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Sensible tiered water rates needed to curb use

Most Americans take water for granted. When we turn on the tap, out comes a limitless supply of potable water for less money than we pay for cellphone service or cable television. So, it’s no surprise that Californians failed to heed Gov. Jerry Brown’s plea to reduce water use. That failure prompted the State Water Resources Control Board to enact emergency regulations that impose tough new restrictions on outdoor water use.

The board’s new rules will help to reduce water use. Some previously apathetic citizens will abide by the new restrictions. Some water suppliers will enforce the board’s mandate. In a strange way, the board has given local officials political cover to take steps they were too timid to take.

Yet, other officials have responded grudgingly. The board has left enforcement to local agencies, some of whom aren’t too keen to play the role of water police. The much-ballyhooed $500 fine for wasting water may come only after repeated warnings and court action.

Even water suppliers who aggressively want to enforce the rules will face challenges. Understaffed enforcement departments will require new funding. Enforcement officers face time-consuming tasks, such as determining whether a fountain has a recirculating system. Loopholes will undermine the effectiveness of the rules: Limiting outdoor watering to two days per week doesn’t prevent a homeowner from running the hose all day.

The reduction in water use will come at a cost – literally. It will create a revenue-stream problem for water suppliers. Water rates offset a supplier’s out-of-pocket costs by bringing in an amount calculated to equal those costs. If the volume of water delivered by a supplier declines, so too do the supplier’s revenues.

In 2011, Texas suppliers found this out the hard way. A prolonged drought prompted hundreds of communities to place severe restrictions on outdoor water use. Customers reduced their consumption, which in turn reduced the suppliers’ revenue streams. Local elected officials faced an uncomfortable situation. Having ordered citizens to use less water, politicians had to raise water rates to recoup the lost revenue. Many customers were furious. California should learn from the Texas experience and take a different approach.

Buried in the small print of the California Water Resources Control Board’s emergency regulations is an alternative that has gone largely unnoticed. Instead of imposing restrictions on outdoor water use, a supplier may obtain board approval for “allocation-based rate structures.” Water suppliers could use a system of increasing block rates to encourage conservation. Seasonal adjustments to the rates could target high water use during the summer for outdoor irrigation.

Increasing block rates would give all homeowners a financial incentive to reduce their water use. Such rates would also allow water suppliers to avoid the costs associated with monitoring and enforcing regulatory bans on outdoor uses.

Raising water rates is politically dicey. But local officials are going to have to raise rates anyway, so they may as well justify their actions under the auspices of the water resources board option.

A sensible rate structure would establish a baseline with free water for essential human needs. Beyond that point, rates would increase at various thresholds until the highest rate is reached. Suppliers should set the top rate to capture discretionary outdoor use, such as for lush landscapes, pools and fountains. If people want to have these features, they may do so. But they are going to pay for them.

A small number of California water districts have experimented with tiered rates. In Riverside County, the Eastern Municipal Water District has adopted an increasing block rate system, which has given residents an incentive to fix leaks and stop wasting water.

The city of Sacramento faces a special challenge as it continues to install meters in homes. For those homes with meters (roughly half), the city should implement increasing block rates. One might argue that there is no need to do so, given that the city has enacted a range of mandatory conservation requirements. But pricing water is another sensible water conservation tool.

Given the severity of the drought, there is no reason to hold off on developing tiered rates until the completion of the meter installation program. That will take years. Fresno recently finished installing meters, and water use promptly dropped by 22 percent per person.

Water suppliers in California have done such a good job managing water that citizens take it for granted. A USC Dornsife/Los Angeles Times poll found that the worst drought in memory has had little or no impact on the lives of most Californians. Pricing water sensibly would help to educate Californians that water is finite and exhaustible.