With Gov. Brown declaring California is in an official drought, some water districts in Northern California must now get serious about making their customers conserve water. At least one water district rewards consumers for higher consumption with lower rates. With cheap water, where is the incentive to conserve?
San Juan Water District taps Folsom Lake
Folsom lake fluctuates annually from full to half empty during the year. But the combination of record rainless winter days, virtually no snow pack and Folsom Lake dropping to 20% of capacity has put the fear of God in many water districts that rely on the lake for water, to ratchet up mandatory water restrictions. The current cheap water rates never fostered area residents to plan for drastic conservation measures.
On January 8, San Juan Water District approved increased conservation measures in response to the record low levels of Folsom Lake and the dry forecast for 2014. We are asking you to reduce indoor water use by 20 percent and eliminate outdoor water use. Thank you for your continued help to reduce and conserve water. – San Juan Water District
Average cost of water decreases
However, my purveyor of water, San Juan Water District (SJWD), who relies solely on Folsom Lake water, has encouraged little conservation with a water pricing structure that doesn’t penalize for excessive water use. The district ensures cheap water with their highest tier consumptive use rate that is less expensive than their second tier. In short, the more water a homeowner uses above 220 units, the lower the average cost. See: San Juan Water District Rates and Fees. One unit = One hundred cubic feet (ccf) = 748 gallons.
|San Juan Water District Single Family Rate Structure|
|Price/Unit||Units||Tier Cost||Average Price/Unit|
Example based on a single family residence using 420 units of water over a 60 day billing cycle.
How much should water cost?
As it was explained to me several years ago by staff at the San Juan Water District, the lower third tier water rate reflects the fact that the cost of water treatment is captured in the higher rate of the second tier. The lower third tier price covers the costs of distribution such as electricity to pump the water. Thus, having consumers pay an equal rate above the 220 units of water consumed would be an unwarranted and excess charge on the water.
One of a kind rate structure
I have no doubt that the water rate study upon which SJWD based their pricing is correct for covering all the water district’s costs. What the rate structure doesn’t convey is any long term commitment to conservation on the part of the consumer. The rational for a less expensive third tier of consumption seems to be an anomaly among other water districts in California.
Should rates include a conservation factor?
Perhaps the conventional wisdom of pricing a public good such as water at higher consumption rates to encourage conservation is wrong. Does this mean that all water districts that don’t offer a reduced priced upper consumption tiers after water treatment costs are satisfied are needlessly gouging the public? Should rates not be used as an inducement to conserve? The San Juan Water District’s rate structure may just be the product of a sense of entitlement to Folsom Lake water based on proximity to the source and a contract with the Bureau of Reclamation.
Below are the rate structures for local water districts for residential customers. These districts also buy treated water from San Juan Water District for distribution to their customers.
|Tier||City of Citrus Heights Water District|
|Fair Oaks Water District|
|Orange Vale Water Company|
Droughts equal reduced water sales
Water districts only generate revenue to cover their costs when they sell water. They must balance the competing interests of their customers’ desire for low rates against the costs to acquire, treat and distribute the water. When low water rates crash into mandatory restrictions on consumption, a water district can lose millions of dollars and throw their budgets into chaos.
Rate structures contrived to meet revenue projections
Any water rate structure is an arbitrary device to generate revenue to meet expected costs. For example, the billing cycle of metered water can have an enormous impact on the total revenue of the water district. A short billing cycle would have most customers paying the lower rate as they wouldn’t have an opportunity to consume as much water. A longer billing cycle would have the customer paying higher rates (in most districts) for water that is providing the same utility as the lower rates.
Cheap water showers
Consequently, the billing period is a factor when considering the rate structure to maximize revenue for the district. From the consumer’s perspective, they derive the same economic utility or satisfaction whether they use a unit of water at the lower rate or the higher rate. The shower taken with water at a lower rate is just as satisfying as if the water being consumed was at a higher rate near the end of the billing cycle.
Conservation is not the goal
The San Juan Water District rate structure was not designed to encourage the conservation of a limited resource. The district’s pricing of water is meant to cover the operating costs. It was designed to maintain low water rates for the consumers who are also the members of the Board of Directors. The self interest of the district’s management and customers directly conflicts with the conservation of a public good. Regardless of the water laws and contracts, water is a public good that when disproportionately consumed by one party, it will adversely impact downstream users.
Are other water districts gouging consumers?
It’s interestingly to review how other water districts price their water. Below are examples of Bay Area and Southern California water utilities and their rate structures. None of these water districts decrease the cost of the water in the upper tiers like San Juan Water District.
|Tier||City of San Francisco|
|Marin Municipal Water District|
|2||22 – 48||$7.48000|
|3||49 – 80||$14.97000|
|San Jose Water Company|
|Santa Monica Public Works|
|2||15 – 40||$3.74000|
|3||41 – 148||$5.60000|
|City of San Diego|
|2||9 – 24||$4.08000|
|3||25 – 36||$5.82000|
|City of Burbank|
|2||16 – 30||$1.37200|
Low rates help re-elected Board members
It is not the fault of water districts like San Juan Water District that they create rate structures that ignore the long term limited availability of a public good. The autonomous nature of hundreds of separate water districts defaults to rate structures and conservation measures that cater to keeping elected board members in their position. What incentive does the San Juan Water District or its consumers have to conserve water so residents in the City of Sacramento have access to quality drinking water without draconian water restrictions? Apparently none.
Southern California planned for drought
While Northern California water districts face mandatory restrictions because of the looming drought, Southern California seems to be prepared. The Metropolitan Water District has spent billions of dollars on conservation, new reservoirs and replenishing their groundwater aquifers.
With California bracing for a potential third consecutive dry year, Kightlinger reiterated that
Metropolitan has no plans to require mandatory water conservation restrictions this year or next. He
said that’s because of the significant investments in storage the agency has made in recent years
expressly to meet dry year demands. In addition, heightened water conservation and water-use
efficiency throughout Southern California has helped significantly to preserve water supplies. – Metropolitan Water District
Northern California landscapes may go brown because low water rates encouraged excessive use which the current drought level supplies can’t accommodate. In addition, the lack of long term coordinated planning has left water districts depending on dwindling reservoirs such as Folsom with few supplemental alternatives to meet demand.
Dead pool in sight
As Folsom Lake drops closer the dead pool level where the San Juan Water District can’t draw from the reservoir, we will be told to stop using water. Yet, the rates never encouraged me or my neighbors to conserve water and I doubt they will change in the future. Any real conservation and planning the region might have started decades ago after the 1977 drought still might not have spared a dwindling Folsom Lake. But Southern California has taught us that regional planning, coordination, and investment can help ameliorate the dire consequences of a drought.
It’s my water
There is an enduring sentiment in Northern California that the rain and snow will eventually come, fill up the lakes and we can all go back to using the cheap water we are “entitled” to and to heck with everyone else. In the mean time, the consumer and landscape friendly water rates are of little value when there is no water to use.