From Regulation

Panopticon

What happens when governments ask the public to report water waste?

Ever feel like you're being watched?

Rainfall has been low, the mountain snowpack is thin, and Californians are bracing for another year of scarcity. But this time we've got a raft of data from the historic 2014-2017 emergency to inform drought management in 2021.*

As the drought ravaged California in 2014, the State Water Resources Control Board (SWRCB) issued several orders restricting discretionary outdoor water use like lawn watering and car washing. A revival of these restrictions may be coming this summer, so it’s useful to look at their implementation during the last drought.

If you see something, say something

As with any regulation, enforcement of water use restrictions requires monitoring--after all, you can't enforce a rule if you don't know who is breaking it. Water management agencies sometimes use inspections or patrols to spot violations. Citizen participation can augment agencies’ monitoring capacity, and so often governments invite the general public to join in the effort. Public management researchers call this implementation strategy participatory surveillance.

Participatory surveillance became part of the Golden State’s water conservation regulatory regime during the 2014-2017 drought, as state and local agencies provided telephone hotlines and websites for the public to report water waste anonymously. California communities responded with gusto: over the 32-month emergency, water utilities logged more than 485,000 water waste reports. In a new Water Resources Research paper, Youlang Zhang, David Switzer, and I analyzed water waste reporting across 408 water systems during the 2014-2017 emergency—with important implications for 2021 and beyond.

What kinds of communities get the most water waste reports?

We marshaled a variety of data to explore the factors correlated with water waste reporting, measured as monthly reports per thousand population. Unsurprisingly, the drought severity and the strictness of local water restrictions were among the strongest predictors of complaints: as the drought worsened and restrictions tightened, reports of water waste increased. But our analysis also identified significant social, institutional, and political correlates of reporting.

Education. Water waste reports correlated positively with the share of a community’s population with a college degree—even after adjusting for income, poverty, and racial/ethnic composition. A more educated public, it seems, generates more water waste complaints:

Institutional structure. A clear ordered relationship between utility ownership/organization and water waste reports emerged in the data: all else equal, municipal utilities got the most participation, followed by special districts, with investor-owned utilities getting the lowest participation:

We think that these disparities mainly have to do with familiarity. Municipalities are in most situations far more visible to the public than special district governments and investor-owned systems, and so garner greater media attention and citizen participation.

Party competition. We expected higher voter turnout to correlate with greater water waste reporting, but our analysis didn’t find any significant relationship between the two. However, we found that the composition of the local electorate predicted participatory surveillance in a surprising way: water waste reporting was higher in communities where the electorate was closely divided between Democrats and Republicans.

We measured partisan competition as one minus the local difference between registered Democrats and Republicans, divided by total registered voters.** Are hardcore partisans tattling on their opposition party neighbors? Maybe, but we suspect that heightened party competition simply indicates a more civically engaged public.

Does water waste reporting lead to greater conservation?

We also analyzed the correlation between water waste complaints and conservation outcomes, using the SWRCB’s official measure of conservation (current water use compared with the same month in pre-drought 2013). Yes, waste complaints positively correlated with subsequent water conservation. Substantively, one more complaint per thousand persons predicts a 0.56% increase in monthly water conservation. This effect is small in percentage terms, but represents a great deal of water in a state as big as California: one more complaint per thousand persons per month for each utility would have resulted in 32 billion gallons more water saved during the emergency—enough supply San Francisco for 16 months.

So is participatory surveillance a good idea for water utilities?

With the data on hand we can’t say for sure that participatory surveillance caused the conservation we see. But the results are consistent with the idea that public engagement expands monitoring capacity and suggests that participatory surveillance can enhance the effectiveness of urban water restrictions. More generally, inviting the public to report maintenance or water quality problems could be a useful way to put more “eyes on the street” and help water utilities perform better.

But it’s also clear that participatory surveillance is a social phenomenon, so water waste reporting is likely to work better in some places than others. Authorities looking to manage drought in California and elsewhere should bear in mind that demographic, institutional, and political contexts can condition the effects of public reporting strategies.

Irrigation Karen coming your way

In deputizing the masses, participatory surveillance also changes relationships between citizens, and so could deepen social divisions when people report each other for breaking the rules. Whether the promise of participatory surveillance as a way to strengthen water restrictions justifies its possibly divisive social side-effects is a harder, more fundamental question.



*In past posts I’ve analyzed decoupling, wholesale supply contracts, and enforcement of irrigation restrictions from the last California drought.

**If a utility service area was entirely dominated by one party (i.e., 100% of registrations), then the value of the party competition index would be zero. If the area was evenly divided between Democrats and Republicans (50% Dem, 50% GOP), the value of this party competition index would be one.

Lone Star Blues

When utility regulation fails, democracy fails

Photo: Texas Tribune

The utility failures in the Lone Star State last week cascaded into a disaster when extreme weather hit an isolated electrical grid.* But more than a natural or engineering catastrophe, the disaster that unfolded in Texas was a regulatory failure. The institutions that govern utilities did not function as they should, and the resulting debacle was literally deadly. That institutional failure will reverberate in political memory long after electricity and water are restored; where essential services like energy and water are concerned, regulatory failure undermines legitimacy of government itself.

Utility regulation & the Texas disaster

With their high fixed costs, significant barriers to entry, and huge economies of scale, utilities are natural monopolies. The trouble with monopolies is that they are not subject to market competition, and so producers can get away with selling lousy products and charging absurdly high prices. To get around this problem, states rely on Public Utilities Commissions (PUCs) to ensure quality, reliability, and fair pricing for utilities. Commissioners and their staffs of professional engineers, economists, lawyers, and other experts act as checks against monopoly abuses by setting rules for utility service quality and limiting pricing.

The disaster in Texas last week is a vivid illustration of what can happen when regulators shirk that responsibility. The PUC considered strengthening weatherization rules for energy producers following cold weather events over the past decade. But energy producers resisted weatherization rules due to compliance costs, and regulators ultimately did not force producers to weatherize adequately. The PUC’s timidity might be a case of “regulatory capture,” but it also could be that the Commissioners simply decided that weatherproofing wasn’t a high priority. The state’s regulatory regime also fostered incentives that emphasized short-run pricing over system resilience. These decisions may have led to lower overall energy prices in the Lone Star State**, but they also left the state’s energy grid less resilient and more vulnerable to extreme winter weather.

When an arctic blast hit, energy production faltered. Energy failures cascaded into water system failures, as pipes froze and pumps and treatment systems failed. More than a week after the cold snap hit, many Texas communities are still struggling to get water systems functioning properly, to say nothing of the countless homeowners whose pipes burst as temperatures plunged. None of these problems was unforeseeable or beyond engineers’ ability to manager; they were all preventable.

Water, energy, and legitimacy

The legitimacy of any government rests on its ability to secure its people’s basic needs—and it doesn’t get any more basic than a warm home and safe drinking water. There is more at stake in utility regulation than efficient investment or fair pricing: basic services are cornerstones of political legitimacy.

A few years ago, I worked with Texas A&M’s ISTPP on a national public opinion survey that asked standard questions about trust in government, and later about people’s experiences with tap water. We found that people who experience bad-tasting, dirty, or low-pressure tap water service were significantly less trusting of their local government—even after adjusting for partisanship, gender, race, ethnicity, age, income, and home ownership:

N=1,979. Point estimates & confidence intervals from OLS regression.

These findings are hardly surprising, but underscore just how central water is to the health of the Republic. When basic services fail, citizens understandably lose faith in the officials responsible for protecting the public. In that sense, the PUCs and other obscure technocratic agencies that regulate basic services are bulwarks of democracy. In a moment when mistrust of government is rampant and the nation’s political fabric is frayed, getting basic services right is more important than ever.




*I moved to Madison from Houston six months ago. Who would have guessed that my first winter in Wisconsin would have been easier to manage?

**Maybe. Kind of. Energy pricing is complicated.

†I just completed a book manuscript with Samantha Zuhlke & David Switzer that uses Americans’ drinking water choices to explore the ways that basic services shape consumer behavior and citizen trust in government; the graph in this post is a sneak preview. More on that project in the months ahead...

Echoes of Vizzini

No, EPA did not propose affordability guidelines for municipal utilities

Affordability!

Late last week the EPA published in the Federal Register some proposed new guidelines for evaluating sewer utilities’ financial strength. In press releases and public comments, water sector and local government organizations lauded the proposal as an important action on “affordability,” and a few news outlets dutifully reported on the EPA’s new water "affordability" guidance. Likely most people would think that means lower water bills for low-income households.

But the EPA’s proposed guidelines have little to do with affordability as most of us think about that word—the guidelines are not about ensuring that low-income Americans can pay for water. Rather, the proposal is about whether communities have sufficient resources to pay for water pollution controls required under federal law. In practical terms, the new guidelines are about whether sewer utilities have to comply with the Clean Water Act in a timely manner.

Understanding what’s going on here requires understanding a bit about sewers, the Clean Water Act, and why utility managers think about “affordability” differently from the rest of us.  

Clean Water Act and local economics

Municipal sewer systems must meet a variety of pollution control rules under the federal Clean Water Act. Many of these rules require major investments in infrastructure and ongoing operational and maintenance costs. Often these costs can be quite high, especially in older communities that operate combined sewers that suffer significant sewage overflows during rainstorms. Overflows can cause raw sewage to run into rivers, lakes, and coastal waters, with attendant damage to health and environmental quality. The Clean Water Act aims to reduce, mitigate, and eventually eliminate such pollution. Recognizing that pollution controls are expensive, Congress built into the law provisions that a allow sewer utility to delay compliance with water pollution controls if compliance would outstrip its “economic capability.”

Yuck.

With few exceptions, sanitary sewer utilities in the U.S. are owned and operated by local governments. In practice, then, when sewer systems face significant Clean Water Act compliance costs, local officials sometimes try to negotiate delayed compliance with EPA or state environmental regulators by arguing that their communities have insufficient economic resources to comply with the law.

To evaluate these claims, EPA conducts a Financial Capability Assessment (FCA)—an appraisal of water pollution control costs relative to a community’s overall economic resources. This appraisal is supposed to be holistic, capturing a range of economic indicators. Since 1997, a key element of EPA’s assessment methodology has been the residential indicator, which is intended to reflect the impact of sewer system costs on rate payers. The residential indicator is the average sewer bill as a percentage of the community’s median household income (%MHI). When that value exceeds 2.0%, EPA considers pollution control costs to be “high” and potentially eligible for delayed compliance.

This approach isn’t great, but it’s not a crazy way to evaluate community-level financial capability.* Still, the residential indicator has been much-maligned in the water sector and was the subject of a comprehensive critique from the National Academy of Public Administration three years ago. Last year AWWA, WEF, and NACWA joined forces to advance a new analytical framework to guide FCA instead of %MHI. The AWWA/WEF/NACWA methodology incorporated local poverty levels and sought to evaluate Clean Water Act compliance costs in terms of their potential impacts on household sewer bills at the 20th percentile income.

What EPA is proposing

Still with me? Great. The proposal that EPA released last week is a revision to the FCA guidelines with two broad alternatives. Much of the proposal aligns wiht the methodology favored by AWWA/WEF/NACWA. Under the Alternative 1, EPA retains the traditional %MHI residential indicator and the suite of economic indicators in its existing methodology, but would add assessments of local poverty prevalence and potential rate impacts on 20th percentile income households. Alternative 2 would allow utilities to use a “dynamic financial and rate model” to evaluate the impacts of Clean Water Act compliance costs on customers.** At the heart of the new proposal are a pair of tables that integrate the old and new methodologies:

Alphabet soup

More alphabet soup

Recognizing the underlying distribution of economic conditions by accounting for poverty and 20th percentile incomes is an important advancement. Under either alternative, these guidelines are marked improvements on the status quo in that they provide a more complete, nuanced economic picture of the communities that sewer utilities serve.

Still, it’s important to keep the purpose of all this analysis in mind: under either alternative, the FCA would inform EPA’s negotiations with sewer utilities over compliance schedules. The point of these guidelines is to determine whether and how much sewer utilities ought to delay compliance with the Clean Water Act. Compared with current practices, the proposed guidelines are more flexible and could in some instances lead to more permissive regulation.

Financial Capability ≠ Affordability

EPA did not propose guidelines on affordability for low-income water or sewer customers. Under the proposal, EPA could consider low-income customer assistance programs (CAPs) as part of its overall assessment, but nothing in the proposed guidelines requires or even encourages CAPs. The proposed guidelines would not oblige utilities to structure rates in ways that constrain prices for conservative or low-income customers. Indeed, a utility that was looking for ways to delay investments would actually have an incentive to set more regressive prices: high fixed charges and declining block rates would make FCA metrics look worse, and so help justify compliance control delays.

So despite the rhetoric in headlines and press releases, these guidelines really aren’t about affordability in the way that most of us understand the term. Sure, delayed Clean Water Act compliance will reduce a sewer utility’s revenue needs. But EPA doesn’t regulate rates under the Clean Water Act, and so there’s no guarantee that financial savings from Clean Water Act noncompliance will accrue to low-income customers. In short, these guidelines are not about low-income affordability, they’re about utility finances and water pollution.

Don’t blame EPA for this confusion—they’ve been scrupulously clear and consistent that their guidelines are about financial capability. Regrettably, the industry press releases and news stories have been waving an affordability banner where it doesn’t quite belong.

Can communities afford clean water?

All this confusion over terminology invites reflection on what affordability really means. When municipal sewer utility leaders declare that they can’t “afford” to comply with the Clean Water Act, they’re making a political judgment that spending on other things or keeping taxes and service rates low is preferable to following water pollution rules. That is the prerogative of local policymakers. Communities need to pay for many important things, and clean water is just one of them. The democratic process is meant to help us sort out our collective priorities.

That’s why there’s more at stake here than pedantry. In expanding the meaning of “financial capability” to recognize the distribution of incomes in communities, these guidelines invite us to think about the distribution of environmental conditions in the same communities. The proposed guidelines don’t contemplate whether foregoing water pollution control in the name of “affordability” really helps or hurts low-income households. Do working class folks benefit when a city has low utility bills, but faces frequent and ongoing sewer overflows? Who suffers when raw sewage flows into rivers, lakes, and harbors because utilities can’t “afford” Clean Water Act compliance?

Using the right words compels us to confront these uncomfortable questions, and focuses our attention to what FCA guidelines mean where the sewage meets the street.



*%MHI is, however, terrible, horrible, no-good, very bad way to measure low-income household affordability.

**This alternative is going make rate consultants happy.