Bacon's Rebellion

Democracy Thrives in Sunlight

A Higher Price for a Cold Shower

—

by

James A. Bacon
in

With drought conditions firmly in place, a number of localities are instituting mandatory water restrictions.

But rather than writing piddling fines for violating what are rather lax restrictions, how about using prices to address the problem? Over at the Economist blog, that’s exactly what they propose:

…water utilities are not equipped to respond to similar supply shocks to water reserves with demand-limiting measures. As such, all that stands between a homeowner and his green lawn is a sense of civic duty. Powerful stuff, on occasion, but not powerful enough to keep those reservoirs full.

Allowing water prices to vary with supply would encourage consumers to make their own decisions about how much water they really need. If adopted on a long-term basis, and not just in response to crises, water pricing would allow communities to avoid future price spikes by investing the increased water revenues in additional supply capacity. Pricing in a region’s particular susceptibility to drought might also slow growth in areas of the country ill-equipped to provide for massive populations.

Hmm. Maybe there really is a market for everything.

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28 responses to “A Higher Price for a Cold Shower”

  1. E M Risse Avatar
    E M Risse

    Great idea.

    If one has a variable meter on the water and on both gas and electricity then one could choose a cold shower, one heated with their own solar pannel or blow the budget on a long hot one.

    When we moved to Warrenton, the water rates helped convince us to get rid of grass and plant hardy perenitals.

    It is not an easy task but after 5 years we have the situation well enough in hand that the current drought has had little effect and next years drought should have even less.

    EMR

  2. Anonymous Avatar
    Anonymous

    Press Release: Richmond Greens Challenge Mayor’s Water Rates

    During a severe drought, a 28% discount for Richmond residential customers using over 74,800 gallons per month is proposed!
    Richmond’s minimum water/sewer fees to remain the highest of any city in the United States!

    A new water/sewer rate structure advocated in a report submitted by Richmond’s Mayor Douglas Wilder would not correct Richmond’s inequitable residential minimum water/sewer rates, which remain the highest of any city in the nation. In fact, the report recommends that the minimum water bill be raised by an additional 19 cents per month while the minimum sewer bill would be reduced by only $1.03. The Mayor’s proposed minimum water/sewer service charge of $42.72 would be three times the minimum water/sewer bill of $14.05 charged by Henrico County, which purchases some of its water from Richmond.

    The new water rates do not go far enough in encouraging conservation of this precious resource. Proposed during the serious Fall/2007 drought, the Mayor’s recommendation would offer a 28% high volume discount to those residential customers who use or waste MORE than 100 hundred cubic feet of water a month. By contrast, Henrico County offers a 38% discount for water and sewer customers who use LESS than 6 CCF per month.

    Under the Mayor’s proposal, those using the least water will continue to subsidize customers using the most water. The city would protect high volume users from “rate shock” while ensuring that social-security grandmas, and those who use little water, will continue to be shocked by their high water and sewer bills each month.

    The preposterous assumption is made in the city’s utility study that the entire fixed costs of providing water and sewer service must be recovered by the minimum water/sewer service charges to satisfy the preference of bond rating agencies! Imagine the uproar if the electric utility proposed recovering its entire fixed costs through its base minimum service charge — before providing the first kilowatt of electricity.

    We urge the city to adopt a water/sewer rate structure modeled after Henrico County’s equitable fees that promote conservation. End the city policy of offering steep discounts for customers who use over 100 CCF (74,800 gallons) of water per month. Follow the lead of Henrico County and offer a 38% discount in water/sewer fees for those customers who use less than 6 CCF (4,488 gallons) per month. Cut Richmond’s minimum water/sewer service fees by two-thirds to match Henrico’s minimum monthly fees of only $4.65 for water and $9.40 for sewer service. Charge minimum water/sewer service service fees that reflect the actual cost of providing the service rather than attempting to recover the City’s entire fixed costs from the minimum water/service fees.

    Let’s use the drought of 2007 as an incentive for Richmond to eliminate the high volume discounts for water/sewer service that do not promote conservation, and to correct the exorbitant and unfair base minimum water and sewer service fees that are the highest in the country. Let’s put a stop to forcing the customers using the least water to subsidize those who are using the most. Let’s follow Henrico’s lead by adopting an equitable rate structure that encourages conservation of this precious resource.

    Henrico County:
    Bi-monthly minimum service charge: water — $9.30; wastewater — $18.80 (Total Monthly: $14.05)
    [billed once every two months, comparable to monthly service charge: $4.65 water; $9.40 wastewater]
    Basic water and wastewater rates are:
    $2.14/CCF; wastewater rate is $2.27/ CCF
    If you use 6 CCF or less you receive a discount rate of 38%: water rate is $1.33/CCF; wastewater rate is 1.39/CCF

    Current Richmond City:
    Monthly minimum service charge: water — $17.71; wastewater — $25.85 (Total: $43.56)
    Basic water and wastewater rates are:
    Volume 0-100 CCF, water — 1.144/CCF; wastewater — 1.684/CCF
    Volume 101-2000 CCF, water — 585/CCF; wastewater — 1.684/CCF
    Volume over 2000 CCF, water — .467/CCF; wastewater — 1.684/CCF

    Proposed Richmond City
    Monthly minimum service charge: water — $17.90; wastewater — $24.82 (Total: $42.72)
    Volume 0-100 CCF, water — $1.522; wastewater — $2.455
    Volume 101-2000 CCF, water –$1.090; wastewater — $2.455
    Volume over 2000 CCF, water — $0.997; wastewater — $2.455

    Richmond Green Party is a local chapter of the Green Party of the United States (gp.org).

    Contact:
    Richmond Green Party Acting Chair:

    Scott Burger, 804 714 5444, scottburger@mac.com

  3. Larry Gross Avatar
    Larry Gross

    the problem with water systems –

    is the same as with electricity

    and that is.. the more they sell.. the more money they make and the less they sell.. the less money they make.

    There is no incentive to conserve – unless of course there becomes a shortage of what it is that you are actually selling and that, in turn, results in outages.

    In at least one case that I am familiar with, the utility was charging more for water.. so they could use the money to subsidize hook-ups…

    so they charge more across the board and there were no incentives for conservation.. because.. that would have affected the cash flows.

    as they say… “follow the money”.

    so that’s the dirty little secret of _some_ water systems that basically rely on / need / want a particular cash flow.

  4. Anonymous Avatar
    Anonymous

    Precious resource, my foot.

    There is no shortage of water.

    A recent hydrologic study here in Fauquier concluded there was sufficient water for any contemplated future need.

    Here on the farm, we have been irrigating constantly for the past month, to avoid serious plant losses. We have an irrigation problem, not a water problem.

    With hay selling for $9 a bale, I could easily have afforded to irrigate the whole farm, if I had the capital. But, since I own and operate my own water supply and pay the full costs, (trust me, no one is close enough that I will drain ever drain their well) I have no one to blam but myself for inadequate planning or costs that are “too high”.

    But I’ll say this, at the end of the day , when I come in sweaty and gritty, no price is too high for a hot, full volume, high pressure, luxurious shower.

    Just last week, I saw a roadside illuminated sign, runnign on a generator, that was advertizing mandatory water restrictions in Loudoun county.

    When I am traveling, it annoys me to no end to pay top dollar for a hotels room with a miserly shower, and then go outside and see them flooding the landscape and street.

    It is nothing but kowtowing to “conservation interests” who have no one’s intersts in mind but their own. I am far from one to waste anything, but this nonsense is total and utter BS. This is not Nevada.

    Directly in fron of the sign were three high pressure, long distance irrgation jets, watering the grass along the roadside in front of an industrial complex.

    In fact, I was surprised that the water had not shorted out the sign!

    Anonymous raises a valid complaint that high volume users are getting dicounts at the generalusers cost. However, this is a common practice in all industries in order to protect the base customers. Surely their is some way to balance the need for basic load considerations which keep costs low for everyone, and idiotic rate increases designed as a palliative to the vocal conservation lunatics.

    Part of the problem is that we assume that most or all of the water we use winds up going to the sewage treatment plant, so we bill sewage treatment as part of the water bill.

    In fact, a lot of the sewage treatment capacity is wasted because of infiltration due to insufficiently maintained sewage systems. We are spending millions paying for water used for (perfectly valid) irrigation, and then paying millions more to treat water that is already perfectly clean.

    On the farm, all the water I use, except for that which is transpired through the plants or evaporates is recycled directly to the ground. Where exactly, is the waste? Even the water that is transpired, helps cool my house.

    Granted, not everyone has the space premium that I have (and pay for dearly), but in the larger sense, the rest of the world is no different from the farm.

    Get off it.

    Instead of exhorting people to conserve water wastefully, lets see to it that people have enough water for what they need, and do it as efficiently as possible.

    That’s what I do.

  5. Jim Bacon Avatar
    Jim Bacon

    Virginia had a drought four or five years ago, and the Warner administration worked on some kind of water conservation plan. As I recall, it leaned more heavily on rationing and controls than price mechanisms. By the time the plan was finished, the drought had ended and nobody was interested anymore. Now that we’ve got another drought, I’m surprised that we haven’t heard much from the Kaine administration. I wonder if anything is going on behind the scenes.

  6. Lyle Solla-Yates Avatar
    Lyle Solla-Yates

    Larry-

    Exactly, Both water and energy are so subsidized that both quantity supplied and price are way off the actual cost of supply (though it may be that this varies between areas). The only concern I’ve heard about raising water prices to their market demand is that this may be unfair to the social security grannies mentioned above on fixed incomes. One way to balance that is to use some of the extra revenue to support efficiency consulting. Generally, efficiency is much cheaper than expanding supply, and so does make economic sense for producers when markets are working.

  7. Anonymous Avatar
    Anonymous

    Lyle is right. Efficiency is generally chaper than expanding supply.

    Except, then you don’t get the expanded supply. A water saving shower head operating with a low temp water heater is efficient at saving water and energy, but it doesn’t do the same muscle relieving job job that a nice, hot, luxurious, shower massager does. For me, at the end of the day, it is false economy.

    I basically have my own water company. I have fixed costs for well, pump, distribution, and for a big cistern that recycles “free” renewable water. I have variable costs for moving the water, but basically the water itself is free: it is going to be there whether I use it or not.

    Just like a major water company, because of my fixed costs the more water I use, the less it costs per gallon. I never bothered to figurte out what the cost is, because it is too cheap to woory about.

    So, if it is that cheap on a private, small scale, then what the heck happened to the economies of scale that we would expect from a big supplier? If it is more expensive than it should cost, then how is it being subsidized? I know tyhe water company drives a lot nicer trucks than I do, maybe that’s what we are subsidizing.

    RH

  8. E M Risse Avatar
    E M Risse

    It seems quite simple:

    Larry is right. If the objective is conservation — and that is the only objective that shrinks the ecological footprint — then the more you use, the higher the rate you pay.

    If Granny uses 1000 acre feet a week, she is raising cane, rice or alligators.

    EMR

  9. Anonymous Avatar
    Anonymous

    What????

    Nonsense.

    What if my water use is both better (more efficient) and more ecological that yours?

    I should still pay a higher rate, just because I use more water more efficiently for a more ecological purpose?

    If water is a government service why should anyone pay more than the service costs to provide?

    Which is more ecological, Cane, Rice, or Alligators?

    Or zinc anodizing, for tht matter.

  10. Larry Gross Avatar
    Larry Gross

    …”If water is a government service why should anyone pay more than the service costs to provide?”

    gee.. lets put the government in charge of electricity and gasoline then we wouldn’t have to pay for profits and at the same time we could appoint a “decider” to grant lower prices to those who put their use of water/electricty/gasoline to “better use” than most smucks…

    how bizarre …

    what school of economics is this?

    seriously.

  11. Anonymous Avatar
    Anonymous

    Exactly my point, Larry. I’m surprised you didn’t see it coming.

    If one user pays more per gallon than another user, and assuming the costs for delivery are the same, then someone is going to get subsidized at someone else’s expense.

    You can either charge less per gallon for those that use less water so that the higher rates and lower rates balance out across the system, or you can just charge a higher rate for those that use more, in which case the system will throw off positive cash flow to the government to use subsidizing some other service.

    But the person that uses less probably has a different purpose for the use than the one that uses more. So merely by charging a higher rate for using more, you have put in place a “decider” that place a value judgement on types of uses. If method produces positive cash flow then the “decider” also makes value judgements across differnt product lines.

    It is, as you say, bizarre, and EMR’s simple solution isn’t simple at all.

    Therefore, if it is a government service (and we are all equal) why would one user pay more per gallon just because he uses more gallons? If anything, the big users raise the base for fixed costs which make the system more reliable for us all.

    That said, if they all use the same amount of water, which would you rather have next to you, a rose farm, a pickle factory, or a leather tannery?

    If the pickle factory generates three times as much revenue, jobs and taxes, which one would you want in your water district (assuming it wasn’t next door)?

    If you only have enough water to support one, which would you pick?

    RH

  12. E M Risse Avatar
    E M Risse

    “What if my water use is both better (more efficient) and more ecological that yours?”

    THE CONTEXT OF THESE COMMENTS WAS DOMESTIC WATER CONSUMPTION. USE OF MORE WATER IS NOT ECOLOGICAL BECUSE WATER IS THE RESOURCE THAT IS BEING CONSERVED.

    I should still pay a higher rate, just because I use more water more efficiently for a more ecological purpose?

    MOST HIGH WATER USES CAN EMPLOY FILTERING AND RECYCLING IF THE COST OF RAW WATER FEEDSTOCK IS HIGH.

    CHEAP PROCESS WATER YIELDS USES LIKE ACID LEACHING.

    If water is a government service why should anyone pay more than the service costs to provide?

    BECAUSE EVERY SERVICE SHOULD BE PRICED BASED ON TOTAL COST. THAT IS THE FREE MARKET.

    WATER IS A SCARCE RESOURCE AND NEEDS TO BE CONSERVED TO ACHIEVE A SUSTAINABLE TRAJECTORY FOR CIVILIZATION. THAT IS DEMOCRACY.

    Which is more ecological, Cane, Rice, or Alligators?

    Or zinc anodizing, for tht matter.

    CANE, RICE AND ALLIGATORS ARE EXAMPLES OF THINGS “GRANNY” MIGHT BE DOING WITH ALL THE WATER. IF SO, SHE CAN PAY FOR THAT WATER WITH PER BUSINESS PROFITS.

    ZINC ANODIZING? SEE RECYCLING ABOVE.

    EMR

  13. Anonymous Avatar
    Anonymous

    “THE CONTEXT OF THESE COMMENTS WAS DOMESTIC WATER CONSUMPTION. “

    That’s a fair complaint. restricted to that context, I concede your point.

    A shower takes less water than a tub, ordinarily. If I have trouble standing, should I pay more for my water because I use more, considering it cost the county the same per gallon?

  14. Anonymous Avatar
    Anonymous

    “MOST HIGH WATER USES CAN EMPLOY FILTERING AND RECYCLING IF THE COST OF RAW WATER FEEDSTOCK IS HIGH.”

    OK, but we assume best practices are required. After all of that, If I still use more water for make up, why should I be charged more than it costs?

  15. Anonymous Avatar
    Anonymous

    “BECAUSE EVERY SERVICE SHOULD BE PRICED BASED ON TOTAL COST. THAT IS THE FREE MARKET. “

    OK, but how does that answer the question of why I should pay more than it costs?

    Economists would say that the only reason to propose this is so that you can get benefits you don’t pay for. It is imposing external costs on another and it is economically the same as creating external pollution.

    RH

  16. Anonymous Avatar
    Anonymous

    CHEAP PROCESS WATER YIELDS USES LIKE ACID LEACHING.

    And the business of government is to promote economic activity on a fair basis. Acid leaching has an economic value, whether we approve of it or not. Presumably, acid leaching is regulated on a fair basis and not some overblown, highly subjective assessment of potential problems that have some small probability of happening eventually. If we assume that everything else is perfect and fair, then what do we do about water pricing?

    Artificially charging more for process water leads to artificially higher costs for goods we all use and depend on. It also might lead to more mining of higher grade ore than recycling lower grade ore already mined, and therefore a real environmental deficit in the name of savings. if the savings we get in the form of less expense for providing water is less than the loss we incur from losing the uses of water, then we have saved nothing.

    Except on the water departments books. And the water department has no incentive and no requirement to consider total costs.

    Therein lies the problem.

    So, again, assuming that best practicies are required anyway, what is the justification for either charging more for acid leaching (bizarre in Larry’s words) or charging more per gallon regardless of the use, when after all, best practices are already covered?

    EVERY SERVICE SHOULD BE PRICED BASED ON TOTAL COST.

    And not one penny more. Expecially not if the the porposed extra cost is only based on some subjective ossification of what we like and don’t like.

    RH

  17. Larry Gross Avatar
    Larry Gross

    because the allocated capital costs are based on predicted per user useage. If that number goes up then bigger reservoirs, treatement plants and water lines have to be built than would have for lower useage rates.

    A certain sized pipe can serve X number of people whose useage is equivalent.

    Say 100 people can share a pipe then they’ll split the cost of the pipe 100 ways.

    But say 20 of the 100 use twice as much – then that means that that pipe can only serve 80 people.

    The people who use more have imposed much higher capital costs and should may more.

    In essence.. those that need a bigger pipe should pay for their bigger pipe.

    The “subsidy” that RH espouses is actually paid by those who use less but have to pay higher rates so that bigger pipes can be built to serve the higher rate/higher demand users.

    RH is always talking about adding up the costs… clearly.. if you add up the costs for providing water from the finite resources like reservoirs, treatment plants and distribution pipes – you can easily see the higher costs imposed from higher useage.

    yes RH claims that higher users are subsidizing lower users.

    RH apparently assumes that the size of the reservoir and facilities can dynamically expand and shrink according to demand.

    So you build a really really cheap reservoir… for 100 people and than when you add 500 more.. the reservoir automatically expands… to respond to the demand..

    This is called .. Supply Side Economics…

    🙂

  18. Anonymous Avatar
    Anonymous

    “Say 100 people can share a pipe then they’ll split the cost of the pipe 100 ways.

    But say 20 of the 100 use twice as much – then that means that that pipe can only serve 80 people.”

    What?????

    That is crazy. We know that the pipe can carry X amount of water, and we set the water price to cover that cost. If some users use more, then they pay more of the cost, even if it is the same rate.

    You can, of course, encourage them to use more water off peak, and store it in their own facilities for later use.

    You can do that by charging lower prices off peak or higher rates on peak, and just recognize that this means you have different values for different water uses, which is as you say, bizarre.

    RH

  19. Anonymous Avatar
    Anonymous

    “yes RH claims that higher users are subsidizing lower users.

    RH apparently assumes that the size of the reservoir and facilities can dynamically expand and shrink according to demand.”

    I never said any such thing. What I said was that large users support a large base usage, which justifies a larger capital expense. In turn this large capacity (and demand) makes the supply more dependable for the smaller users and takes the risk out of building a smaller and cheaper system which has less reserve capacity.

    So yes, to the extent that the larger and more dynamic system reduces risk there is an element of large users subsidizing the smaller ones.

    The flip side is if you build this huge capacity, and then your big user moves away,leaving you holding the bag. You might not want to encourage that with higher prices.

    But, you know when you build that pipe it can deliver X amount of water, and the price is set accordingly. Whether you sell the water to one customer or a hundred makes no difference, except you send out more or fewer bills.

    Unless of course you just don’t like one customer or another.

  20. Anonymous Avatar
    Anonymous

    “So you build a really really cheap reservoir… for 100 people and than when you add 500 more.. the reservoir automatically expands… to respond to the demand..”

    If you build a really cheap reservor, you get what you deserve for insuficient planning.

    But it won’t matter anyway because the new users will have to pay for the new capital expansion through, proffers, impact fees, tap fees, building fees, inspection fees, and so on, by your reckoning.

    So all new capital cost is charged to the new guys. Once that is done, everyone pays pretty much an equal amount for the amount of water delivered. Presumably, the larger and newer system has economies of scale and more reliability, and everyone gets more dependable water at a lower rate.

    In other words, the new guys subsidise the existing users.

    RH

  21. Anonymous Avatar
    Anonymous

    What happens if your, new, big user is far on the outskirts of town, in the area away form homes, zoned industrial.

    You charge him full capital costs for running that pipe way over there and expanding the size of the sytem to accomodate him, plus a fair margin.

    Then you begin to sprout new residential customers along the line. Essentaily the first big user subsidized the rest, unless you charge them tap fees and return the money to the big guy who came first.

    Fat chance that’s going to happen, so you use the extra money from new tap fees to lower the monthly water bill for everyone.

    Since the big guy uses more water, he gets a bigger break (and he made a bigger up front investment).
    This is pretty fair, what goes around comes around. You make a big investment early, you get a bigger brak later.

    Except the original early owners also get a lower rate and better service, which they paid nothing for.

  22. Anonymous Avatar
    Anonymous

    You guys are nuts.

    The Greens’ press release was right on target in that they are taking a PUBLIC utility to task for subsidizing waste and punishing conservation in a very regressive manner.

    Not only that, don’t overlook the fact that the City of Richmond is selling water at a discount to the surrounding counties while gouging its own citizens.

  23. Anonymous Avatar
    Anonymous

    You cannot assume that higher water usage is equivalent to waste. The Greens don’t understand what they are talking about.

    However, the matter of different rates for the same water is clearly unfair.

    RH

  24. Anonymous Avatar
    Anonymous

    Atlanta’s has water problems too.

    A brief recap–Lake Lanier, the primary water source for most of the Atlanta metro area has only 2-4 months of water left at current outflow rates. Drought conditions prevent the lake from refilling.

    Citizens blame the state for failing to anticipate the effects of rapid growth. The state blames the Army Corp of engineers for refusing to reduce outflow rates. The Corp blames the Endangered Species Act for requiring adequate flow for protected habitats downstream in Florida and Alabama. Environmentalists blame the state for failing to prepare and the state blames…are you ready for this..a below average hurricane season.

  25. Larry Gross Avatar
    Larry Gross

    I love this.

    There is a presumption that water availability is unlimited.. and that the issue is building the storage and distribution systems and further that the larger users of water.. are .. essentially paying for the lower users so therefore deserve a discount.

    Remember when this was the concept used also for electricity?

    Wow.. perhaps we should do this for gasoline. If I buy 100 gallons, I should get it for $2 a gallon because when I buy that much, I’m actually making it cheaper for those that only buy 10 gallons…

    and bring back that old electricty fee schedule also.

    I want to get cheaper electricity and if I can by using more then by gosh.. why in the world would I not do that.

    I could even run a line to my neigbors homes.. and make money selling my cheaper electricty to them for less than they pay the power company for it.

    Ponzi Schemes for the little guys!

    🙂

  26. Anonymous Avatar
    Anonymous

    Twist thei any way you like.

    There is an issue of fixed and variable costs and economies of scale which do help the little guy.

    RH

  27. Larry Gross Avatar
    Larry Gross

    but what is the benefit to society of encouraging higher levels of consumption of finite or limited and costly-to-provide resources?

    Water is NOT abundant during a drought – look around you.

    Aren’t policies that encourage MORE consumption – ultimately not a benefit?

  28. Anonymous Avatar
    Anonymous

    Aren’t policies that encourage MORE consumption – ultimately not a benefit?

    Yes, and so are policies that provide insufficient water.

    Total costs = cost of providing water + costs of water conservation.

    RH

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