Is Water Too Cheap?

Each day you and I are positive in the assumption that when the faucet is turned on, water will undoubtedly flow. This seemingly predictable fact of life has only been the reality for a short period of time historically speaking. For most of the history of human civilization, clean running water right into one's home was non-existent. It was not uncommon for battles to be fought over territory that contained rivers or lakes. This is due to the obvious, but often forgotten fact, that water is a necessity. Without it, life for all practical intensive purposes stops. However even knowing this history, and occasionally appreciating the availability of water, especially here in the United States, why the hell is it so cheap? Using my own monthly bills as an example my water costs per month are approximately $20-$25. But the question remains, is that too cheap? Should I pay more for the access to this essential ingredient to life? Or should Bill gates pay 18 dollars a gallon, and I pay pennies?

I have often wondered why, especially during a drought, does the cost of water not wildly fluctuate. Why doesn't the cost of water per gallon double, triple, or quadruple during a water shortage. Another important commodity, oil, reacts according to these basic economic principles of supply and demand, but water is something wholly different. Is this an adequate system that is currently in place? Should water allocated for essential uses be cheaper than water that is destined to fill a swimming pool? Would it be fair for wealthy people to pay more for their water than poor people? Is there a fundamental constitutional right to water? Finally, where does equitable payment for a necessary commodity come to terms with the necessity of the commodity that there is not enough of all the time? And at this intersection what are some potential solutions to help resolve whatever disparity may exist.

The idea of creating a "two-tier" water pricing system is not a new idea. The concept of charging more people when they have the means to pay is incorporated into our tax system, and has been a concept used repeatedly throughout human history. The www.sfgate.com discussed this idea and made some compelling arguments.

There are California water agencies that price water for residents in two tiers like a progressive income tax: The first tier is the least expensive. The problem isn't this initial allocation of water that people need for everyday essentials (sanitation, drinking and cooking). The problem is that the second tier of less essential water is too cheap. The price Californians pay for water doesn't reflect the risk involved in relying on the Sierra Nevada snowpack, rainy winters and the Colorado River. Any true cost of water must reflect this risk. If not, when there is a drought, the users are unprepared.

Not only should all California water agencies price water in two tiers, but they should be raising the price of less-essential water. In doing so, consumers will be able to choose how they want to conserve. Even more importantly, California's thousands of entrepreneurs have the incentive to improve, create and market water-efficient products and processes. Raising prices means that millions of consumers and thousands of entrepreneurs will be working on reducing water use instead of waiting for orders from the governor.

 So what if we, as a state, did do this? Setting aside the political maneuvering that would be required, is the fundamental idea worth entertaining? In my opinion the answer is unequivocally yes. Treating water like any other resource that is subject to the principles of productive and functioning markets would enable innovation to take root and thrive. In many instances government is not in the business of innovating novel solutions to complex problems. Government can be utilized as a funding source, but real success comes from financially motivated entrepreneurs. These men and women have the capacity, as proven throughout history, to solve problems while also making money. Creating a water conservation market that would incorporate both private and public business and institutions could achieve water usage goals and sustainability in California.

However, it would be irresponsible to continue down this line of reasoning without addressing the very real issue of a person's "right" to water. Not being a trained lawyer the question to this answer does not appear as clear cut. First, one has to agree or disagree that a person has a right to water. Second, if the answer is yes, how far does this right extend, and what can the law dictate to a water market, as to how much or little they can legally charge? According to the United Nations the "right to water" does exist. The United Nations resolution stated,

"The human right to water places certain responsibilities upon governments to ensure that people can enjoy "sufficient, safe, accessible and affordable water, without discrimination" 

An interesting phrase within the UN's definition is, "accessible and affordable water, without discrimination." Would a reasonable person claim that a two-tier water pricing is discriminatory, or simply practical? Or does "discrimination" only apply to water restrictions based on someone's religion, nationality, ethnicity, or sex? The wording of this right is ambiguous but it does lay a foundation to work off, if one makes certain assumptions. For the sake of argument, let say that discrimination only applies to instances where restricted water access is due to an individuals religion, nationality, ethnicity, or sex. If this is true than there is an argument to be made that a two tier water pricing system could in fact be legal, and also practical. In short, the status-quo of water usage and pricing has not kept up with the needs of the public as a whole.

In California more people live here than ever before, and the demands on the water supply, due to a variety of factors, has never been higher. The current policy of voluntary conservation, as pointed in the SFgate article, rarely if ever work. Additionally, the flat cost of water does not allow innovative market based conservation techniques to be utilized. A new approach needs to be taken when discussing water allocation, use, and cost. While a person does have a right to access affordable water, that doesn't necessarily mean that Warren Buffet and I need to pay the same price each time we flush our toilet, or fill up our cup.