Flawed rate structures cost California water utilities half a billion dollars

Tara Lohan at Water Deeply had a great interview last week with Tom Ash of Southern California’s Inland Empire Water Agencies about the problem of water revenue in a time of conservation and drought:

Tom Ash: What I learned is that it doesn’t matter where in the world – China, Chile, Spain, France, Italy, Israel – we all have the same problems in terms of water rates. We all have droughts, we all are facing climate change, we all have population growth. And in most countries they are having trouble recovering the cost of service.

Agencies in California in the last year probably will have lost about half a billion dollars in water revenues.

My Twitter quip was that the agencies had lost half a billion dollars because of conservation, but Jessica Blois correctly pointed out that was not quite right:


Ash goes on to offer a useful explanation of the difference between charging for the sale of water and charging for the basic infrastructure delivery:

Its job is to deliver clean, safe water, 24/7. Most of those costs to do that are fixed and the fixed costs are put into the cost of water. On average, let’s say 75 percent of costs are fixed for most public water agencies – it’s not the water that is expensive.

The entire interview is worth a read.


  1. It is clear that as stated 75% of the cost of the water system is the same no matter the amount of water used (up to the capacity of the pipes). This explains why where I live the base charge per month for water is 27.67 and then 2.55 per thousand gallons. It seems that utilitys need to move to a higher base charge to recover the fixed cost.

  2. ‘Flawed’ is in the eye of the beholder. One reason that agencies push fixed costs into water usage is as an anti-poverty measure. Forcing poor people to ask for discounted water is embarrassing and likely ineffective. (How many people would even know that discounting programs exist?) So plenty of people, including elected representatives, believe that a bare minimum supply of water should be free, as a human right / civil right.

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