Like water customers throughout the Central Coast and many other parts of California, Scotts Valley Water District ratepayers have responded to the historic drought by sharply reducing their water use even as El Niño rains fall across our service area. Although El Niño is bringing some relief to the parched soil, it will take longer than a single year for our thirsty watersheds to recover. Water conservation is still necessary to assist in the recuperation of our watersheds.
SVWD recommends that its customers maintain their efficient use of water. By setting a target of using 75 gallons per person per day in summer and 60 gallons per person per day in winter, we can collectively meet that goal.
Although this conservation plan will help our watersheds, it also generates a different kind of problem. We are used to being rewarded when we do our part in helping out. However, that general rule works differently when we talk about water pricing.
People often ask me: “If I’m using less water, why doesn’t my water bill go down?” It’s a great question, and here is how I try to explain that counterintuitive correlation.
The value of water is an emerging and interesting discussion topic that comes up in formal business settings as well as in personal conversations. In December, my first column talked about the imbalance that exists between the value we place on water and its overall importance in our lives. When we compare the relatively low price we pay for the full service of having 24/7 access to safe, clean and reliable water as opposed to other non-essential things we buy, then it’s easier to evaluate water rates.
As indispensable as water is, however, sometimes its value is viewed solely through the prism of price and cost. There is a complicated connection between the price of a gallon of water, the trend to use water more efficiently and the financial requirements that water districts must consider. Together, they create a difficult situation to balance.
In order to deliver even a drop of water, a complex system of pipes, valves, pump stations, treatment plants and reservoirs have to be built and maintained. These are high up-front capital investments and fixed costs that must be covered by the sale price of the total number of units of water produced.
Once put in service, the facilities must be run following strenuous guidelines to ensure a safe and clean water supply. All of these processes require skilled personnel regardless of how much water is produced and delivered in any given day or year.
I often contemplate whether water utilities are in the business of selling a commodity or providing a service. If we are being viewed as a service provider, there should be less focus on the gallons of water consumed and more emphasis of the level of service received by the customer. Drought conditions may diminish the amount of available water, but water utilities must still deliver safe, clean, water to each customer without interruption of service. In many cases, water agencies have stepped up their game by offering customers additional or enhanced services regardless of the drought.
By law, publicly owned water agencies cannot make a profit in operating the utility. They are allowed to only charge customers in keeping with the cost of service. The cost of service includes debt service payments for capital improvements, operating costs of treatment, distribution, billing, customer service functions, personnel and other business costs. When customers use less water, the revenue decreases and the water agencies struggle to cover the cost of providing the same level of service. Unlike many other water agencies, to date Scotts Valley Water District has not instituted a drought-related fee or raised rates to replace lost revenue.
However, we have been taking a financial hit from the significant reductions in the potable water demand in the last couple of years, while trying to balance the shortfall by judiciously managing our operating expenses and dipping into our reserves. This spring, as part of our ongoing efforts to manage the District’s financial resources in a responsible manner, the District will undertake a comprehensive rate study that will include a cost of service analysis.
So, the answer to the question about the relationship between reduced water demand and water rates is pretty complicated. But it’s a worthy discussion to have in our community as we work our way through (and hopefully out of) the historic drought.
On behalf of the SVWD’s dedicated staff and board members, let me share that it’s our pleasure to serve the community of ScottsValley. From time to time, I will share my thoughts about the value of water with the community. I encourage you to share your ideas with SVWD.
Visit svwd.org, email us at [email protected] and like us on Facebook.
Piret Harmon is the General Manager of the Scotts Valley Water District.
