Why districts are slow to charge market rates for water (2009) • Hacker News Board

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

#21

Post by cool_dude85 » Mon, May 22, 2023, 2:52 AM UTC

eru wrote: post #13

bombcar wrote: post #5

Earlier quoted context omitted.

Because water is so cheap (cheaper than dirt) that it’s not punitive at all to pay for twice or ten or a hundred times normal.

On the one hand, if water is so cheap, why do you need to punish people for using a bit more of it, then? On the other hand, if water is so scarce that you need to discourage people from using a bit extra, why do you price it so cheap in the first place?

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 the city's aquifer down.

Hence the conundrum. Price it fair, some people can't afford flush the toilet. Subsidize it at a flat(ish) rate, or even just ignore externalities, some people can afford to destroy the commons. So, conservation pricing.

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

#22

Post by mindslight » Mon, May 22, 2023, 2:56 AM UTC

joe_the_user wrote: post #12

Headline: Why districts are slow to charge market rates for water." P1: Why don’t districts pass the marginal costs of water on to their constituents? P2: HAH! Do you see what I did there? [switch constituents with customers] Me: Actually, the thing I notice is the switch from "market costs" to marginal costs. It should be obvious that "market costs" are fiction for water districts since these districts are virtually…

> I'd say in contrast, water fees are fundamentally taxes and so water districts are inherently supported by taxes and the talk are "market rate" is basically neoliberal ideology that aims to squeeze the average rate-payer/tax-payer in the name of "markets" but which doesn't actually use real markets.

Thank you for this comment. The disingenuous invocation of "market rate" is the first thing that hit me about this article too. From most everyone's perspective, "market rate" implies a competitive market. But to a monopolist, it means the maximum amount of wealth they can extract from captive customers. eg the peak of the Laffer curve. Or in the world we're headed towards, surveillance driven fine grained price discrimination.

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

#23

Post by mindslight » Mon, May 22, 2023, 3:15 AM UTC

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 high consumer rates in Texas were only with a few specific electricity providers that passed on spot prices (combined with Texas's lack of a capacity market (an implicit subsidy for wind) that caused spot prices to spike so much). I've no doubt that many people signed up for those plans not fully knowing what they were getting into. But I can also look at such a pricing structure and see how I could embrace it, assuming a reasonable time quantum and automatable ahead of time price notifications.

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

#24

Post by RetroHippyNimby » Mon, May 22, 2023, 3:18 AM UTC

Why is there a market rate for water? Shouldn't there be a cost for water without a market?

We shouldn't be selling water at whatever the market will bear, but whatever the cost is to produce clean water (or less). Whatever amount prevents waste but allows everyone access to clean, potable water should be the what is charged.

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

#25

Post by nocoiner » Mon, May 22, 2023, 3:20 AM UTC

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 people who were paying $1000/hr were people who had selected an energy plan where they paid the wholesale rate. Normally that rate was a small fraction of the typical retail rate, but the risks should have been obvious to anyone of moderate intelligence.

Playing the lottery - small downside, huge (albeit improbable) upside. Buying wholesale power unhedged - small upside, huge downside, and not all that unlikely - in the last few years here, we’ve had several hundred year storms.

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

#26

Post by amluto » Mon, May 22, 2023, 3:51 AM UTC

nocoiner wrote: post #25

joe_the_user wrote: post #20

Earlier quoted context omitted.

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 people who were paying $1000/hr were people who had selected an energy plan where they paid the wholesale rate. Normally that rate was a small fraction of the typical retail rate, but the risks should have been obvious to anyone of moderate intelligence. Playing the lottery - small downside, huge (albeit improbable) upside. Buying wholesale power unhedged - small upside, huge downside, and not all that unlikely -…

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 different statement.

I wonder whether there is good research on market design for goods like electricity that are:

- Generated at a rate that is only weakly dependent on demand. (But may have expensive sources that will only operate when it’s economical to do so.)

- Are generated by very capital-intensive plants.

- Are mostly not storable. Taking delivery of electricity now and reselling later is expensive.

- Are needed by users in a mostly inelastic manner.

Cloud computing resources are similar. The “spot” electricity and cloud compute markets are a bit odd. They don’t work at all like spot commodities, many of which can be put in warehouses.

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

#27

Post by bombcar » Mon, May 22, 2023, 4:14 AM UTC

eru wrote: post #13

bombcar wrote: post #5

Earlier quoted context omitted.

Because water is so cheap (cheaper than dirt) that it’s not punitive at all to pay for twice or ten or a hundred times normal.

On the one hand, if water is so cheap, why do you need to punish people for using a bit more of it, then? On the other hand, if water is so scarce that you need to discourage people from using a bit extra, why do you price it so cheap in the first place?

Because like other utilities, homeowners often get vastly subsidized usage. Which can be fine until it starts running out.

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

#28

Post by eru » Mon, May 22, 2023, 4:26 AM UTC

amluto wrote: post #26

nocoiner wrote: post #25

Earlier quoted context omitted.

The people who were paying $1000/hr were people who had selected an energy plan where they paid the wholesale rate. Normally that rate was a small fraction of the typical retail rate, but the risks should have been obvious to anyone of moderate intelligence. Playing the lottery - small downside, huge (albeit improbable) upside. Buying wholesale power unhedged - small upside, huge downside, and not all that unlikely -…

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.

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

#29

Post by eru » Mon, May 22, 2023, 4:27 AM UTC

bombcar wrote: post #27

eru wrote: post #13

Earlier quoted context omitted.

On the one hand, if water is so cheap, why do you need to punish people for using a bit more of it, then? On the other hand, if water is so scarce that you need to discourage people from using a bit extra, why do you price it so cheap in the first place?

Because like other utilities, homeowners often get vastly subsidized usage. Which can be fine until it starts running out.

I would suggest to drop the subsidies, instead of bolting on extra rules.

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

#30

Post by eru » Mon, May 22, 2023, 4:29 AM UTC

cool_dude85 wrote: post #21

eru wrote: post #13

Earlier quoted context omitted.

On the one hand, if water is so cheap, why do you need to punish people for using a bit more of it, then? On the other hand, if water is so scarce that you need to discourage people from using a bit extra, why do you price it so cheap in the first place?

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 pump out the extra gallon, it becomes economical to do silly stuff like grow water intensive crops in the desert and draw the city's aquifer down.

Your pricing should take the longer term into account. An auction style pricing can do that. (Or a system that simulates auction-style pricing. No need to go through all the hassle of actually holding auctions.)

> Hence the conundrum. Price it fair, some people can't afford flush the toilet. Subsidize it at a flat(ish) rate, or even just ignore externalities, some people can afford to destroy the commons. So, conservation pricing.

That sounds like your conclusion is driving your argument.

Give poor people money, if you want to help them. Instead of mucking around with prices.

They can then use the money to either pay for water or move somewhere less inhospitable. Or spend it on something they like even more than either of these two alternatives.

Btw, flushing toilets with drinking-quality water sounds like a big waste. You should only do that when you have plenty of water to go around. Perhaps that family wants to buy a composting toilet, and pocket the savings? Instead of flushing water down the drain every day?