Tag Archives: Bay-Delta

Maven’s Notebook: “Normative science has a corrosive effect on the entire scientific enterprise”

‘Normative science’ has a corrosive effect on the entire scientific enterprise, says Dr. Robert Lackey These days, scientists in environmental science, natural resources, ecology, conse…

Source: MAVEN’S NOTEBOOK – Water news

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UCLA professor’s comments not helping California’s drought problem

An environmental horticulturalist for UC Cooperative Extension in Los Angeles, Don Hodel, has been getting a lot of press recently criticizing the State Water Board’s urban water restrictions. He advises that the Water Board should have advised targeting changes in watering practices rather than limiting supplies, and claims that urban restrictions were unneeded, implying that agriculture should bear the entire brunt. Unfortunately, he’s made at least two grievous errors in his assessment.

First, Hodel fails to understand that the actual implementation of the reductions is to be done by the local water utilities, not the Water Board. The Board only provided the targets, and the stick if the targets aren’t met. Hodel needs to complain to the utilities if he thinks they aren’t doing their job.

But of course, he’s equally naive about the huge problem of communicating about changing irrigation practices to millions of urban customers across hundreds (yes) of distinct water utilities. Of course, these utilities have been trying to get their customers to improve outdoor watering, but just getting their attention is a big enough problem.

Second, his real agenda is to imply that urban horticulture is more valuable the state’s agricultural industry. Urban agencies have only so much contractual and physical access to water supplies. To not cutback deliveries would require transferring water from farmers. But there’s at least two problems with that, the first being that agricultural water is much more valuable than Hodel imagines and second is that it’s not easy getting the water from northern to southern California.

It turns out that those farmers have been doing an exceptional job at improving their irrigation practices; the problem is that they’ve used that efficiency to increase output rather than to save water. The original proponents of agricultural water efficiency didn’t anticipate this response and the surplus didn’t materialize for urban users or the environment.

And even so, moving water from farm areas and treating it for domestic uses adds substantially to the cost of water. It’s the primary reason why urban water costs well in excess of $2,000 per acre-foot while agricultural water is much less than $500 per acre-foot. Water isn’t a particularly fungible good, and proponents of water transfers as the “solution” ignore this issue (along with the problems of market design and function.)

These types of moments are when I wished that journalists were better informed and able to filter out the uninformed “experts.”

Interesting interview with the Delta Watermaster

OK, it’s not a scene from Ghostbusters. Delta Watermaster Michael George makes some statements that have been percolating about but not publicly discussed. He points out that agricultural water efficiency, contrary to water savings calculations by groups such as Pacific Institute, has lead to increased productivity with the same amount of water. He also appears to support the Twin Tunnels approach.

Assessing the economic impacts of drought regulations

M.Cubed was asked by the State Water Resources Control Board to prepare an economic assessment of the emergency regulations ordered by the Governor to reduce municipal water use by 25%. We gathered a team that included Roger Mann of RMann Economics, Tom Wegge of TCW Economics, Richard Howitt and Duncan MacEwan of ERA Economics, and prepared the report in about two weeks. The SWRCB included a summary of those findings in its regulatory digest.

The innovative aspect of our study is to steer away from a single point probabilistic estimate of the benefits of the regulations and instead to focus on the potential vulnerability and consequences of the risk of continued drought in the future.

The EO is intended to address potentially significant economic vulnerabilities – risks – rather than statistical or probabilistic expectations. If the drought and high temperatures continue in California, water saved as a result of the order will become increasingly valuable. Under these circumstances, costs estimated to be associated with the EO this year could be more than exceeded by greater adverse impacts next year if the EO had not been issued.

Australia had an extended drought that lasted 10 years before ending in 2012 that cut 1.6% off its GDP. For California that would be $35 billion in a single year which is multiples of the range of costs we estimated for the regulations. In other words, the probability of continued drought would have to be less than 4% to make this option uneconomic.

We also pointed out that while the water utilities will lose revenues this year, as mostly public agencies, they will have to make up those losses in the future. For this reason, those revenue losses should be treated as eventual economic costs.

Paying for Water in California

My partner David Mitchell has coauthored an article in the Hastings Law Review:

Paying for Water in California: The Legal Framework

Brian Gray, Dean Misczynski, Ellen Hanak, Andrew Fahlund, Jay Lund, David Mitchell, and James Nachbaur
Over the past four decades, California voters passed a series of initiatives that
amended the California Constitution to limit the power of the state legislature and
local governments to enact taxes and restrict their authority to adopt fees and other
charges to fund government programs. Three of these initiatives—Proposition 13
(enacted in 1978), Proposition 218 (passed in 1996), and Proposition 26 (approved in
2010)—have placed significant constraints on the funding of water resources projects.
Although each of these laws has enhanced the transparency and accountability of the
decision-making process, the funding constraints now jeopardize an array of vital
water supply, management, and regulatory functions. These include funding for the
development of new water supplies, integrated water management, protection of
groundwater resources, development of alternative water sources (including recycled
and conserved water programs), control of stormwater discharges, and regulation of
water extraction and water use to protect water rights, water quality, aquatic species,
and other beneficial uses of the state’s water systems.
This Article is a companion to the report Paying for Water in California and focuses
on the legal aspects of water financing. The Paying for Water study demonstrated the critical importance of local funding to support California’s water system: local
utilities and governments raise eighty-five percent of the more than thirty billion
dollars spent annually on water supply, quality, flood, and ecosystem management
through local fees and taxes. The study identified a two to three billion dollar annual
funding gap, with critical gaps already evident for provision of safe drinking water in
small, rural communities, prevention of stormwater pollution, protection of people,
property, and infrastructure from flooding, recovery efforts for aquatic ecosystems,
and integrated water management. In most cases, these gaps reflect legal obstacles to
raising more funds locally. In addition, urban water and wastewater systems—now in
relatively good fiscal health—face looming challenges related to rising costs and legal
constraints on the ability to raise fees to support modern, integrated water
management.
This Article begins with an overview of the traditional sources of funding for water
development, management, and regulation, and proceeds to a detailed analysis of the
effects of the constitutional constraints (especially of Propositions 218 and 26) on
these essential governmental programs. Topics include: (i) analysis of the effects of
Proposition 218 on water rates and fees charged by public retail water agencies for
water service and integrated, portfolio-based water management; (ii) consideration of
the special problems of Proposition 218 for groundwater regulation and stormwater
discharge programs; (iii) predictions about the effects of Proposition 26 on wholesale
water rates, water stewardship charges, and regulatory fees; and (iv) suggestions for
harmonizing the fiscal strictures of Propositions 218 and 26 with the reasonable use
mandates of Article X, Section 2, of the California Constitution, which form the
foundation of the state’s water law and policy.
Our key conclusions are that: (1) Propositions 218 and 26 have created significant
impediments to economically rational and sustainable funding of California’s most
important water service, management, and regulatory programs; (2) judicial
interpretations of the constitutional restrictions generally have compounded these
impediments; and (3) reform of the law is needed. The Article concludes with
recommendations that water agencies, the legislature, the courts, and the voters
should consider as a means of correcting (or at least ameliorating) those aspects of
the law that are inconsistent with sound and creative water resources administration

RFF Library: 100 Years of California’s Water Rights System: Patterns, Trends and Uncertainty

A link to the recent study quantifying California’s water rights.

RFF Library Blog

Environmental Research Letters (2014 v9 p084012; doi:10.1088/1748-9326/9/8/084012) / by Theodore E Grantham and Joshua H Viers
http://iopscience.iop.org/1748-9326/9/8/084012/

For 100 years, California’s State Water Resources Control Board and its predecessors have been responsible for allocating available water supplies to beneficial uses, but inaccurate and incomplete accounting of water rights has made the state ill-equipped to satisfy growing societal demands for water supply reliability and healthy ecosystems. Here, we present the first comprehensive evaluation of appropriative water rights to identify where, and to what extent, water has been dedicated to human uses relative to natural supplies. The results show that water right allocations total 400 billion cubic meters, approximately five times the state’s mean annual runoff. In the state’s major river basins, water rights account for up to 1000% of natural surface water supplies, with the greatest degree of appropriation observed in tributaries to the Sacramento and San Joaquin Rivers and…

View original post 112 more words

The URAC could not agree on a recommendation to the Davis City Council on a preferred rate option. We probably had too many options with too many proposals for most members to sort through. In retrospect, we probably should have used pairwise comparisons to narrow down the choices for a final vote.

URAC members now have the option to submit a statement in support of a rate proposal. Frank Loge and I previously composed a statement on why summer water costs are higher, a portion of which I posted here. We will submit another statement in support of seasonal rates.

The proponents of Measure P have argued that voters the completely supported all of their reasons for rejecting the original rates, but the reality is quite varied, ranging from concerns about rate increases to rejecting the original water to concerns about the complexity of the new rate structure to resentment over the “look back” provision in the new rates to objections over summer prices. Given the razor thin margin and the low turnout, addressing anyone of these issues would have lead to rejection of Measure P. And now even Measure P proponent Bob Dunning has said that he will accept higher summer rates.  With that in mind, here’s our comments to be sent to the new City Council:

Fellow URAC Member Frank Loge and I wrote about why Davis water supplies cost more in the summer and why simple economic principles lead to those costs being allocated to the highest period of use—the summer in this case.  We want to expand on that statement of economic principles to suggest that the Council adopt seasonal rates with a summer premium.

Davis has extolled itself as being environmentally progressive. We have adopted an aggressive plan to reduce our greenhouse gas emissions and we have required proposed housing developments to adopt stringent standards that minimize environmental impacts. We should extend that commitment to how we use our water.

Moving to a surface water supply is an environmentally responsible way to reduce the impact of our wastewater discharges and the GHG emissions created by pumping water with electricity. However, we don’t get a free pass on using this new water source. The greatest environmental stress on the Sacramento-San Joaquin Rivers Delta occurs in the summer months when river flows ebb. The SWRCB already has ordered curtailments for junior water rights holders (which includes Conaway Ranch) and may order further summer cutbacks. We need to set water rates that reflect our commitment to reducing our footprint on the environment. That means charging a premium on summer water use when environmental costs are higher.

These higher environmental costs are consistent with other system costs including infrastructure and water rights, so the Council can rely on the draft rates constructed with to reflect those underlying seasonal cost patterns. According to analysis prepared by Bartle Wells and presented to the URAC, 55% of total system costs are higher during the summer than the winter period. In addition, current water pumping costs also are higher during the summer as that PG&E commercial time-of-use rates go up during the summer. Under the draft seasonal rates, summer volumetric charges would be 46% higher than winter.

These rates should not be tiered for two reasons. First, examining single family residential (SFR) use by decile shows that all but the lowest rank uses about twice as much water in the summer as in the winter. That means all customers are creating higher summer costs, both financial and environmental, and all should be signaled to conserve. Second, recent studies have shown that tiered rates have not delivered on promised conservation. While the highest users who see a high price may conserve, the lowest users see a below-average price that causes them to overuse water. The two effects offset each other. Using tiers to address concerns about low-income and senior customers causes such benefits to leak to wealthier customers who don’t need the assistance—this issue is best addressed through other rate assistance programs outside of setting the standard rate.

Finally, the Council should look closely at the amount of fixed charges included in the rates. While a large portion of the costs may appear fixed in the short run from an accounting standpoint, from an economic standpoint (which the appropriate stance for setting rates) the City has invested in much of the infrastructure and water rights to meet long-term variations in demand. This means that the water supply and even some of the local distribution system costs are actually variable costs. The Water Advisory Committee (WAC) found that 87% of system costs fall into this variable category and we haven’t seen information to cause us to revise this estimate.

Of concern though is that the City can’t ignore the financial accounting of costs, most importantly debt service.  Debt rating agencies that drive bond interest rates want a higher fixed revenue component. For investor-owned water utilities in California, particularly smaller ones, which rely on higher variable revenues than most municipal utilities, the swings in revenues have caused financial distress of late.

The City must balance the desire to match rates to costs with the need to meet financial commitments. This can be done in one of two ways. The first is to establish a hydrologic conditions or “drought” balancing account that accrues revenues in low-cost “wet” years and is drawn down in high-cost “dry” years. Establishing such an account, however, means that rates are likely to be higher in most years than if the rates had a higher fixed cost component due to higher financing costs. The City essentially has to carry two components of debt, the first to pay for the new water supply system and the second to fund the balancing account. The second method is to increase the amount collected in fixed charges each year so that the variation in revenues doesn’t cut into debt service. Bartle Wells has recommended a minimum of 40% in fixed charges that is consistent with practices with other municipalities. We don’t have a strong preference for either approach, but the Council should be aware of its choices.

Below are two charts I prepared during the URAC meeting (and shared) that compare bill shares across usage deciles for SFR customers. The first chart shows allocations with 40% fixed costs, the second with 13% fixed costs. Note that the consumption shares are steeper than the cost shares due to the fixed costs. At 0% fixed costs, cost and consumption allocations would be identical. It’s important to note that consideration of fairness must not be a simplistic analysis of average water consumption, but also must consider the other investments and costs incurred to deliver that water.

CostAllocation-40P Cost allocation by Decile with 13% Fixed Costs

One final note: the City may not have been in this position if it had more clearly communicated the CBFR rate structure to the community. Measure P passed by only 2%–a swing of 144 votes would have defeated it. I think that most people will understand that water costs are higher in the summer; the City just says, “we live in California where it doesn’t rain during the summer and everyone starts watering their lawn.” The CBFR component could have been more clearly labeled as the “Summer Demand Charge.” Most people would have made the connection and there would have been much less outcry over “complexity.”