From Privatization

New Normals?

​Lessons from California ​water conservation​, 2019

​Reservoirs aren't supposed to look like this.

Tough water times may be back in California. After the Golden State suffered through a historically severe drought from 2012-2017, ​pleasantly wet weather in 2018-2019 refilled reservoirs and replenished mountain snowpacks. But the state’s drought monitor shows that the past few months have trended drier, and water managers are worried that the state might be slipping back toward another drought.

One fortunate legacy of California’s recent struggles with drought is the California Water Board’s investment in data collection and dissemination. Researchers are learning important lessons about water management from that wealth of data on water consumption and conservation. Complete data for 2019 are now available, and I’ve just had a first look.

Three things emerge from my initial cut at the 2019 data that merit mention against the ominous backdrop of a looming drought.

1. ​A way of life

California’s overall urban water use remains down significantly from the pre-drought days. The state government​ ​established emergency conservation ​rules during the peak of the drought, cutting statewide urban water consumption by nearly 25%. But Governor Jerry Brown and other leaders also vowed to make water conservation “a way of life” that would extend beyond the emergency.

Californians seem to have taken the goal to heart, at least in aggregate. Though water conservation is not at the zealous peak we saw in 2015-2016, it remains strong:

Data: California Water Resources Control Board

Falling conservation in 2018 led to some hand-wringing, but conservation rebounded in 2019 to a statewide aggregate 18.1% relative to the state’s official 2013 baseline. That’s pretty remarkable and suggests that much of the reduction in California’s urban water demand is more or less permanent. Absent severe drought or monsoon-like precipitation, California’s overall water conservation will likely remain in the mid-to-high teens for the foreseeable future. That’s a public policy success story.

2. Persistent public-private disparity

One of the most fascinating findings that emerged from my earlier analysis of the California drought with Youlang Zhang and David Switzer was that the state’s private, investor-owned utilities conserved significantly more water than local government utilities during the drought.* We linked that difference in drought response to the institutions that govern water finance. We also found that the public-private conservation gap persisted even after the drought ended, with the greatest disparities during the summer when water demands are at their highest. Back in 2018 your humble blogger forecasted that that “public and private conservation will converge in the spring and diverge again in the summer and autumn.” And indeed, the pattern held: there was essentially no difference between public and private water utility conservation during the winter months, but during the 2018 May-September peak season, California’s investor-owned systems saved more water than their local government counterparts.

Did the pattern persist in 2019? In short, yes:

Data: California Water Resources Control Board

As you can see, public and private utility conservation move in pretty close parallel. During the non-peak period (January-April and October-December), there is essentially no difference in average conservation by ownership. But a public-private gap emerged again during the May-September peak period. In 2018 the difference was 2.3%; in 2019 the gap was smaller—investor-owned utilities saved an average of 1.5% more water than local governments. To give that percentage some context, think of it this way: if public utilities saved at the same rate as private utilities in 2019, the difference would have been about 15 billion gallons, roughly equivalent to the City of Long Beach’s annual water consumption.

The public-private disparity in summertime conservation now also appears to be a way of life in California. The difference is almost certainly related to pricing and revenue. Decoupling über alles.

3. Indoor outpacing outdoor?

​Finally, the five years of data now in front of us show how California’s urban water conservation relates to overall seasonal demand. In 2015, when severe outdoor irrigation restrictions were in effect for much of California, 70% of the state’s conservation came from reduced demand in the peak season. Since then, the share of peak season consumption has fallen to about half:

Data: California Water Resources Control Board

In 2019 non-peak conservation crept up to 52% of overall savings. It’s hard to infer exactly what’s driving this pattern from aggregated monthly data, but the picture suggests that the most persistent water savings seen in California over the past five years has come from indoor efficiency. Average water consumption in 2019 was about 98 gallons per person per day (gpcd), but some cities are far lower. For example, water demand in conservative San Francisco shows hardly any seasonal peak at all, and averages just 42 gpcd—a level approaching the theoretical minimum to sustain developed world conditions.

While there are probably still plenty of savings to be had from indoor efficiency, meeting the challenge of another potential drought year—and driving further sustainable conservation—will require tackling peak demands through pricing and regulation. Get ready for another year of water cops and rate revolts.


* Water geeks Interested readers can see the full study in Policy Studies Journal for the details.

​© 2020 Manny Teodoro

Aftermath

A California Surprise, Part 3

Ever popular drought porn

California’s private utilities continued to out-conserve public utilities even after the state lifted its mandate.

In 2015 the California State Water Resources Control Board (SWRCB) ordered drinking water utilities to reduce water usage by 25% statewide. As I reported in an earlier post, something surprising happened: compared with local governments, the state’s private, investor-owned utilities imposed stricter water use regulations, were nearly twice as likely to comply with the state mandate, and conserved significantly more water overall. My last post traced this disparity to differences in the institutions that govern water rates in California and the conservation incentives that those institutions create.

In June 2016 the state declared an end to the drought emergency and lifted the mandatory conservation rules, and allowed utilities to set their own conservation targets. Somewhat to the state’s chagrin, 84% of utilities–including nearly all of the state’s private utilities–responded by setting their conservation targets at zero (so much for self-regulation!). Still, conservation has continued, with the state’s utilities still using far less water on average than they did before the drought.

But curiously, the public-private conservation disparity has persisted well after the state mandate ended and most conservation targets dropped to zero.

Enduring differences

Even after the state lifted the rules in June 2016, private utilities continued to impose stricter irrigation restrictions on average compared with public utilities. Through February 2017, public utilities allowed an average of about one more day per week relative to private utilities. In the spring of 2017 the gap began to narrow. In June 2017 the relationship switched: since then, public utilities have been imposed tougher irrigation restrictions. The cause of that switch isn’t clear, and we haven’t really looked into it.

Data source: California State Water Resources Control Board

But the really surprising thing is the persistent disparity in overall conservation. This graph plots average conservation (relative to the same month in 2013) for public and private utilities from June 2016 through the end of calendar 2017:

Data source: California State Water Resources Control Board

As you can see, overall conservation declined for public and private alike as drought conditions eased. But the really interesting thing here is the consistent difference between public and private sectors: except for February through May 2017, private utilities conserved about 2-3% more on average than public utilities.

While the difference doesn’t seem like much in percentage terms, in a state as large as California, a few percentage points can be enormous in absolute volumes of water. Had public utilities saved at the same rate as private utilities over that period of time, the difference would have been about 52 billion gallons—more water than San Francisco uses in two years. Regression analysis in my forthcoming article coauthored with Youlang Zhang and David Switzer confirms what the graph implies: after accounting for demographics, population density, climatic conditions, source water, and other variables, we find that California’s private utilities out-conserved public utilities in the post-mandate period by a statistically significant average of 2.7%.

Decoupling is a hell of a drug

This consistent public-private difference lends greater weight to the idea that rate decoupling facilitates water conservation for private utilities, and that political constraints hamper public sector conservation. If 2018 holds to form, public and private conservation will converge in the spring and diverge again in the summer and autumn. Look for an update here in early 2019 when full 2018 data are available.

Golden State Waterers

A California surprise, Part I

Drought porn

Something unexpected happened when California ordered its utilities to save water: the state’s investor-owned private utilities out-conserved local governments.

California’s long-term drought began as early as 2007, but intensified to crisis conditions by 2012. Conditions worsened, and in response 2015 Governor Jerry Brown and the California State Water Resources Control Board imposed restrictions on 408 drinking water utilities designed to reduce urban water usage by 25% statewide. The order required utilities to cut water use, but left individual utilities to choose the means by which to achieve conservation. The mandate assigned each utility its own conservation target, with standards ranging from 4-36% reductions relative to 2013 levels. These standards were formulaic, and varied based on utilities’ historical water consumption.

It was pretty bad

These conservation rules were in place for twelve months—June 2015 through May 2016—and applied to both local government utilities and private, investor-owned utilities. Conservation rules were assigned based on historical demand patterns and supply considerations only, not on ownership or governance.

Happily, the State of California has shared utility-level conservation data lavishly—a boon to water policy researchers! Over the past year, I’ve been sifting through that mountain of data with Youlang Zhang and David Switzer to see how California’s conservation efforts have fared. We’re discovering some fascinating things. The first of our studies is now forthcoming in Policy Studies Journal.

Restricting the flow

Faced with water scarcity, communities frequently restrict residential outdoor water use, such as car washing and especially lawn/garden irrigation. These water restrictions are effective in driving immediate reductions in water consumption. In California those restrictions typically take the form of limiting the number of days when outdoor irrigation is allowed each week. The graph below shows how public and private utilities regulated outdoor irrigation during the drought.

Eyeballing that graph, there doesn’t appear to be much difference between public and private utilities. But after adjusting statistically for a host of factors like utility size, demographic composition, and hydrological conditions, it turns out that private, profit-seeking, investor-owned utilities restricted irrigation about 4% more than public, local government utilities. That may not seem like much, as we’ll see it’s actually huge.

Meeting the mandate

We were also interested in what made utilities more or less likely to comply with the state’s conservation rules. Overall compliance was about 53%–that is, on average 53% of utilities reached their conservation targets each month. We modeled compliance statistically, and found a number of interesting correlates of success and failure. But most notable was a yawning gap between public and private sector: after adjusting for other factors, private utilities were nearly twice as likely as similar public utilities to meet the state’s conservation standards.

Conservation achievements

Finally, we analyzed overall conservation during the mandatory conservation period. And again, we found that, after accounting for other factors, private utilities conserved an average of 3% more water each month than their public counterparts during the mandatory restriction period. Although this difference is small in percentage terms, it reflects an enormous difference in absolute volume of water. This plot presents the distributions of conservation results from June 2015-May 2016 for local government utilities (green), and what it would have been if each utility had saved 3% more:

Monthly conservation relative to same month in 2013

The areas within the white bars on the right side of the distribution represent the conservation that didn’t happen due to differences in ownership. Three percent greater conservation would have boosted public utilities’ restriction compliance rate from 51 to 62 percent.

In substantive terms, three percent greater conservation by California’s local government utilities during the mandate period would have reduced the state’s water consumption by 54.6 billion gallons—enough to supply the City of San Francisco for more than two years.

Well that was unexpected

So what happened?

California is once again in the midst of a hot, dry summer; other parts of the world are, too. So it’s worth trying to figure out what’s behind the public-private disparity in drought response. Although it’s surprising at first blush, it’s actually a logical result of the institutions that govern water in America generally and California specifically.  My next post will explain why.*

 

 

 

*Spoiler: as usual, it’s about money and politics. If you can’t wait for the next post, you can read the forthcoming article.