Conservation and the water pricing dilemma

We see this over and over again.

Generally speaking, water is free to municipal/industrial customers in the United States. What we pay in our water bill is for the cost of delivery – the pumps and pipes. We’re paying for water delivery infrastructure, not the commodity itself.

But we nevertheless generally price the water by unit consumed, with utilities setting their rates to cover those infrastructure costs (plus profit if it’s a private utility).

We conserve. Revenue (remember it’s priced by unit sold) goes down. But most of the cost for the pipes and pumps is fixed, and doesn’t vary when users consume less. So conservation-minded customers are rewarded by rate increases. From the Orange County Register:

The Golden State Water Co. has applied to the California Public Utilities Commission to raise its 2013 water rates that could see Golden State’s average residential customer’s bill in Orange County increase by 24 percent. The boost, the company says, is to offset lower profits caused by a drop in water consumption and for system upkeep.

Cue Zetland.


  1. I had a lovely dinner one evening with someone high up in that company. Fascinating conversation and helped me understand private water purveyors a little better. Expect more rate hikes like this in our new normal. Old days are gone.

    Anyway, we just had a large rate increase to pay for infrastructure for future growth. Cost was well into the 5 figures/af. Growth doesn’t really pay for growth, does it?



  2. Timely. I just asked the woman behind “Rip the Drip” PSAs how to sell customers on the inevitable rate increases that follow voluntary conservation. She said she was stumped.

    That won’t do, of course, so I suggested — as in the book [Thanks!] — that scarce water trigger BOTH price increases and PSAs. Then people will use less water AND avoid paying more.

    They should listen to you (us) more 🙂

  3. Ugh. You and DZ both fail. Did either of you pull a copy of the annual budget of any public water company before writing?

    Number 1 cost: salaries. 2. Usually, other fixed costs, like rent, benefits and debt service. 3. Energy for moving and serving the water.

    Now, what can we say about categories 1 & 2? They’re largely fixed from month to month. So, how should a public agency cover a fixed cost? With a fixed income stream, duh. In other words, a standard monthly service charge, NOT a per-unit rate. Per-unit (variable fees) should only cover variable costs.

    Plenty of agencies have figured this out.

  4. Francis –

    Thanks for the comment. I’d be curious to hear more about the agencies that are charging their customers in the way you describe. (And in answer to your question re pulling a copy of a public water utility’s budget, yes.)

Comments are closed.