”. When a government policy places half the water in the state off-limits, dedicated for “environmental purposes”, water cost has certainly been manipulated. Water cost serves as the basis for water prices. We agree on water price elasticity, so you can hardly disagree that the government is manipulating the water market. In my opinion, the government controls it.

    After environmental use, about 40% of water in the state is used in agriculture. These users pay the lowest price (environmental “users” pay nothing), and yet agriculture suffers huge price increases and actual shortage due to “competition” from environmental use. Of course, government use isn’t truly competition, but it is a water user. It affects cost through another economic mechanism — scarcity.

    Urban water users, who comprise about 10 percent of water demand in the state, are nevertheless the voters. The political war between environmental and agricultural users is fought in urban areas and among urban water users. After all, they vote.

    Local water agencies that serve urban dwellers embrace inclining block rates (or “tiers”) because they seek to create an income margin above their cost. Careers, pensions, and even municipal revenue is often at stake. In light of the fact that 90 percent of state water consumption is going in other directions, can we agree that “conservation” is not the first motivation of urban water suppliers?

    After salaries, pensions and the municipal treasuries, there is a penchant for social engineering in inclining block rates. More politics. Punish those large families, punish the large property owner, etc. You are “good”, they are “bad”. Depending on the city you’re in, rates can punish apartment dwellers or punish single-family homeowners. It just depends on who votes. It has nothing to do with cost, or scarcity, or price elasticity.

    Your comment that water users who consume more than their basic needs “OUGHT” to pay more is laughable. It plays on the guilt of urban middle-class voters. You ignore two basic facts: 1.) water supports many economic activities (i.e., jobs) for which “basic needs” have no meaning (consider agriculture, if not environmental use), and 2.) many, many water users have a property right that is connected with their land. For the latter group, limitations on water use imposed by those with a lesser or no right feels like appropriation of property. In other words, it’s a duck.

    Given that your “OUGHT” comment is nonsense, your concern that lower use customers could end-up subsidizing high uses is equally nonsense unless you are a collectivist. But assuming so, then why omit environmental and agricultural use from the equation? If urban dwellers could pay agricultural rates, most urban water agencies would collapse, salaries and pensions unpaid, and municipal treasuries would be drained.

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  7. LetitCollapse
    LetitCollapse 17 October, 2014, 09:18

    Do any of you support the water districts paying homeowners to convert their grass lawns into water efficent landscapes with indigenous desert plants? Grass lawns take lots of water to maintain. What say you???

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  8. ktg Oakland
    ktg Oakland 17 October, 2014, 16:42

    Tiered pricing could be a very effective tool to reduce water usage while meeting the basic human needs of each person at modest cost and provding revenues to maintain the operations of water utilities.
    I’ve proposed to the local water utility that the size of each tier be the same, but be based on the people in the household and days in the billing period. Let’s say 100 gallons per person per day allocated 60 for home use and 40 for full time work or study or daycare. So each home, business and school would have a tier 1 water “allowance” for minimal pricing. The number of potential tiers for a water customer would be unlimited – 1, 2, 3 … 20. The tier 1 price of water should be low and stable. The drought rate factor should be subject to change on the notice of one billing cycle – hopefully one month. If drought conditions arise the rate factor might go from 10% to 50% over a period of months. Thus if the tier 1 tariff is $2.00 per 100 cubic feet, the tier 2 tariff might go from $2.20 to $3.00 per CCF in that time frame. The tier 3 tariff would go from $2.44 to $4.50 in that time frame and the tier 4 tariff would go from $2.68 to $6.75. In each billing period with a change in rate factor forecast an explanation of the progreeive drought condition would be provided to help households and business customers make rational decisions about their water use. Appealling to some moral code would be superflous, just as it is now unfair. The rich could use as much water as they wanted until they decided to take steps such as maintaining storage of their own, employing systems for safe reuse of water for certain purposes. It would become a calculable economic decision for each customer using more than the tier 1 allocation.
    Agricultural scale users should be presented with the same sort of scheme for valuing water. No water should be free unless an individual is drinking directly from the stream – giving us only the same right enjoyed by the tree, fish or other animal. So the farmer too, would pay for water. The size of tier 1 might be a function of human employment offered by the farm and/or the acreage historically under cultivation. The farmer could decide when the cost of water might require some fields to lie fallow so that others of her fields could prosper. A farmer might invest in water storage to ensure the current crop can be brought in. There are lots of wrinkles to discuss in the agricultural arena, including historical “water rights” beyond drinking directly from the passing stream, but it is all part of the discussion that needs to take place.

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  9. Dr Sprinky
    Dr Sprinky 12 April, 2015, 10:47

    Jim Reardon RE: “When a government policy places half the water in the state off-limits, dedicated for “environmental purposes”, water cost has certainly been manipulated.”

    Are you aware “environmental uses” include the state’s vast forests, agriculture in north, reservoir evaporation and fisheries. There is no “government policy” setting aside a percentage of the overall water supply. This is a misstatement hiding a clear misunderstanding of the situation. Total California precipitation (snow and rain) in an average year is 240km3. Directly accountable human use is about 100 km3/year. Many uses aren’t measured as ground water withdrawals and first rights holders; these total perhaps another 20-40 km3/year. It would take massive deforestation and the complete elimination of river stream flow to get more that 50% availability from our water resources. It is true critical environmental uses include keeping salinity from invading fresh water supplies as in the Delta.

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    • Wayne Lusvardi
      Wayne Lusvardi 12 April, 2015, 14:01

      The California Dept. of Water Resources ALLOCATES 64% of all system water (NOT RAINFALL) to the ENVIRONMENT in a WET YEAR; 47% in an AVERAGE, and 35% in a DRY YEAR. That amounts to 62.1 million acre feet in a WET YEAR, 39.4 million acre feet in an AVERAGE YEAR, AND 22.4 million acre feet in a DRY YEAR. System water or “developed water” comes from dams, reservoirs and aqueducts, not from RAINFALL.

      See: California Water Balance Summary

      Link: http://water dot ca dot gov/swp/watersupply dot cfm

      Thank you for your comment.

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    • Jim Reardon
      Jim Reardon 12 April, 2015, 14:21

      Dr Sprinky; I’ll stand by my comment. It is government policy that has prevented development of reservoirs in California.

      If you want to throw around water volume figures measured in cubic kilometers, you might cite your sources.

      Reply this comment
  10. Jim Reardon
    Jim Reardon 12 April, 2015, 14:06

    Over in the Op-Ed section of the LA Times today, the collectivist editorial staff reaches to make the water issue on of “rich and poor”. They fail miserably on a false premise.

    As one involved in the Capistrano lawsuit, I am amazed at what has been written about it and the San Juan Capistrano community. The biggest misconception is that the lawsuit threatens tiered water pricing. It does not. It does threaten the ARBITRARY tiered pricing practices in use in many places around California, including San Juan Capistrano.

    Success in this lawsuit won’t eliminate tiers as a means of conservation. It means that the tiers have to reflect an actual service delivered to a property owner. A tiered system that collects money to pay for conservation investments that will reduce water use on the property, or class of property, that pays the higher tier is completely legitimate and unchallenged.

    The reason the water insiders around California hate the Capistrano lawsuit is because it could break up their private political game. They literally make-up rates to pay for vaguely defined conservation and and other general benefits, and to pad their pensions, but do nothing meaningful to address water demand except to engage in sanctimonious and ineffective lectures. They would prefer to divide Californians into “good” and “bad” categories, or “rich” and “poor” (the argument LA Times has succumbed to here). And of course, the “experts” will define these terms as it may benefit them to do so.

    San Juan Capistrano is hardly a “rich” town. Sorry LA Times. It does have a rich history. Pay us a visit!

    San Juan Capistrano water customers have been paying millions in excess charges on their water bills to support an expensive Groundwater Recovery Plant — for a decade. This burden relieved MWD of the need to deliver thousands of acre-feet of water to San Juan over the period, a fact for which the community gets no credit at all.

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    • Wayne Lusvardi
      Wayne Lusvardi 12 April, 2015, 14:15

      To Jim Reardon

      Keep an eye on Calwatchdog for a report of a new study on water conservation and how mandated Outdoor Watering Restrictions do not save water.

      Reply this comment
  11. Doug V
    Doug V 28 April, 2015, 17:10

    Water is not priced as a system. Fixed charges including service charges, sewer charges and water district property tax assessments are nor related to consumption. We all pay these same fixed charges.

    In essence the small water users subsidize those who use lots of water. As an example one water district in my area charges $37.93 / month service charges, $38.75 / month sewer charges and $406.00 per year as a property tax assessment. The Tier 1 water charge is $1.01 / unit. Retirees in my community using 4 or less units of water have a total bill is about $114.00 for only 4 units of water or $28.50 per unit of water. Using 8 units of water creates a total bill of about $118 or $14.75 per unit of water.

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    • Wayne Lusvardi
      Wayne Lusvardi 28 April, 2015, 20:22

      Thanks for your comment. However, I found it confusing. You write water is not priced as a system then you proceed to describe how your water district sets charges for your water system.

      The point in the article is thare is a principle in Public Utility Economics that the rates set for water are based on the fixed and variable costs for the entirely of the water system, not based on a market price. Prices are associated with markets and rates are associated with cost recovery by a monopoly utility.

      In California a new Appeals Court case (Capistrano taxpayers vs. City of San Juan Capistrano) has struck down setting water rates to subsidize low or high users unless the COST of each tier of water rates have been proven. If water rates do not exceed COSTS to operate the water system then voter approval is not required. But if rates for any use tier exceed the system cost they have to be approved by voters.

      The reason you have water rates that subsidize those who use more water is that your City Council established the water rate structure that way. In my city the City Council adopted a water rate structure that did not subsidize the larger users of water. Then after it was adopted they amended the rate ordinance to subsidize large commercial users that pay a significant amount of taxes.

      Cities want tax producing businesses and are willing to compel homeowners to subsidize them to enrich city coffers. What the Capistrano case has done is limit how cities use water rate subsidies to lure or retain businesses in competition with other nearby cities.

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      • Doug V
        Doug V 29 April, 2015, 10:37

        If Gasoline were priced like Water, you would be hit with a service charge every time you filled up. Example assuming the current price of Gas is $4 / Gal:
        Every time you filled the tank, you would pay a $20 service charge but the Gasoline itself is now priced at $2 / Gallon.

        The economy car needing only 10 gallons of gas would pay the $30 service charge + $20 (10 gal * $2) for a total of $50 or $5 / gallon.

        A truck requiring 30 gallons of gas would pay the same $30 service charge plus an additional $60 (30 gal * $2) for a total of $90 or $3 / gallon.

        The truck received a very cleverly hidden volume discount on the product.

        The oil companies have no problem including their infrastructure costs (pipelines, tankers, wells, pumps, distribution stations, etc.) in the price of gas. Why are the Water Districts unable or unwilling to do this also?

        I have written an article that was just published in the May issue of the Bugle newspaper on page 3. This article discusses many ideas that could possibly help solve the draught in California. The link is:

        Also look at your electric bill. How many fixed charges unrelated to product usage do you see?

        The current system of water pricing subsidizes the big users of water.

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      • Doug V
        Doug V 10 May, 2015, 15:12

        Wayne, I appreciate your comments. I know them to be true in those cases where cities actually govern the water companies.

        As we can both agree, Water Districts were never intended to be tax producers. I also agree with you that the tiered rates are not likely to produce the goal that Governor Brown is asking for.

        With the current draught it is time to change the way Government taxes us for water. Fixed fees not related to consumption nor do they encourage conservation.

        Because Government is artificially pricing water below it’s actual cost, private enterprise is not rushing to the marketplace with new innovations. Water Districts are distributing free toilets, free sprinkler heads, free landscape help, etc.

        Please read my other post for additional arguments.

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        • Wayne Lusvardi
          Wayne Lusvardi 10 May, 2015, 15:32

          In Pasadena where I live the city is having to raise water rates because of the 28% mandatory cutback of water. So cities are pricing water at cost of service (if they priced below cost of service they would be insolvent).

          I’m a big advocate of markets, having written on the marketization of fiber optic easements and expending water transfers. However, creating a spot market price for water in California would create water anarchy and civil war.

          Anything with huge upfront cost, houses or dams, require long-term contracts to amortize the cost over 30 to 50 years. Mortgages and municipal bonds are the long term contracts for building homes and dams.

          If we shifted to a spot market price and had to build all new homes or dams and desalting plants with cash (no loans), we would wait forever for their completion.
          Can you imagine building a house on a cash basis? You would complete a little bit of the house each year over, say, 10 to 20 years. Meanwhile you have no place to live.

          Pay-As-You-Go (cash) financing does not work well with mega-billion dollar dams, water recycling plants, and desalination plants.

          So I would not call shifting to a full market system for water infrastructure an “innovation”. It would actually be a regression back to how private goods were made piecemeal by craftsmen before the Industrial and Capitalist Revolutions.

          Water markets need expanding but this year there isn’t enough surplus water to sell to alleviate the stress of drought. Shifting to a water market in a drought would drive prices literally through the roof. Of course, that is what environmentalists would like to see because it would drive industries and residents out of California. So, oddly, environmentalists have been embracing pseudo-market solutions to drought. A market is a social mechanism for the cheapest priced good or service, not the highest priced. Highest priced goods and services are what you get under either monopoly or socialism.

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          • Doug V
            Doug V 10 May, 2015, 16:35


            In your last post, your last sentence says a lot. By every definition we presently have a monopoly or socialism for water.

            The issue in question is whether you pay for bonds and sewers based on usage. The current method is to increase service charges or attach it to a property tax bill. None of these charges are related to consumption. My proposal has nothing to do with spot or market prices.

            These fixed costs are a known. The expected HCF units of water that are likely to be used is also a known. I am only suggesting a mathematical computation that takes these fixed costs and divide it by the number of HCF units of water expected to be used and then raise the current cost of water by this amount thus eliminating all fixed costs.

            Using my gasoline example, why should someone who conserves water pay more per unit that someone who wastes?

          • Wayne Lusvardi
            Wayne Lusvardi 10 May, 2015, 17:18

            When i say “fixed costs” I mean Cost of Service which includes fixed costs and variable costs. ALL COSTS are included in water rates. There are no subsidies other than those that accrue from tiered rates.

            By the way, most communities have tiered rates so what commercial establishments are subsidized by residential water ratepayers. Cities want the taxes generated by business and industry and thus subsidize them.

            There are no WHOLESALE water subsidies contrary to what phony experts contend. There are differing costs for producing water as follows:

            1930’s – Federal Central Valley Project and Colorado River Project – $20 to $300 per acre foot of water

            1960’s – State Water Project – $300 to $1,000 per acre foot

            2000’s – Water Recycling and Desalination Plants – $1,500 to $3,500 per acre foot.

            The difference in price IS NOT a subsidy contrary to what economists say.

            If a home has a 4% mortgage on it and interest rates climb to 8% we don’t say the homeowner is getting a subsidy. Then why do we say that farmers are getting a water subsidy for the difference in cost based on when water facilities were built?

            In 50 years the relative price for desalination water will be as cheap as farm water. That is not a subsidy.

            Should water be marked to market price instead of historical cost? That would be disastrous and would end the municipal bond market financing for any water projects.

            Thanks for the discussion.

  12. DLZ
    DLZ 28 April, 2015, 21:08

    It is time for CA water users to wake up- did you know we are in a drought? We can hardly escape the daily barrage- The questions is what’s new- we do not hear about fixing the issue- all we hear about is raising the rates and tiered pricing.
    That tells me the focus is all on stuffing the coffers of the city pension plans- tax revenues and the like. I need one more paycheck to pay the DWP bill. No matter how much you conserve that water bill will never go down and all we have are neighborhoods covered in gravel. It’s a shame. Califonria voters and taxpayers have been denied what other cities and states are covered in- WATER. I travel to Phoenix and Tucson- I never hear about a drought there- and they are the desert.
    If you can run pipelines from Alaska and Canada for oil why can’t you run water lines- and by the way – who sold out the water rights for Californians??
    I also think we can give up a multi-trillion dollar bullet train because don’t forget- we have no water.
    The scam of perpetuating the drought as a way to steal once again from the every- day hard working taxpayer is over- this is one fed up rate payer and I wish he groundswell would get going.
    There are ways to conserve and there are ways to steal money away from people and I don’t think they are one and the same- the jig is up!
    So we are having a drought- what’s new-

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