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    GrokSurf's San Diego by George J. Janczyn is produced under a Creative Commons Attribution-Noncommercial-Share Alike 3.0 License.

     

     

Posts Tagged ‘Water prices’

Water rates and the cost of providing service in San Diego

Posted by George J Janczyn on June 26, 2012

Periodically water and wastewater rates paid by San Diego residents becomes a hot topic and with November elections drawing nearer the issue is certainly going to get more coverage, much of it political, in the press. But if you want to truly understand water rates you need to look beyond the surface rhetoric of politicians (recall one mayoral candidate who said he can cut rates by 15% and freeze them that way for five years) and press reports that sometimes inflame more than inform.

Nobody likes to see water rates go up but the City of San Diego’s unique geographic and climate characteristics make expensive water inevitable since most of it has to be imported from great distances. Relying on distant water sources also makes San Diego vulnerable to supply reductions from those sources (Colorado River and Northern California) and potential disasters that could cut the supply entirely for an extended period of time.

Reducing dependence on water imports by developing more local supplies through water recycling and potable reuse is expensive.* Protecting against potential supply cutoffs by increasing local storage capacity is expensive. Water conservation is the most cost-effective means of reducing demand for imported water to the extent that people are willing to conserve. In general, these things are understood by informed residents. What’s not well understood yet is what may happen to water rates in the future.

*(although the City of San Diego doesn’t plan to purchase desalinated water in the foreseeable future, if the Poseidon plant in Carlsbad deal with the County Water Authority (CWA) comes together the city will, however, be required to pay a certain percentage towards that project as part of the cost of being connected to CWA’s infrastructure)

Politics aside, for a better understanding of issues underlying water rate structure there is useful information out there: the 2010 Urban Water Management Plans for the City of San Diego and for San Diego County; the city’s 2011 Recycled Water Master Plan and Recycled Water Study. There’s also the city’s new Comprehensive Water Policy that was implemented following a drive by city councilmember Sherri Lightner to update the city’s old and sometimes conflicting policies.

More immediately, the city has contracted with Black & Veatch (a global engineering, consulting, construction and operations company specializing in infrastructure development) to conduct a Cost of Service Study.

The information and recommendations that will result from this study, due to be completed around the end of the year, will play a large role in determining water and wastewater rates in the coming years.

A very good presentation on how this new study will help determine a new rate structure for San Diego was given at the June 18 meeting of the Independent Rates Oversight Committee.

You can listen to the presentation (including an interesting Q&A afterwards) and view the Powerpoint slides just below.

The presentation was given by Black & Veatch Director Ann Bui, Principle Consultant Brian Jewett, and Patricia Tennyson from Katz & Associates. Thank you to IROC representatives Ernie Linares and Monica Foster for their assistance in securing permission for me to record a copy of the presentation. Apologies for a few seconds of interference about halfway through the recording:

Audio:


 

Slides:

 

Posted in Water | Tagged: , , , | Leave a Comment »

The price of water doesn’t need to go up when you conserve

Posted by George J Janczyn on April 21, 2010

Consider this breaking water news headline:

U.S. urban residents cut water usage; utilities are forced to raise rates / Circle of Blue Water News.

That’s just one of many recent news reports about water rate increases caused, at least in part, by falling revenues due to conservation efforts by customers (it’s worth a serious read).

But things don’t have to be that way.

If a water utility keeps its operating expenses separate from the price of water, then when people use less water they don’t need to be charged more for it. As it says in the above article, “[e]xisting designs for deciding water rates are the culprits. A handful of cities are restructuring their billing systems to benefit conservation-minded consumers who deserve to be rewarded rather than penalized.”

The City of San Diego is set up so that customers pay a ‘fixed’ fee and a ‘water used’ fee. The ‘fixed’ fee goes to operating expenses. By law the ‘water used’ fee can reflect only the cost of the water itself and cannot be padded to generate extra revenue. Unfortunately, since the San Diego Water Department must import nearly all its water and buys it from the San Diego County Water Authority, which in turn gets its water from the Metropolitan Water District of Southern California, San Diego residents are affected by rate increases from those suppliers whose water prices ARE mingled with operating expenses.

Given that situation, it’s not going to help to get angry with the San Diego Water Department when they have to pass along increased water costs. Doing something about our supplier policies is another issue, though.

However, San Diego’s water pricing system has also been criticized for failing to encourage conservation and penalize waste, not least by the Voice of San Diego as well as the San Diego County Taxpayers Association (see the Voice’s article “City officials again accused of water misrepresentations“).

The Circle of Blue item cited above says that “[s]everal water utilities have figured out how to resolve the conflict between conservation and revenue…Irvine Ranch Water District in Orange County, Calif. pioneered a new model when it instituted an allocation-based rate structure in 1991…”.

Irvine is a very good example. Even I have written about it. Here’s a link to Irvine’s water pricing system that takes user needs into account, rewards conservation, and charges more for excessive use.

“There’s no reason why municipalities who implement conservation programs should have to raise their rates,” said Peter Gleick, president of the Pacific Institute. “If that happens it’s a failure of rate design.”

There are very good reasons for San Diego to revise its water pricing system, and we absolutely should get started on that, but don’t expect the result to be lower prices overall, because there’s another serious issue on the horizon, well stated in this On the Public Record post: “Deferred maintenance is coming due and many districts are facing the failure of systems installed in the fifties or before. Reliability must be paid for anew, and that’s why districts will need to charge more even as they’re asking people to use less water.”


Related water pricing blog posts:

 

Posted in Water | Tagged: , | 1 Comment »

The water subsidy for golf courses ‘scandal’

Posted by George J Janczyn on April 17, 2010

Balboa Park Golf Course

Balboa Park Golf Course is not yet using reclaimed water

How your water rates subsidize golf courses” is the headline in a recent Voice of San Diego article by Rob Davis that will probably stir up some indignation around town. The article says that “475 businesses, homeowners associations, golf courses and public agencies” get a 78% discount on reclaimed water which is subsidized by regular water users. The article cites Michael Shames, executive director of UCAN, who suggests that discounted prices for reclaimed water users may be illegal, and that “City Councilwoman Donna Frye called it “out-of-whack” and promised to hold a public hearing on it.” In a subsequent PBS Editors Roundtable discussion, Voice of San Diego executive editor Andrew Donohue said a normal discount for reclaimed water should be only 10% and that the City had been keeping the subsidy for industrial use a secret.

I really don’t see a scandal here.

North City Water Reclamation Plant

First, the discount isn’t a secret (although details on its financial impact may be hard to obtain). The City’s Guaranteed Water for Industry Program is where the discounted water has been publicly documented [the discount is also documented here]. Initially the discount was only for businesses certified under the program, but presently the $0.80 per HCF price (which they wrote was a 50% discount) applies to all purchasers of reclaimed water (with the exception of Poway which is charged more because it didn’t pay certain capacity fees). [There is no discount for the fixed base fee, however. All water users pay the same base fee.]

Second, the suggestion that one group is subsidizing another group sidesteps the fact that it’s looking at two classes of water–it’s not one group of potable users subsidizing another group of potable users. It may be true, though, that if reclaimed water is being sold at a loss the entire Water Department budget has to absorb that loss [or possibly the Wastewater Department in which case the sewer fee would be the water customer revenue source supporting the recycled water sales].

Third, to use reclaimed water requires an expensive investment in purple pipe infrastructure and plumbing, so a discount in the water price certainly makes that decision by potential new customers a little easier.

Ocean outfall at Point Loma

Last, as things stand, San Diego’s water reclamation plants remain unable to sell all the water they can treat. The Voice’s article briefly mentions the 2001 City Council decision to discount the water in order to attract buyers, but the lack of buyers is still a very important fact to consider. A large amount of usable reclaimed water they can’t sell, even today, is pumped to the Point Loma Wastewater Treatment Plant and disposed of through the ocean outfall into the Pacific. Considering the substantial infrastructure expense and the amount of treated water going to waste, it only makes sense that large water consumers like golf courses should be targeted first as customers for reclaimed water. Without a discount for the reclaimed water, businesses have less incentive to stop using potable drinking water for their irrigation and industrial needs. [Consider, too, that the City is under an EPA mandate to maximize the reuse of the water treated at this plant]. Do we really prefer to continue sending precious potable water to golf courses and industry while treating reclaimed water to usable standards and then dumping it in the ocean?

Yes, we need to reexamine the discounted price for reclaimed water; that price probably should at least be adjusted for inflation and operating costs. And in fact, the Water Department is currently performing a Recycled Water Pricing Study which is due sometime this year.

As for additional outlets for surplus reclaimed water, I completely support the Indirect Potable Reuse Study that is looking at advanced purification of reclaimed water to bring it to a potable drinking water standard. That project envisions a 1 million gallon per day operation during the study, and if deemed feasible and if approved by the Mayor and Council, a full-scale IPR/Reservoir Augmentation project with a plant adjacent to the North City Water Reclamation Plant and a pipeline to San Vicente Reservoir, would generate approximately 16 MGD. But convincing the population to agree to recycled drinking water isn’t made easier when the media keeps calling it “toilet to tap.” The Voice’s “…use its sewage to boost drinking water supplies” is just as bad. Surely they can do better than that. A good substitute for the awkward phrase “indirect potable reuse” that I’ve seen used is “repurified water.”

So, we still need to find a way to stop throwing recycled water away — we need to find new buyers for that water. I say we should definitely make a realistic adjustment to the discount for reclaimed water, but not eliminate it. In the long term reclaimed water needs to make a big difference in the availability and reliability of drinking water supplies for San Diego and we should support incentives to increase its use.


Apr 20, 2010: The Voice continues to press its complaint with The unanswered golf course subsidy question: “The city knows the answers to those questions — it just isn’t sharing.”

Looking at the Recycled Water Cost Study draft report (the ‘confidential city study‘ that the article refers to), I see that it recommends the recycled water rate to significantly increase from the present $0.80 per HCF to $1.46 in 2010, $2.03 in 2011, and $2.66 in 2012. The report also states that the recycled rate increases are expected to eventually allow the potable water system to recover all contributions it is making to support the recycled system discount.

 

Posted in Environment, Water | Tagged: , , | 2 Comments »

San Diego encourages development with corporate water discounts

Posted by George J Janczyn on March 30, 2010

Like newspapers facing economic facts, San Diego is facing water facts.

For years now, the news industry has searched for a way to profit (or survive) in the digital environment created by the Internet and still be able to produce high-quality journalism. The financial model that sustained print-only newspapers no longer works today.

Clay Shirky, a well-known analyst on the problem, worries that newspapers are irreplaceable for accountability journalism and hopes they’ll continue performing that function on the Internet but he doesn’t think they’ll ever be able to return to the old model they enjoyed. He doubts that fee-based news (“paywalls”) will work except possibly in certain specialized areas where information is jealously guarded, such as finance. Rather than continue searching for a way to replicate their economic model in a digital age, he says, newspapers need to adapt to the ways of the web by finding a new balance through “vast and varied experimentation” (see his insightful presentation “Internet Issues Facing Newspapers” at Harvard’s Kennedy School). Others have cited organizations such as ProPublica and Voice of San Diego as examples of worthwhile efforts to produce high-quality journalism in the new environment.

Similarly, our relationship with water is changing. Our old assumptions are being challenged. It is becoming more and more obvious that our supply of water has a definite limit in general and also that for whatever reason (e.g., climate change, Delta environmental issues), our supply of imported water could well be reduced in the future.

Certainly we’ve responded in many ways. We’ve negotiated agreements to buy additional water from farmers and others, we’ve increased voluntary conservation, we’re looking at possible new groundwater resources, we’re considering (sort of) using prices to influence water use, we’re recycling, we’re exploring Indirect Potable Reuse, we’re installing a desalination plant, we’re enlarging the San Vicente Dam. Despite these measures, as long as there is unrestrained growth in our demand for this finite resource we obviously can’t expect a good outcome. And growth is one thing we haven’t dealt with sufficiently in response to the situation.

San Diego’s pro-development position on growth has only softened somewhat. The San Diego Association of Governments (SANDAG) projects that the region will have 1.2 million additional residents, for a total population of 4.4 million by the year 2050.

In January 2010, SANDAG’s website had a Housing section listed on their sidebar, where they stated that “SANDAG is working to eliminate barriers to development…[which] may include complex development entitlement and permitting processes, construction defect litigation, and development standards that do not reflect the goal of providing more housing.”

Web page in Jan 2010. Note the Housing sidebar includes Funding and Incentives.

Their tone has changed somewhat now. That housing sidebar of their website is now incorporated in their Land Use and Regional Growth page, and the above quotation no longer appears. Instead, they say they’ll work to “manage our population growth, preserve our environment, and sustain our economic prosperity.”

Housing sidebar is now under Land Use along with Sustainable Communities and other like headings

And in a rare departure from its pro-development endeavors, SANDAG recently denied a permit for a proposed 2,632-unit housing development in the North County. Water availability was just one consideration for that decision, but we’ll need more actions like that in the future.

The City of San Diego has worked to increase its water independence and reduce consumption, although it still gives businesses special programs and discounts.

The Guaranteed Water For Industry Program enables some water customers to become “exempt” from potential mandatory water conservation measures adopted by the City. After certification, such firms are placed on a list of preferred customers who will not be forced to reduce their consumption of potable or reclaimed water during a drought (“water warning”) situation. It applies to all industrial firms located in an “Optimized Zone” which currently includes the communities of University, Mira Mesa, Scripps Miramar Ranch, and Miramar Ranch North.

* Provides a guaranteed supply of potable and reclaimed water for irrigation, cooling, research, product development, and production activities during drought conditions.

* Provides ongoing cost savings to businesses through discounted rates for reclaimed water usage (.80/HCF, currently a 50 percent discount).

There’s also a Business & Industry Incentive Program. In order to “improve the business climate of the city,” this program gives businesses a 40 percent reduction in water capacity fees and a 60 percent reduction in sewer capacity fees (Council Policy 900-12).

Both of these programs are ripe for reconsideration in view of the growth problems we’re facing.

April 16 update: Since publishing this story, I was told by a representative from the San Diego Water Department that their web pages contain incorrect information:

First, the Guaranteed Water for Industry Program no longer has any bearing on the price of reclaimed water. As things now stand, the discounted rate of $0.80/HCF applies to ALL buyers of reclaimed water. Here’s the updated flyer for the program.

Second, the fee reductions indicated in the Business & Industry Incentive Program were invalidated by a Supreme Court ruling and the City has not authorized any fee reductions under this program since 2007.

Third, the exemption from drought water conservation rules now extends to ALL users of reclaimed water–it is no longer a benefit of the program.

As author Robert Glennon observes “Our existing supplies are stretched to the limit, yet demographers expect the U.S. population to grow by 120 million by midcentury…To understand the depth of the water crisis, consider that more than thirty-five of the lower forty-eight states are fighting with their neighbors over water” (from Unquenchable: America’s Water Crisis and What To Do About It, Island Press, 2009).

In addressing its water future, San Diego has been doing almost everything that’s been thought of. However, its entire water pricing system could use a complete overhaul with an eye towards incentives to conserve; and, San Diego has to redouble its resolve in confronting powerful forces for growth and expansion, because given the size of our population, even significant restraints could take decades before there is a visible reduction in the growth rate. It’s good to see that SANDAG is possibly reducing its aggressive promotion of development, but that’s not enough.

Just as newspapers need to face the realities of the digital world, San Diego needs to adapt to the realities of water. In his presentation, Shirky draws a parallel with the control of ideas, saying the news media ultimately cannot succeed in “attempting to treat an infinite good as if it were a finite good.” With water, it’s the same thing in reverse with a twist: even though water is an infinite (recirculating) good, we should be (but haven’t been) treating it as a finite good. Shirky said news needs to find a good balance. With water, well, they say it always seeks its own level.

Posted in Commerce, Government, Newspapers, Water | Tagged: , | Leave a Comment »

 
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