California’s Water Conservation Regulations and the Law of Unintended Consequences Part 1—Management Impacts

The California Drought has elicited fascinating reactions. Water was moved by truck—whether to meet basic human health and safety needs in areas where wells ran dry; comfort and aesthetic needs in affluent communities like Montecito; or individual luxury needs, like the case of the celebrity who was fined for illegally transporting water over district boundaries to his estate. “Drought shaming” (use of social media by individuals to identify and reprove water wasters) emerged as a common and acceptable practice. Almonds were vilified. And some individuals even push back and deny that the drought exists.

Among the policy-oriented counteractions, an array of economists have proposed new pricing strategies designed to encourage conservation among end users. Economists and policy analysts advocated for more organized markets to better distribute water resources among water suppliers. Water districts offered rebates to offset the cost of converting residential lawns to drought-tolerant landscaping. And the State of California took an extensive regulatory approach to dealing with the drought (see “California Steps Toward Statewide Centralized Water System,” Journal of Water, April 2015).

As a result, Californians are conserving water, and possibly have developed a new conservation ethos.

Though unpopular, the state’s draconian conservation mandate was crafted to meet the state’s end game of reducing municipal water use, where other efforts, including a call for voluntary conservation in 2014, have failed. And, contrary to popular belief, agricultural water use did not get off scot-free. The agricultural community was also subjected to stringent conservation this year due to zero-percent project water allocations from the Central Valley Project and to certain irrigators from the Klamath Project, reduced allocations to Settlement Contractors, curtailment of senior water rights, and dropping water tables, which increased the difficulty and cost of acquiring groundwater.

But policies that command water conservation are not without side effects—or unintended consequences, as they are known in the social sciences.

Unintended consequences at their simplest would be the unforeseen or unintended outcomes of a purposeful action. They result from the inherent complexity of the system (e.g. social structure, environment, world or universe) in which the action occurs and can be positive (unexpected fortuitous result), negative (unexpected drawback) or perverse (backfiring, exacerbating the problem).

The unintended consequences of water conservation have impacts in a variety of policy areas. In this post, I discuss management impacts. Future posts in this series will include economic and environmental impacts, issues of fairness and solutions.

Management impacts include reduced runoff, strains on infrastructure and revenue shortfalls.

Reduced Runoff [1]
In agricultural communities, a major impact of conservation is the reduction of irrigation runoff.

When a lot of water is applied to soil, as with flood irrigation, the soil absorbs the water until it becomes saturated, and the excess runs off. Where it ends up depends on the geological and topographical characteristics of the land—but in general, it either returns to the same stream system or feeds another body of water. When less water is applied, the water will still absorb into to soil, but there will be less, if any, excess to run off.

This premise is illustrated in an article posted by Northern Colorado’s local NPR station. The reporter tells the tale of two irrigators in the South Platte River Basin—one who switched from flood irrigation to the more efficient center pivot irrigation and, paradoxically, is now using more water and generating less runoff , which makes its way back to the river system as return flow. The second irrigator has a water right that depends on the return flows generated by the first. The unintended consequence here is the injury to a downstream water right in an over-appropriated basin.

On a more salient point, the Imperial Irrigation District (“IID”) has implemented conservation measures and a fallowing program to generate water for transfers to other areas. Because conservation and fallowing mean less water applied to the land, they also mean less runoff flowing into the Salton Sea, and thereby accelerating its decline. This was not entirely unforeseen, as the Quantification Settlement Agreement (“QSA”) provides for the delivery of mitigation water to the Salton Sea through 2017 and ramps up period for transfers to the San Diego County Water Authority (“SDCWA”) until the full amount of 200,000 AF per year is reached in 2021.  But with the end of mitigation deliveries imminent and full transfers to SDCWA following shortly thereafter, IID is taking strong actions to deal with the unintended impacts to the Salton Sea. (For background on IID’s actions, see “Imperial Irrigation District Petitions State Board for Salton Sea Restoration,” Journal of Water, January 2015 and “Imperial Irrigation District Releases Comprehensive Framework For Salton Sea Restoration,” Journal of Water, September 2015).

Strains on Infrastructure
Agricultural runoff has a counterpart in urban areas—the water that runs down the drain or is flushed down the toilet, aka wastewater. And it can be similarly troubling when it is reduced.

A recent article in the Los Angeles Times, “Unintended consequences of conserving water: leaky pipes, less revenue, bad odors,” discusses the infrastructure problems faced by sanitation districts. Reduced water use reduces wastewater flows, which means there is less water in the sewer system to move solids, which are then collecting causing corrosion, back-ups and odor problems—especially in areas like Sacramento, where the system is flat, precluding any gravity-driven movement through the system.

Despite sensational and frequent water main breaks in some areas, freshwater systems are not experiencing strains from conservation. According to numerous news reports, the breaks are due to the age of the infrastructure or weather conditions. Extreme weather, including the hot, dry conditions that lead to the need for conservation, can cause soil to shift, which would undermine the beds supporting underground pipes. When it comes to it freshwater, less water in the pipes means less water in the pipes.

Revenue Shortfalls
In 2014, the Montecito Water District found itself nearing the end of its water supply and took action imposing water allocations. Water use was reduced by about half—but the reduction in water sales put the district on track to end the year in the red, unless rates were increased.

Montecito Water District is in a unique situation, where it does not have a robust groundwater basin, and it has limited access to alternative supplies. Yet even without the specter of having the water supply run dry, other water districts throughout the state are experiencing a similar financial quagmire.

In order to comply with the state’s conservation mandate, some districts are rationing water supplies, while others are imposing outdoor watering restrictions and pushing out public information campaigns aimed to reduce water use. Water use is reducing. The State Water Resources Control Board (“State Board”) reported that water savings in August 2015 were more than twice the savings of August 2014.

But the celebrated water savings mean that water sales fell and, therefore, so did revenue. With the water suppliers bound by the Prop 218 cost-of-service provision, which specifies that utilities can charge for a service only what it costs them to provide that service, they have little wiggle room to bear the impact of a revenue reduction.

Some fail to see the problem. Whether it is a myopic view of the impact on one’s own water bill or simply cynicism among the public, there is little tolerance for water managers’ attempts to use the only tool they have available to resolve their fiscal dilemma: increase revenue.

Why do reductions in revenue mean that rate payers have to pay more for their water? The answer has become such a common refrain that it borders on truism: water suppliers have costs that are fixed (infrastructure costs) and costs that are variable (water supply costs)—but the water users pay a volumetric charge.

This cost and rate-setting system, in and of itself, is not problematic. In fact, it meets the publicly-desirable “user pays” doctrine. By tying a water user’s share of the fixed cost to the volumetric charge, an entity that uses more water—and therefore a larger share of the infrastructure—pays proportionately more of the infrastructure cost. It also avoids the political pitfalls of a fixed charge, which many advocates argue are inherently unfair to the poor.

In the next post, I will discuss economic impacts, which hit residents, businesses and communities.

 


[1] While the precise nature of the impact of runoff reductions can fall into any policy area, depending on the next stop for the runoff and the nature and concentration of constituents in the water, but it becomes a management issue to mitigate or otherwise resolve the problem.

 

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About Marta L. Weismann

Marta L. Weismann, Director of Research of Stratecon Inc.—an economics and strategic planning consulting firm—provides research support for all aspects of Stratecon’s services and is the Managing Editor for the Journal of Water, a quarterly publication providing in-depth analysis of water market activity and selected water policy developments in the Colorado River Basin, Texas and elsewhere in the Southwest. She also participates on teams dedicated to developing new ways to address water supply issues in the American Southwest. For more, go to www.stratwater.com.