The Morning Report
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The San Francisco Chronicle detailed today one of the indirect consequences of water conservation: Water rates go up. The story is worth checking out just to get a glimpse of this graphic that helps highlight the issue.
The phenomenon is true for districts throughout the state. Their costs are largely fixed. They’re paying down long-term debt on infrastructure projects; staff salaries — costs that mostly stay constant regardless of how much water they sell.
When utilities sell less water and revenues drop, their debts remain the same. And revenues for water utilities like the San Diego Water Department are solely derived from the water they sell. (The Water Department couldn’t raise rates, for example, to pay down the city’s pension debt or to close the city’s structural budget gap.) So utilities have to increase the price of water to keep up on their debt payments and salaries and other fixed costs.
While the city of San Diego last year budgeted to sell less water, it didn’t increase rates to make up the resulting shortfall, instead trimming its budget. But other agencies have not been able to do the same. The Los Angeles-based Metropolitan Water District, the wholesaler that supplies most of San Diego’s water, last week said it would increase rates 20 percent in September. The city has passed several similar increases on to residents in the last two years. Because when its suppliers raise prices, the city must, too.