I Can Fix the Water "Shortage" in Five Minutes

Apparently the next "crisis" is that America is running out of water.  This is mostly an issue in the west, where growth is high and fresh water is rarer than in the east.  Here is one example of the brewing panic:

The growing human population is creating cities where desert or scrub
land used to be. Rainfall always has been and always will be in short
supply. Only so much water can be diverted from rivers to satisfy the
water needs of these desert dwellers. The aquifers are being drained.
Soon there will be demands to divert water from large inland lakes like the Great Lakes which would put those bodies of water in peril.

Oh my god, I can see it now - fish flopping on the muddy exposed bottom of Lake Michigan.

Look, the problem is not lack of water.  The problem is lack of market sanity.  Water in the west is regulated and sold in a hodge-podge of complex arrangements and negotiations.   The whole system is too complex to describe here, but at least one general conclusion can be safely drawn about the whole system:  Water is under-priced.   

For reference, lets look at my home city.  If building cities in the desert is the new evil, then I live in that great Satan called Phoenix.  And while my electricity charges are enough to get my attention (higher efficiency AC: check; compact fluorescent bulbs: check; solar: still too expensive), my water bill seldom grabs my focus.   

And now I know why.  Check out this analysis, conducted apparently by the city of Austin but which I found on the Portland Water Bureau's web site:

City Monthly cost for water service of 8,500 gallons
Memphis, Tennessee $14.16
Phoenix, Arizona $16.27
Charlotte, North Carolina $17.52
Dallas, Texas $20.04
Austin, Texas $23.15
Portland, Oregon $23.44
Louisville, Kentucky $23.47
Houston, Texas $26.49
Milwaukee, Wisconsin $27.86
East Bay MUD, Oakland, California $31.13
Atlanta, Georgia $33.60
San Diego, California $37.52
Seattle, Washington $39.75

Can you believe it?  We here in Phoenix, out in the middle of the largest desert on the continent, during a multi-year drought (yes you can still have a drought in the desert), while everyone laments that Lake Powell and other reservoirs are getting sucked dry, Phoenix has one of the lowest water prices of any city in the country.  Can you get over the irony of Seattle having some of the highest priced water in the country and Phoenix the lowest?

And you know what - I have not seen a single article in any of our local media that has once mentioned this fact.  Look here -- the articles blame global warming and lack of conservation and development and too many lawns and not enough low-flow faucets and talk about the need for government rationing, but never once mention PRICE.  We have the scarcest water in the country and one of the lowest prices for water.  Talk about ignoring the elephant in the room.  I should have just labeled this post "Duh!"

And these are the consumer water prices.  The situation actually gets worse when you look at agriculture.  In most of the southwest, farmers get water prices subsidized below the rates paid by ordinary consumers.  When you combine these water subsidies with massive subsidies already rich groups get for growing crops in the desert from farm programs, you get an enormous distorted incentive to grow water-hungry crops that are totally inappropriate for the desert.

So here is my five minute plan:  We may be a ways away from creating an actual market in water, but in the mean time, the quasi-governmental agencies providing it need to raise the prices (to everyone) up to a level that demand matches supply.  More conservation will occur, and marginal commercial, residential, and agricultural development will disappear.  If the price goes high enough, someone may even go out and find a new, innovative source of water for the area. 

Unfortunately, this is just too dang easy, and, from reading recent articles in the media, not even in the menu of options being considered.  Government bureaucrats are much more comfortable with rationing and limitations on development, because it gives them more power and creates a new set of winners and losers who will donate more to future political campaigns.

Update: Daniel Mitchell at Cato has similar thoughts, based on water shortages in Florida of all places:

So here we are, in the spring of 2007, with rain below
average, with a low lake level, little else in the way of reservoirs,
and a water shortage. What is the response? Well, a rational response
might be to price a scarce commodity such that people will use it only
as they need it, and not frivolously. "¦Instead, we get the response of
the local commissars. So, not allowing the market to work, and not
allowing prices to provide signals to the participants, they have
decided to run our lives for us.

"¦I live at an odd numbered address. That means that if I want to
water my lawn, I can only do it on Monday, Wednesday and Saturday
mornings, from four to eight AM. I can water my plants with a hose on
the same days, but only between five and seven PM. My neighbors across
the street, and behind my house on the next block, get Sunday, Tuesday
and Thursday.

"¦Over thirty years ago, in the first OPEC oil embargo, the
government, rather than allowing prices to rise to account for the
reduced supply, told people when they could purchase gas based on the
parity of their license plate "” even one day, odd the next. My
recollection was that this did nothing to alleviate the shortage "” the
lines remained. The problem was only solved when Nixon-era price
controls on oil were lifted, the market was allowed to work, and oil
prices eventually (and it didn't take all that long) fell to historical
lows.

"¦[H]ere's a radical concept. How about pricing the commodity to the
market? Maybe, if people had to pay more for water to water their lawn,
they'd use less of it? Yes, I know that it's hard to believe, but there
really are some people out there who buy less of something if the price
is higher.

Update #2: The more I think of it, the more this situation really ticks me off.  In their general pandering and populism, politicians are afraid to raise water prices, fearing the decision would be criticized.  So, they keep prices artificially low, knowing that this low price is causing reservoirs and aquifers to be pumped faster than their replacement rate.  Then, as the reservoirs go dry, the politicians blame us, the consumers, for being too profligate with water and call for ... wait for it ... more power for themselves, the ones whose spinelessness is the root cause of the problem, to allocate and ration water and development.

  • Craig

    Not only raise the price, but tier it. If you use more than X gallons per month, you pay much more.

    My favorite argument against this is that "water is just too important to be subject to market forces".

  • ColoComment

    The recent drought has encouraged Denver [Colorado] Water to adjust its rates the past several summers, and also add surcharges for use above certain levels - and found it so effective in discouraging water use that its revenues were pressured. It's also changed its rate structure for 2007 to incorporate steeply tiered pricing, among other things. See: (http://www.denverwater.org/rateinfo/rateinc2007.html).

    Speaking of drought, I believe that a lot of incomers to Colorado from wetter states got an eye-opener when Dillon Reservoir's water level shrank to where its sandy bottom (and the settlement remnants that had been covered by water these many years) was revealed. I remember that when I view Phoenix's and Las Vegas's many fountains, pools, and brilliant green bluegrass lawns.

  • septagon49

    Water is too important a commodity not to have it subject to market forces. What other mechanism is there to ensure a scarce material with multiple uses will get allocated to those uses most efficently and effectively. Every other method tried has led to unnecessary shortages or surpluses. If you think the governement can handle the job then explain why water is so cheap down in Pheonix

  • http://www.humanadvancement.net/blog Kyle Bennett

    septagon, you're dead on right. But that violates the first rule of collectivized markets: That which is most valuable must be had at the least cost.

  • happyjuggler0

    I think the most sensible thing to do that is economically astute as well as politically feasible (i.e. idiotic politicians can understand it), is to price government owned water at 95% (give or take) of what the price would be if "we" had to start up a desalinization plant and pipe the water in from the coast.

    Then, at that raised price, take the "profits" and distribute them to the "shareholders", namely the residents of the affected area. One share per resident, be it man woman or child, but it has to be real people, not corporations. Landlords don't get a bigger cut either, only citizens on a per person basis are "shareholders".

    The raised prices radically reduce consumption without paternalistic pleas or regulations on showerheads etc., while at the same time everyone shares in the benefits of owning the water company (i.e. government monopoly), thus shutting up those who claim this is a regressive tax. Indeed the poor might actually make money on the higher water prices.

    And if it turns out that 95% of market rates (e.g. desalinization plants with pipeline) isn't high enough to raise the water table, then it becomes time to take bids for desalinization plants....

  • http://www.greatlakesforall.com Steve Huyser-Honig

    I'm from Michigan and can assure you that many in the Great Lakes are plenty concerned about the covetous eyes of the parched southwest on our water. What most don't realize is that only 1% of the water in the Great Lakes is recharged each year--so it's hardly a renewable resource.

    I was traveling in New Mexico earlier this year and was astounded to read that 75% of the water in New Mexico is used for irrigation. Here's a great article on the topic: http://sfreporter.com/articles/publish/cover-040407-the-big-suck.php

    So it seems the southwest has plenty of water for its burgeoning cities. You just have to stop using it to grow corn and hay.

  • http://www.myrtlehocklemeier.blogspot.com Myrtle

    I remember the "we are running out of water" crowd from 30 years ago. They used to drum this into us in grade school. I guess the message didn't cause me to make the political choices later on as an adult that it was intended to.

    Great posts on global warming (although I don't respond to them.)

    I have heard it said that if we don't do something drastic on the global warming that within ten years it will be too late. Does that mean that the whining will stop ten years from now after it's too late? I can't wait!

    Next thing I'd like to see tied into the water conservation topic is the horrible restriction on gallons per flush. I've heard there is a black market for toilets with bigger flushes. Is that true? A toilet blackmarket? It's so absurdly funny. The poor people have to flush three times with 2.5 gallons to accomplish what used to be done with one 5 gal flush meanwhile an entire class of people have evaporating swimming pools and showers with so many luxury nozzles in them that they resemble car washes.

  • Infogleaner

    Raise the water rates double the current cost of providing water. Then MANDATE (very, very important word) that the excess funds be spent ONLY on alternative water supplies (like rainwater retrieval, desalination, etc.)

    This would fix the water shortage and guarantee future supplies.

  • http://blog.steamstreet.com Jon Nichols

    Well put. I also moved from the Midwest to Northern California, and I couldn't believe how much more 'irrigation' there was (i.e. lawn watering).

    Of course, the farm lobby will have none of this water price increase... that's who the battle is with.

  • Chris

    For a GREAT read about the American West and its water history, read Cadillac Desert by Mark Reasoner (?) You can get it from Amazon. Super interesting book, without being a boring history lecture. Information about the history of L.A., Las Vegas, Colorado, the Arizona water pact, etc. etc. Did you know that the state of Colorado RENAMED the "Grand" River as the "Colorado" River so that everyone would know WHOSE water it was? That is why it is called the Grand Canyon, because the canyon was named before the river name was changed!

  • Anonymous

    Phoenix is on top of a giant aquifer, and the midwest sits on the largest aquifer in the country (one of the largest on the continent I think). A huge percentage of water we use is taken from groundwater, not rivers or lakes, and groundwater is a finite resource. That is most likely why water prices in Phoenix are cheap.

  • Random Internet Passer-by

    As a geology major, person above me:
    <3

  • Stephen

    You live in Phoenix and you're talking about water and you don't mention all the golf courses? You don't mention all the people who have planted grass in their yards - grass, a grass lawn in the desert. It makes me wonder if you are a big-time golfer and/or one of those mopes with a lawn in the desert. You don't mention that stupid lake in Tempe, a man-made lake which serves no purpose whatsoever, that loses thousands of gallons of water every day through evaporation? You don't mention all the restaurants and other outdoor seating setups that mist water over people to cool them?

    I don't live there but I've spent plenty of time there. I didn't know the water was so cheap there; that is completely insane. I say triple it in price, or quadruple it, and businesses pay every bit as much as anyone else NO MATTER HOW MUCH WATER THEY USE (ie no 'discounts'), golf courses pay twenty-seven times as much as anyone else, anyone with a lawn gets shot by tomorrow night, and that stupid lake is drained, but not until after the politicians who voted to create it are drowned in it.

    The people who have set these things up - the golf courses and that stupid lake in particular - are completely nuts.

  • Malcontent

    Raise the price of water. The farmers will lobby the govt so they can continue to have almost all the water. The developers will buy the rest.

    The fish without a lobby or money will die.

  • jose Hevia

    Here in Spain, there is the north, with plenty of water but not sun, and south with sun, but not water.

    So you get the picture. You can see with google earth the vast amounts of terrain that were dessert in Almeria(when a lot of westerns got filmed) and now are Golf camps, houses and tomatoes greenhouses. Population grow in south, emigrate from north, and get more political power(democracy).

    You buy dessert terrain at 2eur/m^2 you can it sell at 3000eur/m^2 if there is water. Last president wanted to take it from Ebro river.(http://en.wikipedia.org/wiki/Ebro).

  • http://www.nffc.net/ farmerbob

    Agriculture rarely affects the water supply the way large metropolitan areas do, particularly the way a sprawling suburban city like Phoenix does. Lush lawns and golf courses, as others have mentioned, are the most immediately offensive water-wasters. At least corn and hay have some utility, putting affordable food in the mouths of all the city-dwelling critics.

    Farmers, at least those who operate family and small farms, depend directly on the water supply for their entire way of life and tend to self-regulate. Desk-jockeys with golf-carts and SUVs have no immediate motivation to give water a second thought, so long as the water pressure is good in the shower and the sprinkler system makes a nice mist.

  • Tian

    Here in South Africa the local government used tiered water tariffs to achieve two things: discourage heavy users, and achieve social equity.
    The first tier (up to 10Kl per month) is free, thereafter the price per kL rises depending on the tier into which your usage falls. Therefore, if you are a small water user you can easily get your water for free. Heavy users (e.g. car washes) pay heavily for their top-tier usage, and are therefore well-incentivised to implement water saving & recycling strategies.
    My domestic water bill seldom exceeds R20 (about USD 3.00) since I never wash my car or water my garden (all indigenous vegetation which flourishes or declines seasonally, as they've evolved to do over millennia).

  • urban planner

    Doesn't Phoenix make a lot of money off of the golf industry (tourism, etc.)? If so, then there's no realistic chance of golf courses being penalized for excessive water usage, in spite of the insanity of placing them in the middle of a desert. That's probably at least part of why politicians have never considered raising water prices as an option. The certain days/certain times lawn-watering rules are not intended to reduce demand so much as to prevent spikes in demand that result in temporary shortages and wasted water due to lawn-watering during the middle of the day (when most of the water would evaporate). GRADUALLY raising prices is an obvious and intelligent solution to reduce demand, but realistically, the powers-that-be are unlikely to allow anything to discourage industry, so the average citizen would probably take the hardest hit. It might be better to focus efforts on educating citizens on water conservation so that they understand that they live in a DESERT and shouldn't attempt to turn their yards into rainforests. This applies to business and industry, too--using natural vegetation as landscaping saves a LOT of water, plus it gives the area more character!

  • Ubu Walker

    This makes sense to me, so long as the neediest residents can get some sort of 'water assistance'. No one wants people to dehydrate or be unable to bath because of the price of water.

  • Spike

    This is a perfect example of Socialism for the wealthy and well-connected. The working poor are subject to market forces, but the middle class and business are a swamp of entitlements, subsidies, tax deductions and the like. Much of the American lifestyle would be unsupportable without this massive redistribution. Libertarians might be interested in this piece by Noam Chomsky: http://www.lipmagazine.org/articles/featchomsky_63_p.htm about what the "free market" really means in this country. Don't jerk your knee, he's remarkably sympathetic to our cause, and critical of State Socialism. It's just that he points us in a slightly different direction, to where the distortions of the market really lead.

  • http://www.hellblazer.com Azael

    I kind of find it odd that you're railing against the government wrt rationing and what not. Read Cadillac Desert for the definitive history of how this mess was created.

    I think it highly unlikely that the forces arrayed behind this pricing structure are going to stand by and let their subsidies be taken away.

  • Ian Leedom

    I would also suggest that one read "Cadillac Desert" which is an older but invaluable resource for the history of water in the western US. What the author here misses is that the rates which he quotes are for residences and not for agriculture. Agriculture uses the greatest amount of water by far and does so because those of us who pay taxes subsidize it.

    It is madness to grow cotton in California but that is just what we're doing. This author shouldn't berate Phoenix but rather his Congressional Representatives who have made this all possible. Mind you it would also mean that large parts of the agricultural communities in Arizona and California would collapse but that's a different subject.

  • http://www.kysq.org David Zetland

    You are completely right. (I've been studying this for three years for my dissertation on urban water management.) The major barriers to pricing water at higher levels are these:
    1) Inertia. People are used to paying little or none. 150% increase in rates sounds horrible until you realize its from $0.10/100 gallons to $0.25/100 gallons. Look at what people pay for bottled water!
    2) Chargin based on cosst, not willingness to pay. Most prices are based on cost recovery, not opportunity cost (ie, if there was trading). In the US, most water arrives from public utilities with a mandate to sell water as a "public service", which means as cheap as possible. They need to maximize the value of water.
    3) Agricultural use of water is FAR more outrageous, mostly because they pay lower--even subsidized--prices.

    The "solution" is not dams, more pumping or even low-flush toilets. The solution--as you point out--is charging something sensible for water. (If you are worried about the poor, do not give them cheap water, give them $$ and let them decide what to do with it.)

    ps/Economists have been arguing for markets in water for over 50 years. IF you are curious, the literature, theory and data available are vast.

  • Robert K

    @Myrtle
    If you think the modern toilets are all weak, you really need to get your facts straight. I have a 1.5 gallon toilet that is easily more powerful than any 5 gallon from back in the day. I recently looked at government test results and the newest 1.1 gallon toilets even blow mine away...and mine has plenty of power. Never had to flush it twice..ever. You really need to do some research before spouting off about things you have no experience with besides watching 1 episode of married with children.

  • Al Bundy

    @David Zetland,

    my Ferguson rules!

  • Damir Olejar

    If gas pumps provide benzine that is not in a gas state at all, we should have gas pumps for water.

  • James
  • http://www.myrtlehocklemeier.blogspot.com Myrtle

    Dave,

    I'm sure you get a nice commission from Kohler.

  • Mormon

    Yeah, raise prices and give the government more control over markets and every day life...sounds awesome. Oh yeah, and screw that corn...it uses our water!..all we get out of it is lame stuff like ethanol, bio-plastics and food...who wants all that!?!

    down with corn and other water consuming crops!!!!

  • boulder water

    Living in Colorado, where a lot of the southwest gets there water from, we're very aware of water usage. It's amazing what some education and seeing the effects of drought in person can do for water conservation. After the few years of drought that Colorado has suffered, the water use per capita has gone down. I don't know if it was seeing the empty reservoirs or the mandatory water restrictions that were in place for a few years, but water usage has gone down. The interesting thing was that after the mandatory restrictions were lifted, water usage stayed down. That leads me to believe that a little education and a little fear go a long way to changing habits. I know I think twice before turning the sprinkler system on.

    Also, Boulder, Colorado has just implemented a water budget system this year - http://www.bouldercolorado.gov/index.php?option=com_content&task=view&id=2759&Itemid=2039
    It's based on your home and lot size. Many residents are complaining about having to pay a lot more...my personal experience so far is being under budget and paying the same amount as last year... we'll see what happens when the long dry months of summer come and my lawn dies :-)

    Good blog... Thanks!

  • Noumenon

    If water prices were the way they should be, people like me would buy 1.1 gal/flush toilets voluntarily, and people like Myrtle with their revolting mega-poopie and giant toilet paper wads could get the 5 gallon ones.

    OTOH a lot of people would buy the 5 gallon ones just to secure status, the way they buy quilted toilet paper to prove they're not as cheap as a McDonald's restroom. So the toilet law helps.

  • http://blog.myspace.com/marlalk Marla

    Fresno, CA's Water Infrastruture Compromised - Mass Cover Up

    Illegal and unauthorized re-routing and cross connecting of water lines across private properties. Upon reporting this to the City of Fresno, a Restraining Order was filed against me - they claim I am a "liar." Oddly, their records verify exactly what I reported.

    Our sewer and water infrastructure have been compromised. I believe we may be headed for a disaster of major proportions.

    Illegal, unauthorized, re-routing, cross-connecting of sewer/water lines from one end of Fresno to the other. Somehow being connected to the main line during city-wide revitalization.

    Various homes removed - others removed from foundations and shifted over to cover up evidence. Plat maps altered as though no changes. Done in-between sales or under the guise of "home repairs" this has been going on parcel by parcel all these years. No permits or inspections for ANY of this!

    Unauthorized street widening, relocation of utility poles to line back up, sewer drains, etc. City and PG&E records also altered as though no changes. Our homes, etc. are not what they appear to be - beneath the patching is trash, mold, etc. Yet the prices continue to escalate.

    By simply digging in the lot next to me, where this group ran my family off, a mountain of evidence exists. (Or anywhere else in town - the evidence is everywhere.)

    Mass cover up.