Should water cost us more?

We're on a cusp, says Rep. Jean Wagenius. By that she means many Minnesotans are starting to think differently about water -- how much of it we have, how contaminated is it, how we should use it to make it last, what we pay for it.

Our Ground Level project, which explores community issues around the state, is looking at groundwater in series of online and on air stories called Beneath the Surface. All those questions and more bubbled up when we asked our Public Insight Network about water. So with this post, we're starting to tackle some of them.

I sifted through dozens of comments and questions, looking for themes and interesting quandaries, and then I put many of them to a number of experts and officials, asking for their best thoughts. In the coming weeks, I'll offer up the answers I received in the spirit of helping people think about some thorny issues. I invite your participation via the comments section or on Facebook and Twitter.

I'm starting with the price of water because it came up a lot and because many people see it as one way to address the huge question of water conservation. That's a hot topic in California right now, and seems destined to get into the conversation even here in coming months and years.

First off, here's what Wagenius, who has been a proponent in the Legislature for dealing differently with Minnesota's water, told me:

“We’re on a cusp. In the past we have associated groundwater with plenty and now we are seeing limitations. If  there are barriers to recycling (i.e. legal code-related obstacles) we should get rid of them definitely. But the main point is that using well water is so cheap, why would you even think about recycling? We love our water but we do not have a monetary value for water and groundwater. The cost of water is the cost of drilling the well and building the infrastructure."

FROM THE PUBLIC INSIGHT NETWORK:  Why don’t we charge end users more for water to encourage conservation?

Klayton Eckles, engineering and public works director, Woodbury

There are several factors at play in the pricing structure of water.  First, from an economics perspective the demand curve for water is inelastic, meaning if we double the price we will see a decrease of only a fraction of that.  One study showed it was only a 20% reduction in usage for a 100% price increase.  Another showed consumers don’t pay much attention unless it is a sizable part of their monthly expenditures (over 2% of monthly income).

Second, water in Minnesota is usually provided by a “water utility,” which is given the task of efficiently providing water to its customers, and doing so as economically as possible.  Thus users pay for all of the costs to collect, treat, and deliver the water, and that is all.  Utilities that added surcharges that resulted in profits to the providers, just so the users “did the right thing” would likely face public outrage.  In order to change this equation there would have to be some identifiable implications (that could be tagged with a dollar value) such as a real potential of running out of water or draining the water source dry.

That said, more and more water providers are going toward “progressive pricing structures” where the higher volume users pay a higher price per gallon.  In some cases this can make “essential water” (to cook, wash and flush) extremely affordable, while the non-essential water can be priced much higher.  This approach can have some impact, but has limitations too, related to the studies listed above.

Patrick Sweeney, Research and Communications Director, Freshwater Society

Pricing is a tricky issue.

Almost everyone who has thought deeply about this issue agrees that putting a higher price on water would – if the price were high enough –be a significant incentive for conservation.

On the other hand, it is critical not to price clean, fresh water for basic human needs out of the reach of even its poorest consumers.

In 1992, delegates to a United Nations-sponsored International Conference on Water and the Environment in Dublin issued a declaration that water should be managed as an economic resource, but said that pricing should always take into account human beings’ dependence on water.

The declaration said: “Water has an economic value in all its competing uses and should be recognized as an economic good. Within this principle, it is vital to recognize first the basic right of all human beings to have access to clean water and sanitation at an affordable price. Past failure to recognize the economic value of water has led to wasteful and environmentally damaging uses of the resource. Managing water as an economic good is an important way of achieving efficient and equitable use, and of encouraging conservation and protection of water resources.”

In 2010, the UN General Assembly voted to recognize clean water for drinking and sanitation as a basic human right. Read the UN’s news release on that vote.

If you want to learn a bit more about this philosophical debate on the value of water, check out an article – What is the value of water?” – published in 2008 in the Freshwater Society’s newsletter. Download a PDF of that newsletter.

As to the specific issue of charging for water in Minnesota, the Freshwater Society, in a 2013 report on groundwater, recommended that the Legislature approve an increase in the state’s basic Water Use Reporting fee for groundwater use. We said current fees were  too low to discourage waste or over-use.

The Freshwater Society endorsed a proposal by Gov. Mark Dayton and the Minnesota Department of Natural Resources to increase those  fees by $6.1 million per year.  Freshwater also urged that public water systems “ratchet up their conservation-pricing schedules to discourage all wasteful and excessive uses of water, including lawn sprinkling.”

The DNR calculated at the time that the increases Dayton proposed would have cost households about $1 more per year, and would have boosted the cost of irrigation water from about $10 per million gallons to $22 per million. It’s pretty clear that level of increase would not have spurred much conservation at the household level. It is not clear whether the increase would have been enough to encourage increased efficiencies in irrigation.

The Legislature rejected the fee increases, but provided significant new General Fund spending for the DNR to improve its management and regulation of groundwater.

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