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Why districts are slow to charge market rates for water (2009)

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Re: Why districts are slow to charge market rates for water (2009)

#31

Post by bombcar »

eru wrote: post #30
cool_dude85 wrote: post #21

Earlier quoted context omitted.

Here you find yourselves at the crossroads. Everyone needs water to live. The actual price of water, fairly pricing in long term externalities, may be too much for a family of four to afford their 8 or 10 kgals a month. At least for many such families. But when you price it at the marginal cost to pump out the extra gallon, it becomes economical to do silly stuff like grow water intensive crops in the desert and draw…

> Everyone needs water to live. The actual price of water, fairly pricing in long term externalities, may be too much for a family of four to afford their 8 or 10 kgals a month. At least for many such families. Depends on where you live. And perhaps we shouldn't encourage people to live in such dry areas where an honest pricing of water would make living unaffordable? > But when you price it at the marginal cost to p…

> Depends on where you live. And perhaps we shouldn't encourage people to live in such dry areas where an honest pricing of water would make living unaffordable?

This is a really big aspect of it, and "save water" applied without thought can be counter-productive.

Where I live, the water comes out of the ground in wells, goes through the system, and leeches back into the ground in a giant septic system (that they call the wastewater treatment plant). It's pretty well contained and as long as we are nowhere near the limit the main thing sewer/water is paying for is maintenance of the system.

That is NOT the case everywhere in the USA, especially the states where water is piped in from miles and miles away.

I do agree that much of the problems we have is forcing public utilities (water, power, transit) to ALSO be social programs; this dual-goal always ends up messing things up.

Re: Why districts are slow to charge market rates for water (2009)

#32

Post by amluto »

eru wrote: post #28
amluto wrote: post #26

Earlier quoted context omitted.

Clearly the solution is to get two electric meters, sign one up for normal rates, and sign the other one up for spot rates. And switch between them to use whichever is cheaper. I joke, but only somewhat. This whole model is pretty clearly at least a bit broken. I don’t believe for a second that electricity cost $1k/kWh in any way that truly makes sense. Perhaps marginal electricity cost that much, but that’s a very d…

> Perhaps marginal electricity cost that much, but that’s a very different statement. Marginal electricity is what people use at the margin.

Which means what, exactly? Operating your refrigerator is not marginal usage. Heating your house is only marginal usage to the extent that it’s somewhat optional and its cost depends on the weather. It’s certainly not marginal in the sense that people are looking at the price tag for one hour of heater operating and deciding accordingly.

Re: Why districts are slow to charge market rates for water (2009)

#33

Post by eru »

bombcar wrote: post #31
eru wrote: post #30

Earlier quoted context omitted.

> Everyone needs water to live. The actual price of water, fairly pricing in long term externalities, may be too much for a family of four to afford their 8 or 10 kgals a month. At least for many such families. Depends on where you live. And perhaps we shouldn't encourage people to live in such dry areas where an honest pricing of water would make living unaffordable? > But when you price it at the marginal cost to p…

> Depends on where you live. And perhaps we shouldn't encourage people to live in such dry areas where an honest pricing of water would make living unaffordable? This is a really big aspect of it, and "save water" applied without thought can be counter-productive. Where I live, the water comes out of the ground in wells, goes through the system, and leeches back into the ground in a giant septic system (that they cal…

> I do agree that much of the problems we have is forcing public utilities (water, power, transit) to ALSO be social programs; this dual-goal always ends up messing things up.

Amen to that. Not only public utilities, but also employers and stores etc.

Giving (poor) people money should be the default. Everything else should require careful justification.

Re: Why districts are slow to charge market rates for water (2009)

#34

Post by charlie0 »

bin_bash wrote: post #6

99% Invisible did a podcast recently where they talked about a very similar issue: the privatization of parking meters in Chicago. Parking meters have a similar problem. The purpose is for drivers to pay their fair share to use some real estate in a city, however the city and elected officials in charge have a vested interest to keep prices low . Nobody wants to be the mayor known for raising parking rates. Privatiza…

Changing water price on demand is not easy, but I can see dynamic pricing on parking meters ranging from free suring periods of very low usage to a few dollars a hour during high usage.

Re: Why districts are slow to charge market rates for water (2009)

#35

Post by ggm »

eru wrote: post #9
causality0 wrote: post #4

one side effect of Proposition 218, put forth by the Howard Jarvis Taxpayers Association, was that it became illegal to charge any household more than the costs of conveyance to that parcel. It was illegal to charge punitive rates to send a price signal to wasteful users. Why does punishing wasteful users require charging them more per unit? If I waste a lot of milk, like by bathing in it, I'm punished by having spen…

Water economics are weird. Not because of anything directly in the economics, but because people have really weird ideas and emotional attachments. So instead of charging a market rate proportional to usage (plus a fee to access the network etc, and giving poor people money to afford all this), there's all kinds of weirdness and grandstanding. See https://slatestarcodex.com/2013/08/25/fake-consensualism/ for a wider…

"people" here includes farmers, miners, and a swag of other corporate entities. It's not just about tapwater for people and the public utility function, it's about water rights and costs in the food chain and construction and mining industries, amongst others.

Farmers at least should know they have to operate in a market, with all kinds of conditionality on interrupting flow, capture of water which falls over their land (but is not entirely theirs to keep, because they are in a catchment for a water supply for other people) -And the same with bore water: there's no extraction without impacting somebody else, unless you're in a very unusual position: ground water is another shared commons.

Reticulated water in domestic contexts? Sure. A lot of people don't understand the social and economic pressures. Down here in Australia, with 10+ year droughts across large metro areas recent history and investment in desalination plants, we have a very good idea of the limits to domestic water usage which can be required of us. The farmers in NSW are at war with themselves and riverine management processes around retention of water flows over land, in the streams.

Re: Why districts are slow to charge market rates for water (2009)

#36

Post by eru »

amluto wrote: post #32
eru wrote: post #28

Earlier quoted context omitted.

> Perhaps marginal electricity cost that much, but that’s a very different statement. Marginal electricity is what people use at the margin.

Which means what, exactly? Operating your refrigerator is not marginal usage. Heating your house is only marginal usage to the extent that it’s somewhat optional and its cost depends on the weather. It’s certainly not marginal in the sense that people are looking at the price tag for one hour of heater operating and deciding accordingly.

If you know ahead of time that you are going to use your refrigerator throughout the next 12 months _and_ you want peace of mind, perhaps you shouldn't buy spot electricity for that?

There's a futures market for that. As a retail customer, you probably wouldn't want to use it directly. But companies can offer that as a service for you, and give you a long running contract that they hedge via the futures market.

To the retail customer that looks pretty much like a regular old contract, but with lighter regulation on prices on the backend.

Btw, my comment was meant in the sense that from the point of view of the market, one individual household's electricity consumption wouldn't move prices too much. Thus it's at the margin.

Re: Why districts are slow to charge market rates for water (2009)

#37

Post by lmm »

joe_the_user wrote: post #20
simfree wrote: post #18

Earlier quoted context omitted.

Most utilities are natural monopolies, running water, sewer, gas, electric, telephone, cable and internet to a premise are expensive, generally thousands to tens of thousands per home passed. Utilities celebrate when they can service an address for less than a grand in their public filings. For coaxial TV service the cable company is often required to cover the first $4200 in build out costs to a given address here i…

Most utilities are natural monopolies Yes, and they should be treated as such - regulated according good policies. Reseller models like what Texas has developed disintermediate the customer from their actual electric provider. It's just a legal fiction effectively. Indeed, moreover, the Texas system got "interesting" in a not-good way during the huge blackout a couple years ago when charges jumped to a $1000+/hour fo…

The $1000/hour was set by fiat by the governor, not a real market rate, so it can equally be seen as a case of regulation going wrong.

Re: Why districts are slow to charge market rates for water (2009)

#38

Post by squokko »

causality0 wrote: post #4

one side effect of Proposition 218, put forth by the Howard Jarvis Taxpayers Association, was that it became illegal to charge any household more than the costs of conveyance to that parcel. It was illegal to charge punitive rates to send a price signal to wasteful users. Why does punishing wasteful users require charging them more per unit? If I waste a lot of milk, like by bathing in it, I'm punished by having spen…

Because there is a highly nonlinear utility of water, where enough to drink and cook is essential for survival, enough to bathe and wash is essential for a decent life, and then... nothing. If milk was $200 a gallon you could simply not buy any and you'd be fine, which is not the case with water.

Re: Why districts are slow to charge market rates for water (2009)

#40

Post by pvdoom »

eru wrote: post #9
causality0 wrote: post #4

one side effect of Proposition 218, put forth by the Howard Jarvis Taxpayers Association, was that it became illegal to charge any household more than the costs of conveyance to that parcel. It was illegal to charge punitive rates to send a price signal to wasteful users. Why does punishing wasteful users require charging them more per unit? If I waste a lot of milk, like by bathing in it, I'm punished by having spen…

Water economics are weird. Not because of anything directly in the economics, but because people have really weird ideas and emotional attachments. So instead of charging a market rate proportional to usage (plus a fee to access the network etc, and giving poor people money to afford all this), there's all kinds of weirdness and grandstanding. See https://slatestarcodex.com/2013/08/25/fake-consensualism/ for a wider…

Those examples you give are absolutely things that should be taken into account for - i.e. watering your lawn or filling your pool should be much more expensive than other uses.
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