1. There is less water being sold, so the cost/unit has to rise to cover costs; see this post.
2. Higher prices are a good way to encourage conservation; see this post.

I’ve got a lot of email and read several stories [this and this] on the controversy over the attempt to raise prices in the Helix Water District (HWD, down in San Diego county).

In a nutshell, here’s the problem:

• HWD sells a lot of water to people with large lots (1+ acres) that have animals, landscaping, and “irrigated lifestyle” features.
• HWD proposed an increasing block rate structure per meter that would have added 40-50% to the water bills of people who used the most water — regardless of lot size or number of residents.
• A number of residents complained that it was “not fair” if they had to pay “wasteful” rates when they merely suffer from large lots. (Some people worried about “caregivers” — an uncommon activity that’s more emotional than “horseriders.”)

HWD was going through the Prop218 process of notification and public hearing before raising rates from these prices:

Tier 1 (0-10 units) @ $1.70/unit.
Tier 2 (11-30 units) @ $2.35/unit. (up 38%)
Tier 3 (31-30 units) @ $3.12/unit. (up 33%)

to these ones:

Tier 1 (0-10 units) @ $2.04/unit.
Tier 2 (11-22 units) @ $2.72/unit. (up 33%)
Tier 3 (23-42 units) @ $3.40/unit. (up 25%)
Tier 4 (43+ units) @ $4.52/unit. (up 33%)

Note that these new prices were revised downward from this initial proposal:

Tier 4 (43-59 units) @ $5.10/unit. (up 50%)
Tier 5 (60+ units) @ $6.80/unit. (up 25%)

The rate increases were canceled in response to public outcry and what appear to be failures to comply with public notification guidelines.

The directors backed down, IMO, because they could not justify higher prices as either fair or efficient. The first mistake that they made was to set prices per meter instead per capita. Had they done that, the debate would have turned from “caregiving” to “urban ranching” — with significantly-different moral implications. (HWD can find the number of people in a house through informal survey and audit mechanism; even though few of us are audited, most of us tell the truth to the IRS.)

The second mistake they made was to basically double rates on the highest (now eliminated) fifth tier. I would have suggested a lower increase and then a waiting period to see if demand was less than supply. If it was, the price would not change. If it was not, the directors could have called for another hearing, to raise prices on people using “more than their fair share” — after all, humans come before landscaping, right?

In their defense, the directors did point out the inconsistency of charging increasing block rates to residents when irrigation/business/government users “enjoy” flat rates. Here’s my suggestion of how to charge them increasing block rates.

The Helix directors will listen to public commments on a proposed price structure on June 3rd. I hope that they move to per capita prices, but they will probably move to water budgets — an expensive-to-calculate, difficult-to-understand system that will lock in cheaper water for people with larger lots. AT least it seems to be what they are saying in their current proposal:

To help focus the revised rate study, the board directed staff to apply water conservation goals across all user classes equally, maintain the current three-tier system for the Domestic Class, raise the commodity charge by the same percentage across all user classes and all tiers, implement water budgets for the Irrigation Class, maintain a single unit cost of water for Commercial and Multi-Family classes (no tiering), and prohibit irrigation meter pricing on single-family lots. Within the Irrigation Class, Tier 1 pricing will be full cost recovery, and pricing exceeding the target water budgets will be used to offset conservation activities. The plan will allow single-family lots two meters if they wish to install them, but both will be billed at Domestic Class rates.

I disagree with water budgets and ongoing flat rates, but perhaps that’s all that’s politically feasible.

Too bad, since I’d hate to see HWD run out of water because people are irrigating in the desert (13 inches annual rainafall).

Bottom Line: Man-made water shortages will last until we get prices in line with supplies. The best way to set water prices is on a per capita basis. Urban water is for people, not lawns!