Equitable Water Pricing: Who Pays and Who Benefits from Water Supply Strategies?

 People affected by change have to be deeply involved in the crafting of solutions—they are going to pay for them either economically or through changes in how they live. We need more democracy, not less.   - William Ruckelshaus, the first director of the Environmental Protection Agency

Our water supply predicament in mid Santa Cruz County would benefit from “more democracy”. We’re going to have to pay for water solutions, use less water, or both. Arriving at our choice through democratic means will be a challenge. Our community’s ability to achieve consensus on water solutions could be undermined by the disparity between those customers who are used to using a lot of water and those who use much less. How likely is it that customers whose water use is within sustainable levels will support an expensive water supply project? Such water users would likely favor less expensive demand reduction strategies, that is, strategies that result in lowering the water consumption of high end users.

Customers on the high end of the water use spectrum may favor new water supply projects in spite of their high cost, in order to be able to continue their water use habits.

Water agency decision makers may opt for a combination of water supply and demand reduction strategies. Whatever strategies are chosen, our community will be better off if the decision embodies the principle that customers with low water use should not subsidize those with higher water use. If this principle is put into practice, it should be possible to find consensus on the solutions.

Consensus on the problem statement

There should be no difficulty getting consensus on defining the problem: our aquifers are overdrafted and our streams are overdrafted for much of the year. An objective follows from the problem statement: reduce aquifer overdraft and diversion of water from streams. Everyone benefits from resolving this problem, because if we don’t allow the aquifer to recharge, we lose the resource to salt water intrusion. If we don’t leave more water in the streams for fish habitat, we risk causing the local extinction of native fish. (Those readers who don’t immediately see their own interest in the restoration of populations of steelhead & coho salmon are invited to consider National Geographic’s estimate that “half of all plants, animals and birds on the planet will die off before 2100”[1].)

We don’t have consensus when we consider strategies for achieving the objective. From one point of view the problem results from over-use of the resource by a minority of users. In the Soquel Creek Water District, for example, 51% of single-family residences already meet the District’s goal for water use.

Demand reduction strategies & resistance

What demand reduction strategies can achieve the scale of demand reduction needed by the Soquel Creek Water District? (The District is aiming for a 31% reduction from 2012 use, maintained for a 20-year period during which it is hoped that the groundwater rises to safe levels. The 20 year period may need to be extended given the climate change prediction for shorter winters.)

A traditional approach to demand reduction would be water rationing with price penalties to change water use behavior. Water managers are not hopeful that this strategy will work. Their experience is that price penalties won’t change the behavior of well-heeled users who don’t feel affected by the penalty.

Those customers who don’t keep within their water ration could have their water service restricted by the District. Water managers fear that this approach will drive customers to drill their own wells, thus defeating the whole purpose of reducing pumping from the aquifer.

Partly to discourage this outcome, water managers are looking into forming a groundwater replenishment district, which would be empowered to charge private well owners a fee for measures to recharge the common aquifer. Among seasoned water agency staff, this strategy evokes memories of the backlash against the Board of Supervisors during their inquiry into requiring meters on private wells. People brought firearms to the Supes meeting. The meeting was adjourned. And the subject of metering private wells has never been revisited.

The Soquel Creek Water District is considering a mandatory rationing plan that goes beyond price penalties for excessive use. Under the “full tool box” plan, the District would replace plumbing fixtures, appliances, and landscapes for water customers—at District expense. Estimates for this plan put its cost higher than desalination. This raises the question, will customers whose water use is already low have to pay for these conservation retrofits?

Although the District considers the “full tool box” to have a better chance of achieving the targeted reduction in demand than rationing enforced by price penalties, District leaders have doubts as to its chance of success. Private property owners would need to give their permission for District installation of new fixtures, appliances and landscapes. This may be difficult to achieve.

If demand-reduction strategies won’t work for Soquel Creek Water District because of backlash against coercive measures, are there other ways to reduce demand?  In his book, Fostering Sustainable Behavior, Doug MacKenzie-Mohr believes that financial incentives can be powerful tools with which to motivate behavior. However, MacKenzie-Mohr recognizes that citizens are motivated by other factors, such as contributing to the common good. Thus he recommends partnering with all types of community groups, churches, and schools to solicit signed individual commitments to hold water consumption within a given limit. MacKenzie-Mohr recommends an approach to community outreach that is more extensive than anything we’ve experienced locally.

More Democracy

Donella Meadows, in her book Thinking in Systems, discusses what to do about policy resistance, the push-back against policy measures meant to alter the status quo. Meadows suggests, “Bring in all the actors and use the energy formerly expended on resistance to seek out mutually satisfactory ways for all goals to be realized—or redefinitions of larger and more important goals that everyone can pull toward together”. Meadows is essentially recommending “more democracy”.

The more democracy approach goes beyond what MacKenzie-Mohr is recommending. MacKenzie-Mohr is a social psychologist who offers policy makers more effective ways to elicit behavior change among the public.  The subtitle of his book is An Introduction to Community Based Social Marketing. More democracy is not about more effective ways to get people to follow the policy determined by the policy-makers. It is a process where the people affected by decisions collaborate in making the decisions. According to Donella Meadows, it is public participation in a process that clarifies the common good—versus short-term or private gain—and devises strategies to achieve it.

There are professionals who specialize in public collaborative process. Santa Cruz is about to hire such a professional to guide its Water Solutions Advisory Committee. Soquel Creek District might benefit from an abbreviated public engagement process as a follow up to its current investigations into aquifer overdraft remedies. Since the options available to Soquel Creek District involve significant changes in water use and/or in the cost of water, the deeper the public engagement in devising the solution, the better.

 

If the decision-making process does not involve the public in a more significant way, it is hard to imagine that demand reduction strategies will be effective. Conservation managers at the District point out that very few customers have taken advantage of the extensive rebates offered by the District for equipment such as smart irrigation controllers and rainwater catchment hardware. It’s fair to conclude that not enough customers are really engaged with the problem. It’s understandable that District Board members would hesitate to share decision-making power with a public that is unengaged. Yet under the current decision-making structure, the five District Board members are carrying a heavy weight of responsibility to prevent salt poisoning of the aquifer. More democracy means that the responsibility for addressing the problem is shared by the whole community. Can the public be trusted? If the answer is no, can the aquifer overdraft problem be solved?

Democratic Pricing

If the citizens don’t join in common purpose to reduce their demand, then there really is no choice. The District Board must choose a high-cost water supply strategy to save the aquifer. The non-desal strategies under consideration are inter-agency water transfers, and aquifer recharge with purified wastewater. With either high-cost strategy, there is likely to be significantly less emphasis on demand reduction. That has proven true in Australia where water agency funding of demand reduction declined in places where desalination came online. Once customers can’t avoid paying a lot more for water, they may feel less inclined to restrict their shower time.

With a high-cost new water supply solution, high-end users will be able to continue their accustomed water use. It’s questionable how “democratic” such a decision would be, since customers’ income disparity undermines the effectiveness of the demand reduction strategy that would be in the interest of the majority of customers. If a high-cost water supply strategy is chosen, then at least the cost of that solution should be borne by the high-end water users.

As part of reaching its groundwater pumping goal, the Soquel Creek Water District has set a target for single family home customers of 53 gallons of water used per day per person. From the point of view of the 51% of customers who already meet this target,  this goal is achievable. After all, Melbourne, Australia, averages 43 gallons per capita per day. So it would be equitable to charge the cost of new water supply infrastructure on the tiers of water use above 53 gal/person/day.

Our local water districts are already in step with water agency “best practices” for water conservation by charging tiered rates, whereby the highest increments of water are charged at the highest rates. However, our local water agencies have yet to adopt a principle that the marginal cost of new water supplies (or new conservation investments) should be charged to the highest tiers.

Such a principle is consistent with California law. In order to be compliant with Proposition 218, a rate structure that places the burden of new water supply costs on the highest tiers is legal so long as the water district documents that the rates are reflective of actual costs.[2] Putting new water supply costs on the highest rate tiers meets the principle in California law that “cost-of-service pricing precludes subsidy of one rate payer at the expense of another”[3].

An article in the American Water Works Association[4] argues that  “When excess water consumption is priced to capture the costs associated with overuse, the rates more closely respect each customers’ proportionality requirement by ensuring that those customers who stay within reasonable use of water don’t pay for costs generated by those whose use is excessive.”

At the October meeting of the Santa Cruz Water Commission, Sanjay Gaur, of Raftelis Financial Consultants, said that a recent court decision invalidating tiered rates in San Juan Capistrano is not a threat to tiered pricing. The court’s decision was based on the water district’s failure to correlate prices with costs. Mr. Guar also affirmed the legality of charging the highest tiers for costs of new water projects and conservation programs.

Conclusion

As we cope with overshooting nature’s limits in our water supply, having “more democracy, not less” is challenging due to our income disparities and our lack of experience with successful community collaboration. Whatever the decision making process, an equitable allocation of costs could be a way to achieve community consensus.

[1] http://newswatch.nationalgeographic.com/2012/03/28/the-sixth-great-extinction-a-silent-extermination/

[2] Janet Morningstar, Conservation Water Rates and Restrictions, Complying with Prop 218: “Data and documentation to support the amount of the charges for each increment should be prepared and available to the legislative body at the time the rate schedule is adopted”

[3] Hentschke, “Conservation through water pricing”

[4] Hildebrand et al, “Water conservation made legal: Water budgets and California law”

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