A few months ago, I posted Why the mayor wants you to have a green lawn: The dark side of water conservation where I “exposed” the open secret of declining support for water conservation programs. Water managers call it “the conservation death spiral” when conservation – to put it bluntly – starts cutting into needed revenue generated by water consumption, and forces a rise in rates for the same water. This leads to understandably bewildered and betrayed consumers, and increasingly strapped public utilities who literally can’t afford conservation. At the end of that article, I promised a follow-up post on water rate structures (aka, what you see on your monthly bill) that utilities can use which promote conservation and meet revenue-for-infrastructure needs. It’s taken me a while to follow up, partly because every time I started researching and writing about water rate structures I found myself inexplicably dozing off. Luckily, once I sat down to it, the breakdown isn’t that complicated, so I am hopeful that it’s possible to stay awake for the exciting conclusion (yes, there is one!).
Think for a minute about your water bill. If you live in a big city, it comes from a utility named something like “City Name Water & Sewer”. If you live out of the city limits, it will say something like “Unincorporated Area Name Utilities”. The point is that water delivery and billing is often very localized – for reference, check out the map of water districts in a single county in Washington State (the area around Seattle). While districts are generally cooperating to some extent, even adjacent districts can easily differ in where the water comes from, metering, and rates.
How hard can it be to bill for water?
Think for another minute about how water gets to your house. Easy – through pipes (A+). Slightly more difficult – how far did your water travel? If you live in a small town, it possibly comes from local underground wells. On the other hand, if you live in San Diego, it’s pumped 250 miles from the Colorado River. Either way, there are costs involved in obtaining the water and getting the water to your house. Utilities can mostly divide these costs into two types: fixed (won’t change with consumption) and variable (depends on consumption). See figure below of different fixed and variable costs. Naturally, there are exceptions to every rule, meaning some don’t fit neatly into one category or the other, but it’s close enough to move on.Seems simple – what’s the problem?
While the ratio of fixed to variable costs naturally differs from district to district, 80% fixed: 20% variable is a pretty good general estimate. But for historical reasons which can (and have) filled dissertations, water is often billed at a fixed: variable ratio which is too low; for example, your water bill might be 50% fixed or base rate and 50% consumption-based. For a real example, Las Vegas Water District has 72% fixed costs, but customers are billed so that fixed rates only cover 18% of those costs. In some sense, this system is fair, because high water users pay the most. On the other hand, if everyone starts conserving water, the revenue will drop faster than costs. As I covered in my last blog post, this forces utilities to raise rates, consumers to complain (“I conserved, now I pay more?!?”), and political heads roll.
Where do the fish come in?
After years of studying fish, I have concluded that fish like water; a good guideline is “more is better”. They also generally are not fans of dams, pumping stations, pipelines, or diversions associated with tapping new water sources [Note: people cannot actually create water – if you hear about a new water source being “created” it means that it’s either been taken from somewhere else or manipulated into a storable form like a reservoir]. So fish not only prefer that more water stays in lakes, rivers, and deltas, but that new infrastructure is kept to a minimum. Both of these ends can be achieved by aggressive and consistent emphasis on efficiency and conservation.
But in order to do this, utilities really do need their rates to reflect their fixed and variable costs. A model which is being increasingly held up for emulation was forged by Irvine Ranch Water District in Orange County, CA in 1991. In water management lingo, it’s an “allocation-based conservation rate structure”. More simply, they separate their fixed and variable costs very strictly. Fixed costs are covered through a combination of property taxes, connection fees, and service charges. Actual water use is billed so that very high rates kick in after a basic allocation threshold, which encourages conservation. Utilities that follow some version of this model have the option of putting that money from water guzzlers into conservation programs (for more information than you can shake the proverbial stick at on the ‘Irvine Model’, see refs 2,3,4).
How can I help?
Educate yourself about where your water comes from and how it’s billed – you know that sleep-inducing newsletter your utility sends you every quarter or year? Read it. Water utility companies are often accused of doing a poor job of communicating why rates may need to change. But, let’s face it, are we clamoring for the information? Your water company might be trying to tell you something. After a bunch of research, I ended up on my own water utility’s website and found this simple, poignant plea:
“Please conserve water. Our water supply is pumped from aquifers below us, replenished by local rains. We do not get our water from the Olympic or Cascade Mountains. As water demand increases and as more area is developed, protecting our aquifers becomes even more important.”
Okay, so I might have lied a little about the exciting conclusion, but really, how hard is that? I mean, a fish could probably write it.
- Circle of Blue: “The Price of Water 2012”
- Circle of Blue article “U.S. Urban Residents Cut Water Usage; Utilities are Forced to Raise Prices”: section ‘The Irvine Model’
- David Zetland (water economist, author of Aguanomics) in Forbes magazine: “The Water Shortage Myth”
- Irvine Ranch Water District website: Conservation rate structure
National Geographic: Calculate your water footprint