voiceofsandiego.org: Cafesandiego... The Game of Pricing Water in San Diego: What Is This?

Well, this is a panel discussion. Except you don't have to go anywhere to see it and you don't have to write your question on a note card and give it to someone to give to the moderator.

Nothing is more important to San Diego than its water supply. We import the vast majority of this precious resource from hundreds of miles away through a system of rivers, pumps, canals and reservoirs. Along those routes, more and more people are building homes and businesses and challenging our rights to bring so much water in from so far away.

The city of San Diego is right now discussing how it should charge consumers for water. Officials have had trouble explaining why they can't -- or don't want to -- implement a tiered-rate structure that rewards conservation and forces major consumers of water to pay for it. As reporter Rob Davis deadpanned the other day: "Someone at City Hall must really like San Diego's existing water rate structure."

Davis has done some excellent work chronicling the city's struggles with this policy. But how should we price water?

I'm not going to tell you. But, along with the Equinox Center, we've brought together three experts to try to answer that question. And to help, Equinox has produced this excellent primer to help provide a basis for both how we price water, what we should be aiming for when setting a rate structure, and what other entities have done successfully.

So here's how it works. Here are the panelists: Richard Carson, a professor and former chairman of the economics department at UCSD. His introductory "remarks" are here. You'll want to read them because he flat out declares that there is no water shortage.

Lynn Reaser is the chief economist at Point Loma Nazarene University. Her first piece is here. "Economics 101 teaches that a good priced too low encourages wasteful consumption and inadequate investment in infrastructure. Water has clearly been priced this way."

Our third panelist is Erik Bruvold, the president of the National University System Institute for Policy Research. His introduction is here. To him, it's frustrating: "... the reluctance of the city of San Diego to move toward such a pricing scheme is, to be blunt, inexplicable."

Please feel free to comment underneath their posts. Each day, I'll send them questions culled from my own observations and yours. And we'll post the responses as often and as soon as we can. Try to keep the discussion civil.

No-one has addressed the issue of commercial users versus household use and the politicization of water rates. The hospitality issue, hotels and restaurants, are major water users and use their political heft to ensure they have the cheapest water available even at the expense of individual water users. The biotechnology industry needs access to high quality water in substantial amounts. Finally, the companies producing purified products from seaweed use obscene amounts of water and certainly in the past have used their political power to obtain equally obscene cheap water. Maybe I am wrong about this and if so please set me straight.

Posted by ian Trowbridge | reply to this comment
October 26, 2009 6:42 am

All three of your panelists are spot on. Economics solves this problem. Forget regulation, which is expensive (and near impossible!) to enforce. Raise the price of water and less is consumed. That is just plain common sense. One thing is clear, any sort of "base charge" should be eliminated. Water users should pay for what they use, nothing more, nothing less. The real question is how to raise prices. I prefer a flat rate; however, I understand the draw of a tiered rate. A flat rate that's too high may make water seem expensive for low-income people. One that's too low won't discourage conservation from the biggest users. A tiered structure attempts to solve this dichotomy by artificially lowering the rate for the smallest users (i.e. low-income) and artificially raising the rate for the biggest users (hotels, office buildings, etc.). It sounds great, but is unfair!!!

Posted by Stephen Waits | reply to this comment
October 26, 2009 8:04 am

When water agency operating expenses are drawn from water used fees, the agency has an inherent conflict-of-interest as a consequence. That's why some water districts face operating expense problems when people conserve their water use. A base charge that goes towards operating expenses provides more transparency for the consumer--they know exactly what the cost of the water itself is, and they see the operating costs separately. That's how the city of San Diego operates.

Posted by George | reply to this comment
October 26, 2009 8:35 am

I understand, but that leaves the guy who uses no water still paying just for the privilege of being connected to a water main. Roll the base expenses into the per-gallon rate and be done with it. Then plan to adjust this single rate according to overall consumption (and base operating expenses) on some set schedule -- perhaps monthly or quarterly. Rate changes must be well published. There are several toll-roads doing this on a smaller scale (HWY 91 in LA? I-15 here in SD?). The rate is regularly adjusted so that the toll lanes flow. It's working. The market solves all. Why mess with complicated pricing or regulatory schemes (which will be VERY hard to get right) when we can just price the commodity so that consumption matches our regional goal???

Posted by Stephen Waits | reply to this comment
October 27, 2009 8:24 am

As a residential 2 person household who has made a point to conserve, I'm frustrated. When I look back on my bill and and it says I used 20% less than last year and my payment is 100% higher than that previous year. I can't help to think the system is flawed. Using the same reasoning that "economics solves this problem" why can't people who conserve receive breaks, credits or incentives? Should it go both ways?

Posted by Joel Price | reply to this comment
October 26, 2009 8:31 am

SDCTA's comparative analysis of Irvine Ranch Water District's Single Family Residence Rate Structure to the City of San Diego's is relevant to the dialogue and may spark questions. link I have a few of my own and will pose questions directly to each panelist.

Posted by Lani Lutar | reply to this comment
October 26, 2009 9:10 am

The Equinox's Center's position paper says a major challenge facing a tiered billing system is that consumers can't tell when they are about to bump up to a higher rate. Is there a way that the water authority could set up a website or automatic email alerts so consumers could stay apprised of their water usage at a given time during their billing cycle? Most of us check our monthly cell phone usage a various times and conserve when necessary to avoid paying overage charges. Wouldn't we do the same for water if given the chance?

Posted by Dylan Mann | reply to this comment
October 26, 2009 9:35 am

To do this, you'd need near-realtime monitoring. Retrofit water meters with wifi-enabled devices that you can use at home and you'd have it.

Posted by larry | reply to this comment
October 26, 2009 12:34 pm

Your suggestion is an excellent one. I believe automated meter readers (AMRs) may allow the implementation of your idea, although there could be more involved. Our current water bills are supposed to pay for an AMR pilot program, but my understanding is that the appropriation of funding for the system was recently delayed by the City Council - don't know all the details of why. The use of technology - AMRs, upgraded billing system and other features that allow for real time info regarding water use - would not only go a long way to encourage conservation, it should result in efficiencies and quickly pay for itself. SDCTA supports investment in AMRs which would reduce the need for antiquated, inefficient processes which are labor intensive. We will continue to urge the City to incorporate AMR investment in the next cost of service study.

Posted by Lani Lutar | reply to this comment
October 26, 2009 12:38 pm

AMR, aka smart meters, are useful for informing customers about their energy or water use a particular times of the day. This is relevent when energy supplies and costs vary depending on the time of day (cheaper at night and in the early mornings, but more expensive from noon to 6 pm when demand is higher). But water supplies and prices don't typically vary depending on the time of day, since water is typically stored in reservoirs, so I'm not sure what benefits moving to time of use water pricing would bring us.

Posted by Watcher | reply to this comment
October 28, 2009 9:48 am

Tiered rates work ok in Oceanside. But we need an additional tier for those of us who really saved water yet pay the same as 50% of the other users. Plus we have to stop giving water incentives and demand that new projects create their own water through rain water capture, grey water recycling, etc. All new projects should also be plumbed for recycled water if and when that will become available.

Posted by Coastwatcher | reply to this comment
October 28, 2009 10:01 am

Missing from the discussions is the cost savings that could be effected through on site recycling of waste water. We send 170 MGD tothe Pacific every day. That same water can be cleaned up used and reused in closed systems creating water cycles integral to a home or structure. Every gallon saved is a gallon not purchased, not pumped away and an electrical dvidend in saved power. What do we need?What quality? What is avaiable on site? What storm water is available? Technologies exist for on site recycling of waste water. Storm water introduced into the system may eliminate the need for additiional water. We don't need potable water for flushing, irrigating, or airconditioning. Ecologically sustainable water cycles work. Run the math on a life cycle basis. In the interim if you need lots of water pay on a graduated basis until we stop wasting water.

Posted by Norman Allenby | reply to this comment
October 28, 2009 10:16 am

Few know this, but the City of San Diego's Water Department is, far and away, the largest property owner in the County. It has amassed well in excess of one billion dollars in real estate for which the City has no current use, nor plan. Worse yet, the Water Department, until recently, did not know of all of the properties it owns (there was an audit which was performed in 2006 to come to this conclusion). These properties are, effectively, a bank which the Department uses to shield its actual resources so that it can claim the need for additional funds in the form of rate hikes, rather than selling and leasing properties as a good steward would. It is a shameful practice, which the residents and City Council know nothing about but should. I hope someone steps up and does something about it.

Posted by A Lawyer in San Diego | reply to this comment
November 3, 2009 1:48 pm

The Game of Pricing Water in San Diego: What Is This?

Published: Monday, October 26, 2009 5:12 AM PDT