INCENTIVE PRICING A KEY COMPONENT TO REDUCE WATER USE

BY DAVID CAMPBELL
Water Committee

In spite of the frequent news and announcements about the lack of snow on the State's mountains, low levels in reservoirs, and the resulting damage to farms and fish, many urban residents are complaining about, or ignoring, the conservation measures -- carrots and sticks -- adopted by most Southern California water agencies.

The carrots are generous rebates for water-saving expenditures on high efficiency clothes washers and toilets, irrigation controllers, and synthetic lawns. The sticks are rules and penalties for outdoor watering practices and higher prices per gallon. The Metropolitan Water District of Southern California and other agencies' advertisements increase awareness of the current water shortage so that those persons who have strong civic responsibility, i.e. Sierra Club members, will act to save water and support the conservation efforts of their local water purveyors.

Pricing is the best tool ever invented to recognize scarcity and to ration goods to reallocate shortages. For example, the huge jump in gasoline prices in 2008 led to fewer and shorter car trips, more car-pooling, waiting lists for hybrid autos, and lower prices for used gas-guzzlers. Higher prices for water will make recycling waste-water acceptable; and reduce other thoughtless actions that result from cheap water such as hosing down driveways, watering lawns in the middle of the day, leaky faucets, etc.

Conservation pricing is a prime component of the Federal guidelines for water resources planning that requires a primarily non-structural plan to be included in the range of reasonable alternatives when addressing water shortages. The late Los Angeles Mayor Tom Bradley took this approach by first addressing the drought of 1989-1992 by creating a Water Pricing Committee. The main features are a two-tier pricing bracket with high consumption users paying a higher price for excess water and permission to narrow the amount of the lower-priced water during droughts. This program created conservation incentives that considerably reduced water consumption by L.A. Department of Water and Power (DWP) customers.

Water agencies should, but seldom do, place a seasonal surcharge that recognizes the scarcity value of water during the summer when demand is high and rainfall and streamflows are low. Seasonal rates are useful in maintaining reservoir levels and averting annoying drought restrictions.

Pricing works only if customers are made aware of what the price is. The price of gasoline is posted in huge numbers at every service station so that car and truck drivers respond as expected. Agencies should also sell water by the gallon, not as they now do by quantities that customers can’t envision such as acre-feet, or one hundred cubic feet.

Conservation pricing should provide clear price signals in the form of understandable bills, reward customers who conserve water, create a hidden supply of water for future growth, leave more water in streams for fish and wildlife, and reduce expenditures for higher-priced water from the Metropolitan Water District.

Water agencies public information messages should link conservation pricing with water conservation programs. For example, the Los Angeles DWP recent bill enclosure describes the current drought and illustrates how much water, in gallons, could be saved by following its tips. It could be even more effective by also mentioning the dollars that could be saved by conservation. Even if the price of each gallon of water, about 1⁄4 of a cent, has increased slightly, customers who cut their consumption will see that their total water bill falls.