Poll tax bad, water charge good

This all sounds good to me Richard, except that I doubt most people (myself included) have any idea how much water they use absolutely or relative to others. How to overcome this information problem?

@Richard

Is there a case for installing smart water metres (a la CER’s fabled electricity metres) to facilitate time-of-use or rising block tarrifs on water consumption? Or perhaps water doesn’t suffer from the same peak load as electricity?

Some “smart economy” planning could see both metres using the same communications infrastructure.

@Richard,

When was the last time Irish households suffered from excess water demand at the prevailig marginal price (zero?)

My water meter here in Toronto is remotely read.

One thing about using water treatment plant numbers is that you have to adjust for losses in mains etc. In some systems that can be 30-40%. Water meters force water boards to confront this since they don’t get paid for water that doesn’t reach a tap.

I’ve never seen anyone establish convincingly that the benefits of substituting volume-related pricing of domestic water supplies for exchequer funding will exceed the costs associated with meters, meter reading, billing etc. under Irish conditions. Is such an analysis available?

@ Richard,

How much would it cost per household to install a “smart” water meter. How many households are there? Did the Greens budget for this or is it yet another regressive tax?

My personal view on this is that clean water is a public good and should be funded from the public purse.

Ireland has no shortage of water. It has a shortage of political will for the public good.

Businesses should be metered and pay for water, including hotels and farms. The households of citizens should have clean water as a right and as a matter of public health.

@ Richard

great idea.

if the €175 per annum charge cited in the Indo was based off the average usage amount of 450 l/p/d, then i’d sign up tomorrow. I live by myself, drink bottled water (don’t judge me!), don’t have a garden to water, and generally have a quick and efficient shower. I can’t imagine i use more than 75-100 l/p/d. Metering would likely save me €130 a year.

@Richard,
I don’t think the cost of metering is so trivial as to eliminate the need for a cost-benefit analysis.

Quoting a report by Forfas from September last year on water and waste water services for enterprises: “In general, fixed costs are less than 20 percent of the overall operational charge and cover costs such as meter installation and meter reading.” That doesn’t sound trivial, even for enterprise users that presumably use larger volumes of water than domestic users.
http://www.forfas.ie/media/forfas080902_water_waste_water.pdf

And here’s a quickly-found quote from a paper out of Cranfield: “In terms of financial benefits for the water companies it could be argued that, even in the south-east of England, measures to reduce leakage or develop new resources, such as reservoirs, are more cost-effective than the mass-metering of domestic properties. It would be more sensible to consider the key advantage of metering as a means of meeting or maintaining the supply/demand balance.”
https://dspace.lib.cranfield.ac.uk/bitstream/1826/1450/4/Domestic%20water%20metering-is%20the%20law%20adequate-2006pdf.pdf

Marginal Cost of water iz sero ????? Water is a tad costly: (money, energy, commodity and infrastructure installation and maintenance requirements). It MUST be paid for. You have two options: the taxpayers in general or the taxpayer in particular.

You want to know the REAL cost of potable water. Reference 1.0bl of oil, spot price approx $70/bl, against 1bl potable water at ???? – if the Demander is short of potable water … …!

OTOH barter potable water for diesel – much better idea.

Mandate meters – no exceptions. Everyone pays, no exceptions. Sort out some electronic coupon scheme for needy individuals. We shall be rationing potable water unless we;

1. Construct more storage reservoirs

2. Slow down, then halt the agricultural pollution of groundwater

3. Fix those pesky leaks – the loss is 30%+

4. New building regs to mandate water conservation and re-use

Rain-water capture, water conservation and grey-water re-use are the key objectives.

You can live for perhaps 30 days without food intake – 7 max without potable water! So the Marginal Cost of water iz sero! I fancy not!

B Peter

I’m all for metering and charging _if_ the numbers add up but nobody has clearly made the case to me that charging at the consumer level would lead to the best long term outcome for the quality and capacity of our water supply. The costs are ultimately borne by all of us in one way or another and to be fair we will never directly charge each individual user a fair economic rate for their consumption – if we did then charges would vary across the country by over an order of magnitude, and rural users would really get stung and I for one cannot see that ever being politically acceptable.

So for starters do we have some solid data behind the numbers? If the €175/person per annum is right then the current water supply budget must be somewhere in the region of €700m/pa. That assumed €700m is currently used to maintain the existing distribution network, build new capacity, process raw ground water into the lovely clean stuff we all get for free and finally it has to be pumped around, only a fraction of our water actually gets to us entirely under the force of gravity after all. The number seems reasonable to me that it would cost around €700m pa but it could easily actually be half that or even double that but I’d say it’s right to within an order of magnitude.

Assuming this is the baseline though and we can reduce consumption to the stated target (150l/day vs 450l/day) then can we realistically expect the costs to drop to €175m/pa? I think that’s extremely wishful thinking but even if it was true what would that mean? Would a water network that had to deliver 1/3 of it’s current capacity cost us only 1/3 what it does today? That is almost certainly not going to be true. At best I think we could hope for an equilibrium level somewhere around a third below where we are today. That’s still a saving of around $175m pa though which is certainly worth chasing.

However to get there we have to incur at least some additional fixed costs – how much will it actually cost to maintain and run a brand new nationwide metering system? The fixed costs of installing the meters will be somewhere in the range of €100-€200 and they will (like any other electrical\mechanical device) require maintenance and replacement. Factor in 10% of that per annum that someone has to pay. Running a nationwide network that can link to 1 million homes will cost a few €uro per household per annum. I’ve no idea how much but I’d be amazed if it could be done for less than €10 and wouldn’t be surprised if it cost €50 per node. Large scale electronic distributed sensor networks in Ireland are generally provided by Cellular providers and a cost of around €50 per embedded node would strike me as cheap but perhaps someone familiar with Eircom\Bord Gais can comment here. That’s another fixed annual cost of between €20 and €60m per annum just to get the meters running. Now add in the cost of administering the system and again I’d be shocked if we could create such a new body that operated on an annual basis for less a good few 10’s of millions. I’d put good money on a bet that said this can’t be done (properly) for without incurring additional costs of somewhere around €100m per annum.

Assuming that all of those things come together we’re talking about a win that is best case going to be in the range of around €75m per annum. And to be honest I don’t think we would see those savings for quite some time – the initial costs are likely to swamp that benefit for a good few years even if everything goes right. And we all know that it wont go right.

Surely it would be simpler to create a national body to manage water resources, give them the entire budget and tell them they have to reduce their costs in real terms by some realistic target – say 2% per annum over the next 10 years, control them by measuring service delivery and quality targets and let them have at it. If (as is claimed) 50-75% of processed water is wasted within the network then we have just as much potential for saving money this way as we do by imposing yet another arcane billing\credit bureaucracy on the population at large.

I’m not sure it’s all that feasible for recycling operators to wash paper/cardboard and plastic bags/films, and my belief is that contamination does reduce their value. Recycling operators may also have difficulty cleaning the insides of plastic containers efficiently.

I used to avoid washing recyclables, assuming that recycling operators were just trying to socialise some of their costs, and that they were better able to avoid wasting water during any washing that was really needed than me. I did always scrape cans and empty cartons and plastic bottles to avoid contaminating paper waste.

Now that, in Dublin at least, they have started taking all clean plastics, I’ve reluctantly changed my mind, and started rinsing.

I’m not sure what the reference to unemptied wine bottles in that RTE article is about. You’re not supposed include glass with general recycling waste in Dublin (at least), and I would have guessed that broken glass would be a bigger problem than wine if people break this rule. But I wouldn’t have thought that a little wine would be a big problem with glass collected through a bring bank that is destined to be melted at a high temperature.

Is the fact that I haven’t had a hose-pipe ban for many years say something about the magnitude of the marginal cost of water? That said, the summers have been lousy and wet.

@Richard,

I presume you are using “specific taxation” as shorthand for a charging mechanism for delivery of a quantifiable service. And yes, I would hope it would change the debate to focus on institutions and economic organisation. In Ireland the perception is that water, generically, is free, but, as we all know, real costs are incurred in gathering, storing, treating and distributing potable water (and in collecting and treating waste water).

There is a widespread popular view that these costs should be met from the public purse without any limits on personal or household consumption. I believe that the focus should be on ensuring that these costs are at efficient economic levels, rather than promoting the conservation of water. The latter will be an inevitable consequence of the former.

It is highly unlikely that the current disaggregated, local authority-based provision of water (and waste water) services is very efficient. The alternatives seem to be a national body (as suggested in one of the posts above) or a number of water companies covering contiguous local authority areas and subject to independent regulation – which may be able to apply some “yardstick” regulation.

If the debate proceeds in this direction – with a focus on the efficient delivery of the required quality of water – some of the sting may be extracted from the politcial debate.

@Tony,

This is a fair point. Without trying to avoid responding to it, my focus, initially, is on the efficient level of costs. This leads to identifying the level of charges that will recover these costs and then the structure of charges. Focusing on the structure of charges risks putting the cart before the horse. The US Federal Energy Regulatory Commission has a time-hallowed 5 step approach to rate (tariff or charge) design that is still relevant. It begins with the cost base and ends in rate design.

Responding to the point you raise is part of this process. It involves the allocation of costs and is an attempt to identify cost responsibility so that costs are allocated appropriately to those who cause them to be incurred.

Inevitably some degree of cross-subsidisation is involved – the alternative is a specific charge for each user. The extent of cross-subsidisation permitted usually involves a judgement about balances/trade-offs among efficiency (in the sense that accurate price signals encourage efficient behaviour), equitability and administrative simplicity.

However, the important thing is to get the economic organisation/regulation right so that efficient levels of cost are achieved. Then we can worry about the level and structure of charges.

@Tony,

I think Richard addressed your specific query, but his response also indicates a response to your general point. In addition to measuring how much goes into the pipes it is necessary to measure how much is delivered to, and used by, households and businesses. This is a necessary first step to examine gross supply, costs, leakage and deliveries. And this leads to questions about the economic organisation of the industry, regulation and appropriate point-of use charges.

The real choice is between undeniably inefficient provision of (a variable quality) service that imposes a global fiscal burden and a more efficient provision of (a better and more uniform quality) service with cost recovery related to usage.

The Government’s proposal combines current inefficiencies and poor quailty water supplies with economically unjustified point-of-use charges; this is the worst of all possible worlds – and is likely to provoke an entirely predictable public response.

http://globaleconomicanalysis.blogspot.com/

He is a tad reactionary these days….

Time for Baltimore to “Pull a Vallejo” and Declare Bankruptcy

How rising costs mean bankruptcy for big US cities. Still think this is not a depression?

@ Richard,
Yes that does point to major wastage alright. However if you are charging the consumer for their use (rather than amount produced), will they really care that much?

Or do you see as a next stage – some kind of ‘tax’ on production by the providing authoritites that is then redistrbuted based on customers actual usage in the area? [although that may be a simplistic representation by me]

@ Richard,
OK if we are charging based on production, while the meter tells the person their usage, while the bill is based on production – so am I right in saying that your argumanet is people will get annoyed with the providers and this will lead to lower waste?

This seems a circuitous route to improve costs of provision to me.

@ Richard,
On that perhaps we can agree!