The Big Thirst, page 33
In most communities, in fact, the water bill isn’t for water at all—it is typically just for the cost of getting the water to us, the pumps, the electricity, the staff to monitor water pressure and water safety and to be on standby for water-main breaks. The water itself costs nothing.
But if you had to pick a single problem with water, if you had to pick a single reason that our relationship to water is so out of whack, it is captured in that perfectly turned slogan: “It’s water. Of course it’s free.”
Although we don’t often realize it, free isn’t that great. The lack of a price, on water or on any other resource, leads to all kinds of inequities and inefficiencies. Water may be the most vital substance in every aspect of human endeavor, but the economics of water is a mash-up of tradition, wishful thinking, and poor planning.
Las Vegas—where the water supply is in such desperate shape that home owners are paid $40,000 per acre to rip up their lawns and water police officers enforce the water rules—has among the lowest residential water rates in the country. A typical family’s bill there is $23.62 a month. In Atlanta, the same amount of water would cost you $50. In suburban Philadelphia, an area with ample rain, where water scarcity isn’t an issue at all, it would bring a bill of $80, three times the cost in Las Vegas.4
In Napoleon, Ohio, the Campbell Soup factory, the largest soup factory in the world, simply puts its huge water intakes into the Maumee River and takes all the water it needs. No charge.
Out in California’s Imperial Valley, the vast agricultural basin from which much of our carrots and lettuce and broccoli come, the water is imported from Lake Mead, on the Colorado River, delivered through a vast network of canals. The water is essential to farmers in the Imperial Valley, which, with average rainfall of three inches a year, qualifies as a desert. Every square foot of cultivated dirt in the Imperial Valley has to be irrigated with six feet of water. The Imperial Valley is the eleventh most productive agricultural county in the country; it is also the nation’s largest irrigation district.5
The water is essential, it is imported, it is sucked out of a river that is itself increasingly dehydrated. And the water is cheap. The price for farmers is a flat rate: $19 per acre-foot. That’s $19 for enough water to cover a one-acre field in one foot of water—$19 for 325,851 gallons of water.
The average home in the United States pays $3.24 for 1,000 gallons of water.
The average home in Las Vegas pays $2.71 for 1,000 gallons of water.
A farmer in the Imperial Valley pays six pennies for 1,000 gallons of water.
And here’s the really astonishing thing: The farmer in the Imperial Valley is using exactly the same water as the mother giving her daughter a bath in Las Vegas. The mother is just paying forty-five times as much as the farmer.
A carrot farmer in the Imperial Valley can get about thirty thousand pounds of carrots from an acre of land. Those carrots will use about $114 worth of water to grow. What that means in the grocery store is that the big, three-pound bag of carrots from California required an astonishing 217 gallons of water to grow—and that water cost 1 penny.6
We need carrots, of course—we need affordable carrots. We need farmers, and farmers need huge quantities of water. But why does the water that costs a California farmer $1 cost a Las Vegas homeowner $45?
Las Vegas is often held up as the perfect example of squandering water—not just all those lawns and golf courses, but the casinos with their fountains and canals, all at water rates less than Atlanta or New York City. Without the Colorado River, without Hoover Dam and Lake Mead, Las Vegas really would be a fantasy.
But the Imperial Valley, which depends as surely as Las Vegas on the same imported water, actually uses five times as much water as Las Vegas. And because Clark County, home to Las Vegas, has twelve times more land than the Imperial Valley, the farmer is using sixty times as much water per acre as the casino mogul.7
And why are we growing carrots in the Imperial Valley of California? Just one reason: cheap water available for the farmers. We could grow carrots somewhere else. We’ve decided to have farms in the Imperial Valley as surely as we’ve decided to have casinos in Las Vegas—by providing water to both places, from the very same overtapped Colorado River.
On the surface, Las Vegas somehow seems “unnatural,” a frivolous use of precious water; the farmland, on the other hand, seems smart, a judicious use of the precious water.
Both the Imperial Valley and Las Vegas have huge economic impacts. The water siphoned off to the Imperial Valley generates crops and cattle worth $1.5 billion a year. The water piped into Las Vegas generates gambling revenue alone—not accounting for all the related economic activity, from grocery stores to movie theaters—of $8.8 billion a year. In terms of bang for the bucket, the water we’re using in Las Vegas is having a geometrically larger impact than the water in the Imperial Valley—per gallon, it’s generating twenty-four times more economic activity.8
Once you start to unpack the economics of the way water is used in Las Vegas and in the Imperial Valley—what the water costs and what it helps produce—Las Vegas doesn’t look quite so sinful.
But the really important thing to understand is that Las Vegas casinos and Imperial Valley carrot fields both represent judgments—choices about economic development, water, and water economics. It’s just that we don’t typically acknowledge that they are choices, or that there is an economics of the water required to create both.
There is nothing wrong, in fact, with deciding that casinos can afford more expensive water than carrot farmers—as long as we realize that’s a decision we’ve made.
If we doubled the cost of water to the Imperial Valley farmers—which would surely occasion outrage—the amount of water in the three-pound bag of carrots would be just over two pennies. And the farmers would still be getting water at one-twentieth the cost to the casinos.
Here’s the real reason the economics of water is skewed: The prices the farmer and the casino owner pay for water aren’t prices in the way we think of them. Water prices aren’t fixed in the market—by matching people’s demand for water against its supply. The price of water for both farmers and Las Vegas is simply the cost to deliver the water to each, and nothing more.
So it’s not quite fair to use the term “inequities” for the odd price differentials in the world of water—it is rare to be able to compare such dramatically different water uses and water costs as growing carrots and running a roulette wheel within the same water system. But if the differentials are not necessarily water inequities, they are often water absurdities.
The dramatic price differences exist, in fact, for a quite noble reason: We want to make sure people get the water they need, so we’ve developed a practice of not charging at all for the water itself, we just charge for the water service, the delivery. And in a century of water that was abundant, safe, and free, we’ve haven’t had to ask how much water people used, how much water they should use, how efficient they should be with it—or what they should pay for that water, and what we should pay for their products as a result.
No less a chronicler of capitalism than Adam Smith captured the polarity of water’s value and its price in The Wealth of Nations, in a chapter called “Origin and Use of Money.” Smith compares water and diamonds:
The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called “value in use”; the other, “value in exchange.” The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.9
Smith published The Wealth of Nations in 1776, when getting water required a lot more effort than it does today. So his insight is truer today than it was then. Gather the half-finished bottles of water from the cup holders and the floor of your minivan and see what you can get for them. Forget “value in exchange”—not even their original drinkers will finish off “old” bottled water. Their best use turns out to be filling the dog bowl.
The irony, of course, is that bottled water is the only water we seem happy to pay for in the first place.
NOT MANY PEOPLE DREAM of owning their own water utility, and Bob Eckelbarger certainly didn’t. The water utility in his tiny hometown of Emlenton, Pennsylvania, was such an antiquated, leaky mess, though, that with a stubborn sense of civic duty, he insisted on buying it in order to save it.
Eckelbarger was hired as the lone employee of the Emlenton Water Company when he was twenty-two years old. Two years later, tired of the unwillingness of the five elderly owners to invest their modest profits in updating the crumbling system, Eckelbarger told them he was either quitting or buying the company.
And so, in 1962, Eckelbarger and his wife, Beverly, came to own their own water utility—the water treatment plant, the storage tank, the pumps, the pipes in the ground, and the water meters. They ran the water company like they would have run a small-town doctor’s practice: always on call. They had four hundred customers—all the homes and businesses in Emlenton, serving about twelve hundred people. Bob did the pump and pipe work. Bev did the bills.
Bob was a young man when they bought Emlenton Water Company, and he was nearing retirement age when they sold it thirty-six years later. “Sixteen hours was the longest we ever had an outage,” he says. “We never had a customer out of water overnight.”
When they took over in 1962, the typical customer’s monthly bill was $2.40. “We had total revenue of $960 a month,” says Eckelbarger.
When he bought the company, Eckelbarger got all the records, going back to its 1876 founding, so he knew that in 1912, the year the little utility first installed a water filtration plant, the typical bill was $1.97 a month.
In the half-century between 1912 and 1962, the price of water service in Emlenton had gone up 43 cents, not even a penny a year. In fact, back in 1912, $1.97 was a substantial sum. As much as such comparisons are meaningful, $1.97 in 1912 is equivalent to more than $43 now—the water bill from 1912 would be 25 percent higher than the typical water bill today.
It was a typhoid outbreak in Emlenton in 1912 traced to the water supply that motivated construction of the filtration plant. For water that didn’t make you sick, $1.97 a month might have seemed a bargain.
The filtration plant that Eckelbarger got with the company in 1962 “was pretty much like it was when they built the plant in 1912.” The town’s pipes were leaking 80 percent of the clean water being pumped, and the pumps, Eckelbarger says, “were not steam pumps, but just one generation beyond steam, belts and jackshafts and pulleys and so on.”
In the first few years, just to raise the money to buy new pumps and pipes, Eckelbarger persuaded his parents to mortgage their farm three times.
He also went to the Pennsylvania Public Utilities Commission for approval for a rate increase. “I wrote a letter to the PUC in Harrisburg,” says Eckelbarger. “I had some numbers, our expenses, our income. And I told them we needed more money. After we wrote the letter, they said they would require us to meet with them, so I packed stuff in a briefcase and I went down there”—220 miles east—“and I sat and talked to the man who was head of the water rates for the state. I showed him what we had done by way of improvements, and what we had to do.
“I was asking for $3.20 a month”—80 cents more. “Well, by the time he looked through all the numbers, he said, ‘You need a nickel more. You won’t make it at $3.20.’ He approved a rate higher than we asked for.”
And so in 1963, the rate for water in Emlenton went, in a single leap, from $2.40 a month to $3.25 a month, a 35 percent increase.
Even at $3.25 a month, the water was still just half the relative cost it had been fifty years earlier. In 1963, it was also comparatively cheap. Americans in those days were spending $7.50 a month on alcohol. Any family with a telephone in Emlenton in 1963 was paying $5.65 per month. So the 80 cents was a big one-time jump, but $3.25 a month for water wasn’t a burden, it was a bargain.10
That wasn’t how the people of Emlenton received it, though. “I nearly started a revolution,” says Eckelbarger. “People weren’t very happy with me.”
Even in 1963, even in a small town with its own water company, the treatment plant right downtown on River Street, two things were true: People didn’t know the condition of their water system or the money required to sustain it, and any increase in their monthly water bill was met with annoyance, if not resentment.
Recently, water rates in Indianapolis, which had been frozen for five years, needed to be raised on an emergency basis in the middle of the recession because of rising interest rates on the utility’s debt. During months of hearings and debate in 2009 and 2010, residents expressed their unhappiness.
“We paid our bills in good faith and get nothing for it,” said one woman, apparently discounting the actual water in her anger at the proposed 17.5 percent rate increase.
“We already pay hellacious water rates,” said another woman, who owned two apartment buildings.
Indianapolis’s “hellacious” water rates, before the increase that was ultimately approved, were $25.50 for a home using seven thousand gallons a month. In the end, Indiana’s regulators approved a 12 percent increase—$3 a month, bringing Indianapolis’s rate to $28.50, still 20 percent below the national average.11
Out in El Dorado County, California, in 2010, the water district was proposing to raise water rates for the first time in ten years—a hike of 35 percent, from $23.75 to $32.07 a month, on average, for a stunning ten thousand gallons of water per home. The El Dorado Irrigation District has 42,000 routine water customers; it received 4,500 letters protesting the rate increase.
Over several months, the water district decided to cut the rate increase to 18 percent—a rise of about $4.25 a month instead of $8.30. The president of El Dorado’s board wrote a piece for the Sacramento Bee, explaining that he and his colleagues were simply trying to make up for years of neglect of the district’s pipes and pump stations by past boards, but apologized for “the upheaval caused by the proposed rate increases.”12
In Washington, DC, in February 2010, the city council approved new water rates that would help dramatically accelerate the replacement of the city’s water mains. The 17 percent rate increase will allow the nation’s capital to replace its water mains over a hundred years. At the previous rates, replacing the water mains was scheduled to take three hundred years.13
The attitude about water and money has a universality that crosses cultures and crises. In Australia, in the midst of a grinding, relentless, potentially permanent shift in rainfall that left the country without enough water to function, elected officials lost their jobs just for talking about raising water prices, or because they did raise them.
Jim Gill, who took Perth and its Water Corporation through the water crisis as CEO, says, “A water utility like ours produces water so cheaply, people expect us to continue that. We are just too good at what we do.”
His successor as CEO of Water Corporation, Sue Murphy, articulates the practice of water managers worldwide: “We don’t charge for the water at all. We charge for the pumping, for the storage, for the convenience.” And like her colleagues, she shares the view that water is what’s called in economic terms “price inelastic”: If you change the price, you won’t change the behavior of people using the water.
“If you change the cost of water by a factor of ten,” says Murphy, whose customers have water bills similar to U.S. bills, about $40 a month—“well, the rich people would still have gardens, and the poor people would live in dust bowls.”
No one, of course, is talking about changing water prices by even a factor of two—and well-off people would, in fact, change their behavior if the routine water bill went from $35 a month to $350 a month.
It is, in fact, people from outside the water utility fraternity who have begun to question the idea that the price of water doesn’t matter anyway, so you might as well keep it cheap. Robyn McLeod, commissioner for water security for South Australia, the vast state that includes part of the shriveled Murray-Darling Basin, started life as a history teacher, and came to water through jobs involving the environment and the private sector. Observing the conflict in Australia over scarce water between cities and farmers, between commercial plant growers and suburbanites with brown lawns, she says, “Water is about the economy. And water is far too cheap.”
People have no incentive, in other words, to pay the slightest attention to what water they use or how they use it—because whether they are farmers flood-irrigating fields or wealthy people filling swimming pools, the price is zero, or close to it, so it doesn’t matter how much they use or what the productivity of the water itself is.
The culture of universally cheap water also means that water systems worldwide rarely charge enough to sustain themselves—whether in Delhi or Washington, DC. They perform worse and worse over time, which not only erodes confidence in the system but also creates resistance to the very price hikes that would help solve the problem.
That, in fact, may be the ultimate irony: Keeping water at, or near, free eventually ends up depriving people of the water that the free water is supposed to make available to them. Free water means there isn’t enough revenue to keep the water flowing.
The very organizations we expect to do a good job of providing water to everyone—including people of limited means—end up starved of resources, whether in the developed world or the developing world.
