Long Live Expensive Water

The late-summer Sturm und Drang over high water rates made it to the Dallas City Council this week, where Dallas Water Utilities Director Jody Puckett explained that, calm down, your water meter's fine, you probably don't have a leak, you just probably forgot during the weird monsoons of spring and early summer how much it costs to dump thousands of gallons of water per month onto your lawn. That and the fact that water rates have increased significantly over the past few years. The city now charges $7.63 for every 1,000 gallons of water used above 15,000, an increase of 22 percent since 2012.

But it's in the outlying areas that the outcry over water bills has been the shrillest, particularly the northern suburbs served by the North Texas Municipal Water District. In Richardson, Elise Whitmire's water bill nearly quadrupled, from $80 to $310, after she increased her water usage. Same in Garland, where homeowners packed a meeting with city officials to complain about high water bills. Plano didn't wait for agitated homeowners to start contacting news stations, issuing a press release in late July announcing that, yes, water bills were through the roof and, yes, a lot of residents seemed to be pissed about it. There, as in Dallas, the higher bills were the result of skyrocketing late-summer water usage and increased water costs. But the increases in the suburbs have been far more dramatic. What NTMWD customers pay and how much that's increased varies by city, since those governments decide how to pass wholesale water costs along to their residents. But the rate the NTMWD charges cities will soon be double what it was five years ago. In 2010, the rate was $1.25 per thousand gallons. This year, it's $2.06; next year, it will jump to $2.29 and continue rising through at least 2020, when it's expected to hit $3.40.

The NTMWD has a handy fact sheet that explains why rates are jumping. The population served by the district is expected to double by 2060 as people continue to flock to places like Frisco and McKinney. The district expects that conservation efforts will cut down on per capita water usage, but it's still working to significantly increase supplies through several expensive projects, including the $114.6 million Lower Bois d'Arc Creek Reservoir. Member cities have felt an additional squeeze after the discovery of invasive zebra mussels temporarily cost the district access to Lake Texoma and forced the district to purchase millions of gallons of water per day from Dallas.

The fact sheet does a good job of explaining why water rates have had to go up. It doesn't touch on why, despite the howls of protest, this is a good thing.

On a superficial level, water costs exactly what it should. Dallas Water Utilities, the North Texas Municipal Water District, and other big water systems are self-sustaining enterprises that don't turn a profit or operate at a loss. Rates are set at whatever level is needed to pay for the capital and operating costs necessary to obtain an adequate and reliable supply of water and deliver it to customers. But the rates as traditionally structured don't do a very good job at factoring in externalities, especially the fact that water in Texas is a limited — and increasingly strained — resource.
We know this is so because of how freely people douse their yards. During summer months, outdoor usage can account for half or more of a household's total water use. Not to pick on Whitmire, the Richardson resident featured by The Dallas Morning News, but her family would have had to use about 60,000 gallons of water in a month to account for the $310 bill under the city's current rate structure. For reference, the average American uses between 2,400 and 3,000 gallons of water per month, not counting irrigation. Whitmire's household may use more water than average, but she's hardly an anomaly, particularly in Dallas' northern suburbs. According to the most recent state water plan, four of the top six cities in terms of residential water usage per capita — Frisco, Richardson, McKinney and Plano — are NTMWD members.

Drought-induced conservation efforts, like NTMWD's twice-monthly lawn watering (the easing of which triggered the current complaints) have reduced average water usage. But nothing signals scarcity or makes consumers question discretionary purchases quite like a price hike. Water demand doesn't respond perfectly to price. According to the EPA, a 10 percent increase in residential water rates results in a 2- to 4-percent drop in demand as customers change their habits and maybe go buy a low-flow toilet. The effect probably dissipates at some point, but if the conservative end of that estimate were to hold as NTMWD nearly triples rates between 2010 and 2020, then residential water usage would fall by more than half. Coupled with other conservation measures, the district could perhaps afford to forego some of the costly infrastructure projects currently on the drawing board.

And it's not like the suburban water rates are terribly high, even halfway through NTMWD's price-tripling. The 60,000 gallons of water that result in a $310 bill in Richardson (and a $268 bill in fellow member city McKinney, a $288 bill in Frisco and a $344 bill in Plano) would cost $411 in Dallas. In Houston it'd be $444.38. In Seattle, which we'll toss in because it has the nation's highest residential water bills, it would be $746, assuming it's the peak season and my conversion between gallons and cubic feet was correct. In Austin, whose rate structure punishes high water usage even more than Seattle, with residents paying $23.75 for every thousand gallons used above 11,000, the bill would be a rather insane $1,254. (Modest water usage is much more affordable — $2.10 total for first 2,000 gallons, plus a meter fee — so as not to discourage bathing.)

So, the next time an eye-popping water bill arrives after drenching one's verdant lawn and blooming garden through the dog days of summer, don't be upset. Don't run to your nearest TV news reporter or elected official in a rage. Rejoice! For your sticker shock is a sign that, slowly, North Texas is coming to terms with its water future.
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Eric Nicholson
Contact: Eric Nicholson