Blue Crab Boulevard

Catch 22 And A Half

Drought strikes. People, exhorted by the politicians and functionaries of municipal utilities exert themselves and conserve water. Then comes the reward for all their scrimping on water: Massive fee increases because the water authorities didn't make enough money what with people saving water and all.

ATLANTA — Many residents of the Southeast who sacrificed greener lawns and longer showers to reduce water usage during the region's historic drought are now seeing the other shoe drop: They're being hit with sharp rate increases as water utilities scramble to make up revenue lost because of conservation measures.
The drought is lessening across much of the region, and the most severe outdoor watering restrictions have been eased in places such as Atlanta, Charlotte and South Florida. Now come the heftier water bills.

Among the price hikes:

•Atlanta's water utility, facing hundreds of millions of dollars in bond debt for a $3.9 billion update of its sewer and water systems, is seeking a 15% rate increase to offset conservation losses; other water utilities in metropolitan Atlanta are likely to follow suit if usage stays low.

"We're estimating a $33 million-a-year loss because of the drop in revenue from people conserving," says Janet Ward, spokeswoman for Atlanta's Department of Watershed Management. "That's the Catch-22 that we're in. People conserve, and you're so proud of them. Then you say, 'But wait, you're going to get hit with a bigger bill for conserving.' "

(My sister lives in Atlanta. I just have to ask her her opinion about this.) Many Florida residents are seeing a drought surcharge added to their water bills that adds about 15% to their bills. That seems to be the magic number all through the story. If you did the right thing and conserved, you get hit with a penalty of 15%. If you didn't do the right thing and wasted water – you get hit with a 15% penalty.

Anyone paying attention here? What is the lesson the water authorities just sent? The next time they call for conservation, people are going to tell them where to put their pleas.

UPDATE: Many thanks to Glenn Reynolds for the link.

Bad Ideas | Gaius April 23, 2008

By Larry Sheldon, April 23, 2008 @ 6:33 pm

California was using that technology back in the 1970’s.Reduce water usage or they would come out and put a restrictor in the pipe.Reduce usage, and they jacked the prices up to exceed what you had been paying for a lot more water.
By Maggie, April 23, 2008 @ 8:27 pm

Gaius -
My sister lives in Fayettville, Ga.
Wait until she hears about this (she’s a very busy doctor and hits/misses on daily news … I USUALLY call her from up here in Ohio when I see weather alerts for her area down there …)
By lewy14, April 23, 2008 @ 9:40 pm

Um, yeah, but… the revenue constraints are real. The price of water is going up, the filtration plants have to be built, the bonds have to be paid. In the absence of conservation, all these bills would increase even further.What would you have the Government do, exactly?
By Freddy Hill, April 23, 2008 @ 9:42 pm

That’s government for you. Sales are down? Increase prices!
By Rob Mandel, April 23, 2008 @ 9:46 pm

this is exactly the group we want running health care, right?
By Shannon Love, April 23, 2008 @ 9:50 pm

Price rationing. Give people a certain minimum amount of water free and then charge for any over that. When water stocks go down, raise the price accordingly. You could even fix the price before hand based on water stocks.

To easy I guess.
By Richard R, April 23, 2008 @ 9:51 pm

If they get you to conserve 15%, then the drought ends, they raise the bill AND then they approve construction of 15% more houses. Because – at least in So. Cal. – water and sewer was the limiting factor to begin with. Repeat as needed.One day they’ll have a drought and call for conservation, only to find that nobody’s been wasting water.
By Marybel, April 23, 2008 @ 10:21 pm

Is there ground water in Atlanta and its outlying areas? Hows about drilling a well and just going it on your own? We live in a rural area, have our own well, treat our water, and are completely self reliant in that regard.
By Pink Pig, April 23, 2008 @ 11:25 pm

We’re nowhere close to running out of water. Where did the notion that the government could charge us for water come from? The government’s not supposed to own anything, except that they do. I agree with John Edwards, except not in the way that he meant: there are two Americas, the government and everybody else.
By JEM, April 24, 2008 @ 12:47 am

Many years ago when I lived in SF there was a water bill. Along about the time of the early ’80s drought when water usage dropped they added a ’sewer surcharge’ that eventually (IIRC) exceeded the water usage charge.
By Robert, April 24, 2008 @ 1:42 am

It happened here in Charlotte, NC, also. People are in a rage about it, especially since the county (Mecklenburg) water department didn’t warn up front that water conservation would result in higher fees, so the announcement came as a total shock. And no, the water department can’t make any cuts in personnel, that was the first question asked by enraged customers.
Gotta love government.
By michaelyi, April 24, 2008 @ 2:29 am

Perhaps these socialist enterprises should impose two separate charges on their bill; one to cover the enterprise’s fixed costs and another for the water delivered. Then, when demand for water drops (for whatever reason) the money to pay for bonds and other fixed costs continues to come in without a shocking jump in the per unit cost of the water delivered.
By Don, April 24, 2008 @ 2:39 am

We lived in Atlanta until a year ago. In one of the previous watering restriction instances I left the watering system on accidentally and came home to a notice on the door. That was our warning. So they definitely have "patrols" checking compliance.So "The next time they call for conservation, people are going to tell them where to put their pleas.", the people will do it, because it’s government telling you to do it, and the gov’t will punish you if you don’t.
By davod, April 24, 2008 @ 4:37 am

This happened in the 70s in Perth, Western Australia. The state government said thaty due to the unusually (?) dry conditions they would need to adopt water conservation strategies. The next summer the price of water increased, in part, because they needed x revenue to run the system and in par becaue they wanted to get som more revenue.
You also need to be aware of the cries to conserve electrical power for the same reason. Operating powere stations and grids cost money. regardless of whether you have a private system or a government run system they need a certain amount of cash to operate. Additionally, a commercial operator has to earn profit otherwise it will go out of business. Government operators need a some cash over and above operating expenses into put into the governments coffers.
If you do a good job of conserving they will need to raise the price.
By Will Collier, April 24, 2008 @ 4:45 am

I’d say most people around here were shocked, but given the history and reputation of mismanagement in metro Atlanta, nobody was actually surprised. With apologies to Dale Gribble, local and county government in Atlanta are the feces produced with corruption eats too much stupidity.
By phwest, April 24, 2008 @ 5:11 am

Three points,First, echoing one of the earlier comments – what else did you think would happen? Water distribution is driven mainly by fixed costs – it’s not like the water company buys the water after all, it is collected. The only costs that are strictly tied to throughput are going to be energy related – and they’ve been increasing enough on their own. 15% less demand doesn’t let you shut down pumping stations or treatment plants, and the distribution net doesn’t change either. If the utility is wasting money then it was wasting it before too, and the degree of waste has nothing to do with the conservation program.And the "everybody gets hit with a 15% increase" whine ignores this truth:Person A (conserver): Old Bill $50/month, conserve 20%, drops to $40, 15% increase ends up at $46Person B (non-conserver) : Old Bill $50 month, no conservation, 15% increase ends up at $57.50How exactly is Person A being penalized in this situation – he uses 20% less water than person B and pays 20% less. Even if person A spend money to reduce his water needs, that investment is still saving him money, in fact with the increase it is paying off even more – it just doesn’t feel that way.Basically all that happened was there was a shortage, and so the price went up. But because the supply is controlled by a public utility, the normal response to a shortage – price increases – doesn’t happen immediately. Instead the price is kept artificially low and the water rationed. Then the utility gets a rate hike to cover the revenue shortfall. If this had been a market situation, prices would have shot up immediately until demand fell, and since I suspect water demand is fairly inelastic, I would expect a much bigger than 15% increase would have been required. Once reservoirs (inventory) refilled, prices would have come back down. But either way, prices go up.
By SomeOtherSteve, April 24, 2008 @ 6:27 am

IMHO, this is just a case of where government control of a resource results in a perturbation in the rules of supply and demand.
In a private enterprise model, if a company realized its supply was diminishing, it would raise prices, and market forces would come into play. The rising prices would likely result in lowered consumption or changes in consumption patterns. My wife and I carpool together more now that gas prices have increased.
The government is usually not allowed to operate in that manner. The government cannot use pricing to control consumption, so it uses regulatory compliance to control consumption. However, it is dedicated to providing a level of service. (Droughts can increase maintenance costs since there are frequently more line breaks when the ground contracts and shifts due to a lack of moisture.) The result is that the government entity must account for the shortfall in revenue, so price hikes lag instead of lead the supply/demand curve.
By JohnMc, April 24, 2008 @ 6:59 am

Whaaat!? Boy this does not make sense. Out here in my part of Texas we have shortages all the time usually by mid to late summer. The utility agencies separate out the base charge, which covers the bond/infrastructure [fixed] costs from delivery/usage [variable] costs of the water used. When the reduction alert goes out we don’t get hit with surcharges and our bills actually drop in price. I suspect these agencies out East need a lesson in managerial accounting.
By Jason Allen, April 24, 2008 @ 7:15 am

They did the same thing here in Denver. More and more I think the politicians are using a national playbook to raise taxes and fees. When there was plenty of rainfall,they raised tap fees in new houses to pay for dams for flood control. So more water or less water,they up your costs either way. Its whatever excuse you will swallow.
By C Stanley, April 24, 2008 @ 7:53 am

Don is right- the conservation is mandated, not voluntary, and you do get fined (after first warning) if you don’t comply. We had just put in extensive landscaping and an irrigation system last Spring, only to find that we’re now not permitted to use the irrigation system (all outdoor watering is banned.) We’ll lose most of the plants we invested in this year unless we put in a cistern or rain barrel system. Ugh.
The supply problem stems from the dam management agreements with neighboring states. With the low rainfall over the last few years, no adjustments were made (until it got really critical last summer) to the outflow from our lakes.
By A Student of Utility Regulation, April 24, 2008 @ 10:36 am

Look. In the end, there is a disconnect from goals/rationals between all utilities and government. The same thing happens in natural gas, electricity, etc. They are billed by volumentric measurements because that’s an easy way to measure. Most people think it’s reasonable. But for utilities, there is an incentive to sell more, like any other business.
But government has "the public good" type goals that they mandate utility companies to conserve and promote energy efficiency, etc. So all utility companies are caught in the Catch 22. They have to make programs that pretty much work against their own self interest.
Everyone has had their rates been raised even if they conserved, whether its gas, electricity, or water. This is nothing new and many utility companies are trying to push ‘decoupling mechanisms’ through their respective regulatory bodies.
Add to the fact, it sounds like that water utility put in new/updated infrastructure. The fines came from the city, itself, in their function of promoting conservation, not in their function of being a utility. Just because the water utility and "water police" are owned by the same city doesn’t mean a thing.
To the people that suggested wells, you can only do that if you have the water rights. This varies by local law and the municiple entity would probably have a legal monopoly over the territory, plus that issue is a non-starter since it would only work for people that own a house or land with attached water rights. Plus the existing infrastructure would still belong to the municiple utility. Plus the city-dwellers would have to the money to put the investment of a well and maintainance, if they did have the right to. And they would still be fined for watering their grass.
By jt, April 24, 2008 @ 11:28 am

We have a similar situation with our local trash pickup. The town got suckered into a long-term contract with a regional incinerator, guaranteeing a minimum volume of trash. When the town began curbside recycling, we fell below the minimum–so now we pay for the recycling pickup *and* for the trash we don’t send to the incinarator any more.
Worse, recycling isn’t available to businesses and apartment complexes, where the economies of scale would be most impressive. It would cost too much NOT to burn their paper and plastic trash.
By sam, April 24, 2008 @ 11:30 am

The same thing happened here in Salt Lake a few years back. People conserved and then the charge went up. After that, the water department went to a tiered charge, so if you only use a small amount you don’t pay much, but the rate escalates for larger blocks. The tiered rate encourages people to conserve water in their yards, where most of the consumption is, without hurting domestic use.As for why the government is charging for water, well duh. The water may be free, but cleaning it up and getting it to your faucets is not. Here in the west, the water has to be collected, stored and transported sometimes hundreds of miles. None of that comes cheap. But it makes people much more conscious about where their water comes from and the cost of supplying it. We don’t have the luxury of just waiting a week or two for the rain to fall out of the sky onto our lawns and into our reservoirs.
By Louise B, April 24, 2008 @ 12:24 pm

This exact same thing happened in Albuquerque, New Mexico a couple of years ago. We had a massive PR effort by the city government to reduce water usage. Then the revenues weren’t enough so they increased prices. The latest idea is to put lawns on top of our flat roof houses to save energy. I’m not exactly clear as to why.
Louise B