As people use less water, utilities charge more

To make up for drops in revenue with reduced water use, water utilities have some ways to make more money:

When customers use less water, that means they’re paying less for consumption. This is a good thing, and not just because it’s more ecologically friendly. In the long run, conservation and efficiency are the cheapest ways utilities can avoid needing to develop new supplies in the future.

But in the short-term, conservation and efficiency can put utilities in a pinch, because their sales fall while fixed costs remain the same. Eventually, they need to find a way to make back some of that lost revenue to cover their costs…

That’s why lots of utilities are hiking up the volumetric cost of water itself, even as people are using less of it. But with equity in mind, many water experts advocate for tiered pricing, where customers who use less water pay less per unit. The more you use, the more you climb up pricing tiers. The larger the price increases between the tiers, the more of an opportunity utilities have to make up revenues—and send a message to ratepayers that they shouldn’t ideally be using so much. Likewise, water rates can fluctuate throughout the year, in accordance with use and weather patterns…

Between crumbling infrastructure and downhill sales, it’s going to be hard for utilities to avoid bumping up customer fees to manage systems more effectively. But they also need to start thinking differently about their own business model and how they communicate changes to customers, since those changes are going to be reflected in customer bills.

Which is to say that customers also need to adjust their expectations about water. Is water a commodity to be purchased at a given rate? Or is it more like a public service, like the police or court systems? It might be better to conceptualize it more like the latter.

The infrastructure for many of these systems are expensive and it needs maintenance. Plus, these utilities are usually companies that need to make some money. And, some have argued for years that Americans should pay more for water and other basic goods like this in order to have a better understanding of its value and its limited nature.

More broadly, this could bring American customers back to a recurring issue: at what point do changes due to environmentalism become too costly? This could be quite a shift for many utility users; if they use less water or electricity or natural gas, shouldn’t they save some money?

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