From Politics

Answering the Bell

Social science and defying the choice between clean and affordable water

Thomas Hearns, the Motor City Cobra. One of my all-time favorites. 

Warning: sports cliché coming.

Boxing is more popular as a literary metaphor than as a spectator sport these days. Still, I’m a boxing fan. The combination of athleticism, strategy, and drama of the sport are unrivaled.

Every fighter wants to win, naturally. But there’s no shame in losing a hard-fought bout to a tough opponent. When you take on great opponents, sometimes you lose—on the scorecards, by stoppage, or by knockout. Fans greatly respect unbeaten fighters, but revere those who risk a blemished record to take on the toughest challengers. Most beloved are those who suffer early knockdowns to come back and win. The one kind of loss that boxing fans can’t abide is quitting on the stool: when a fighter chooses not to continue—not because he’s injured, not because his trainer decides he can’t win, but because he lacks the will to continue.

Technical triumph, political pessimism

Last month I participated in an all-day meeting with a group of professors from across the country, all of whom work on drinking water and water quality. We were hashing out a vision for future research to advance the water sector. I was one of just two social scientists in the room; the rest were civil, chemical, and environmental engineers. It was a stimulating and productive day.

But a remark by a renowned professor emeritus from one of America’s top schools of environmental engineering startled me, and has been nagging at me ever since.

We are facing a future where we’ll simply need to accept higher levels of pollution,” he said. The Clean Water Act’s vision of fishable-and-swimmable waters was unattainable, he argued. His pessimism was not due to the emergence of new, impossibly difficult contaminants or technological barriers. The obstacles to clean water he identified were political and economic: the country simply wouldn’t pay for solutions to pollution.  I’m not sure if all his fellow engineers agreed, but more than one head nodded in agreement.

Such pessimism is ironic, coming from an environmental engineer.

These signs used to be more common

Speculative augmentation

One of the most astonishing things about the 1972 Clean Water Act and 1974 Safe Drinking Water Act is that, at the time Congress passed them, nobody really knew how any of it was going to work. The technology needed to achieve fishable-and-swimmable and to ensure safe drinking water nationwide simply didn’t exist at the time. Political scientist Charles Jones called this process speculative augmentation: politicians called for a cleaner environment, and entrusted the bureaucracy and the emerging field of environmental engineering to figure out how to deliver it.

Amazingly, it basically worked. The 20th century was an unprecedented period of advancement for water—it was nothing short of a triumph. Water utilities, sanitary sewers, and stormwater management saved more lives than all the world’s hospitals, and has done more to improve quality of life than any other economic policy. For all their problems, the CWA and SDWA have been pivotal in making those improvements in America. We owe much of that success to engineering research.

Environmental science and social science

The greatest water quality challenges of the 20th century were chemical, biological, and physical. Those challenges remain, and new water quality threats emerge all the time. But the most formidable obstacles ahead are social and political. We know how to handle water contaminants. We don’t know nearly as much about overcoming political barriers to water quality. That isn’t a reason to despair, it’s a reason to refocus.

Medical researchers aren’t paid to declare that diseases are incurable; water researchers shouldn’t counsel acceptance of pollution because politics are hard.

We are a prosperous and resourceful people. I refuse to choose between water quality and affordability. To do so would be to consign society’s most vulnerable and future generations to suffer because we couldn’t or wouldn’t solve institutional problems. If dysfunctional politics force such choices, then we need rigorous, hard-headed research on water politics, policy, management, and finance to overcome them. There are lots of smart and insightful social scientists working on water; we need more. We need another moment of speculative augmentation, this time with social science finding the path forward.

The clean water fight’s not over—we’ve only just started the middle rounds.

Never quit on the stool.

Political Decoupling

A California Surprise, Part 2

More drought porn (this is used to be Folsom Lake)

How private implementation separates public policies from their political costs.

Warning: this post contains hardcore wonkery.

In 2015 the California State Water Resources Control Board (SWRCB) ordered drinking water utilities to reduce water usage by 25% statewide. As my last post described, 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.

Though counterintuitive, this difference in public and private sector water conservation follows rationally from the political institutions that govern water in America generally and California specifically. The keys to this conundrum are money and politics.

Financial risks of conservation

American water utilities operate on a fee-for-service basis; typically, customers pay a fixed monthly charge, plus a charge for each unit of water. Faced with resource scarcity or some other environmental problem, it may make sense to curb water consumption—say, in response to a drought. But reduced consumption reduces revenue. For utilities that rely on rate revenue to fund their operations (and, in the case, of private utilities, to pay their shareholders), conservation can be environmentally good but financially bad.

The financial risks of conservation are especially severe for utilities due to their very high fixed costs. As I’ve observed before, whether a utility delivers one gallon or ten million gallons, the costs of constructing, maintaining, and operating reservoirs, treatment plants, and distribution pipes are the same. A drop in water sales doesn’t bring a matching drop in costs to the utility, so reduced consumption threatens financial sustainability (for government utilities) and profitability (for investor-owned utilities).

Utilities are natural monopolies, and so could charge customers exorbitant prices if they were allowed to set prices any way they like. For that reason, utilities are subject to government price regulation. But the institutions that govern private and public utilities are different, and present them with very different incentives to comply with state conservation rules.

Price regulation & decoupling

Let’s start with private utilities.

Governments regulate private utility pricing through state Public Utilities Commissions (PUCs); in California the PUC is composed of five appointed commissioners. The PUC process is technocratic and legalistic, usually drawing scant media attention. PUC price regulation proceeds under the cost of service principle: companies are limited to recovering the actual cost of providing service, plus a legally-sanctioned rate of return.

It only looks Soviet

Decades ago, the conflict between conservation and profitability for private utilities led environmentalists to develop rate decoupling: the separation of a firm’s revenues from the volume of product it sells. If conservation causes revenue shortfalls, decoupling provides for automatic rate increases to make up the loss. In that way, decoupling shifts the financial risks of conservation from utilities’ investors to their customers, eliminating the incentive for utilities to sell more and more energy, water, or whatever. Decoupling can work in situations where private utilities operate under PUC regulation, and has generally been successful in stimulating conservation in the energy sector. Today about half of US states use rate decoupling for electrical utilities.

In 2008, California became one of just two states (the other is New York) to adopt decoupling for water utilities when it introduced the Water Revenue Adjustment Mechanism (WRAM). Private utilities take advantage of this provision when conservation causes a loss of sales revenue: financial losses associated with reduced sales volumes are recovered in future rate increases through WRAM. PUC records show that by Spring 2018, at least 39 of the 62 investor-owned utilities subject to California’s conservation mandate had invoked WRAM and raised rates following the drought. Decoupling irritates customers, who understandably grumble about paying more for water they didn’t use—the paradox of conservation. But those grumbles are largely impotent, as the PUC’s technocratic process allows WRAM under state law.

Water rate politics & the conservation paradox

And then there are local governments.

Governments (including counties, municipalities, and special districts) that own drinking water utilities are essentially self-regulated with respect to pricing; their rates are set by city councils and district boards. Public water rates are thus subject to the political calculations of local elected officials. Water customers are also voters who prefer lower rates, and so raising rates can have bad electoral consequences for politicians. Unlike the technocratic PUC process, rate-setting for government utilities can be a contentious affair. In California the political risks are especially pronounced, since public water rates are subject to Proposition 218.

California local government utilities can raise rates when conservation measures cause revenue shortfalls; they need not seek permission from the PUC. But raising rates is politically risky for local officials. Whatever their attitudes toward sustainability, citizen-customers of government utilities are just as irritated as customers of private utilities when they use less but pay more. Government managers and elected officials are wary of angering their voting water customers if revenue losses force rate increases.

Attendance at the Redlands city council meeting on water rates was robust. Photo:

Consider the politics of water conservation in the City of Redlands. California’s 2015-2016 emergency rules assigned the city a 33% conservation standard. The city responded with a series of conservation measures, but met its conservation standard in just two out of twelve months and achieved only 11.3% conservation overall. Still, reduced water sales caused a city revenue loss of about $2 million. When utility staff recommended a 19% rate increase to cover the shortfall, more than 3,000 citizens filed protests against the increase in advance of a raucous, five-hour City Council meeting on the subject. Drought-related rate increases prompted similar protests and/or legal challenges in Alameda County Water District, East Bay MUD, Hillsborough, Los Angeles, Pleasanton, and Yorba Linda.

Political decoupling

When combined with rate decoupling, private water provision shifts to private firms the political risk that discourages conservation by governments. The unelected PUC absorbs those political risks instead. In this way, investor-owned water utilities provided a kind of political decoupling during California’s drought: private implementation of conservation rules separated a controversial environmental policy from its political costs, and helped make private firms more effective conduits of environmental policy than were government agencies. Youlang ZhangDavid Switzer, and I develop the idea of political decoupling and its broader implications in a forthcoming article.

Of course, decoupling conservation from its political costs does not eliminate those costs so much as place them beyond the reach of ordinary citizens. That might make for effective drought response, but it weakens democratic local governance.


A California Surprise, Part 3 will discuss what happened after the SWRCB dropped the conservation mandate.