Friday, September 28, 2012

USA Today - Water Rate Study

This week USA Today posted a story about rising water rates throughout the US.  The increases (on a percentage basis) are very large in some cities.  It would also be interesting to see what those changes were on an absolute basis - if your water bill is $20 to start with then raising it to $40 is a 100% increase, but still a pretty small price to pay for having water come out of a pipe in your house whenever you want it.  This is a pretty gross generalization, but it looks to me like the systems with the largest cost increases are concentrated in older eastern cities where they have probably been hit with large bills for major system upgrades to old water system infrastructure or in rapidly growing western cities that might be paying, or preparing to pay, for expensive new supplies to meet surging demands (I'm looking at you San Diego or possibly Atlanta on both counts).

The article does a pretty good job of describing the paradox of conservation with utilities - when you conserve the fixed costs of running the utility are spread over fewer units so the cost per unit increases.  This is especially prevalent in water utilities that often recover a significant portion of fixed costs with variable revenue sources.

I had a thought while reading the discussion of how many utilities are facing high costs from past borrowing to pay for infrastructure upgrades, system expansions, costs of compliance with new regulations, etc.  Did some of them possibly overestimate the revenue they would take in in future years when they had to payback those bonds, either by assuming continued expansion of their connections or that rates of household consumption would level off rather than declining?  I don't doubt that many of the upgrades that were done were necessary, but maybe they would have scheduled the work over a different time frame if they had more reasonable expectations for future revenue streams.  Or tried a bit harder to find ways to curb costs for the needed work.

Thanks to Val Little at WaterCASA for tipping me off to this story.

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