Time for water rationing !!

**Darian** · 04-07-2015, 04:30 PM

Interestingly enough, NPR reported this AM that the LA Metro Water District is going to impose penalties in the form of either increased costs or outright fines for exceeding their allocations on water districts they contract with in the SoCal area. This came about as water use over the entire SoCal area increased by 2% during the month of February.

That action is, IMO, the best way to enforce compliance with conservation goals. This should apply to agricultural activities as well. MWD's capability to do this is probably based on a shorter term contract than those negotiated thru federal/state agencies. The duration of contracts for delivery of water over prior decades has for periods of 25 - 30 years and are rarely, if ever, re-negotiated during that term. That fixed term contract for water also fixes the price per ACF of water for the same period. Toward the end of those contracts, the difference between actual market value and that unit price amounts to a very big subsidy and does nothing to encourage conservation or limit the number of acres planted. The worst part of this situation is it was reported that most, if not all, of these contracts ended and were re-negotiated last year. If the term recommended in the proposed BDCP (50 year duration) was used in the new contracts; locking in another subsidy for agriculture and encouraging increased use it's going to be more of the same.

Increasing the cost of water to market value will make agriculture choose their crops carefully with an eye to decreasing costs through all of the things I've said before to keep costs under control. Of course, the consequence of that would be an increase in the wholesale price of ag products in addition to the cost of water delivered for municipal use. All of this would add up to an increase of costs to the consumer. Are politicians and we (statewide) willing to accept that??? If past history is any indicator, I sincerely doubt it. A couple of good water years would most likely result in a return to "business as usual".

Among several things that are approaching crisis level need for repair/replacement are water infrastructure, including pipelines, sewage treatment, storage/distribution and new DeSal facilities statewide (with the exception of Humboldt, Del Norte Counties

) to name a few. All could be addressed by removing subsidies and selling water at market value.

**JasonB** · 04-07-2015, 05:50 PM

Funny you should mention the idea of "market value" of water. On the one hand, I would be inclined to agree; as the costs of water to me seem completely out of alignment with reality, and may well be a huge part of the current state we are in with regards to water use and water policy. Then again, I have great concern for the concept of whoever can pull together the most money (ethically, or otherwise) being able to use water how they see fit. If anything, I envision this as going further down the road that most of us here are so unhappy with... A few large corporate interests pulling the strings. I have a hard time visualizing this as working well for our fish...

I'm not in any way opposed to removing subsidies, I just do not trust "the market" in this kind of situation to in any way shape or form look out for the "little guys" (including fish). If, by increasing costs to a "true market value" (which I think really should take some serious thinking time for all of us), we were merely paying a bit higher costs, and thus being encouraged to conserve water I wouldn't be particularly opposed. I just don't see it playing out that way, and I do think you're absolutely right that it will not likely happen any time soon, and would likely be political suicide for any politician to get behind (at this point). I have a feeling the costs might go a fair bit higher than any of us would be really prepared to pay in the near future, if we start to consider speculation, hording, and monopolies, and the like into the equation.

Not to distract the original topic too far, but I think we could all do well to consider the water politics of Chile, where clean flowing waters are "normally" (historically) in great abundance. With recent population growth, climate change, power demands, etc... I can't help but wonder how Chileans (now in their 8th straight dry year) think about the "market value" of the water they no longer own.
What might seem like a fair market price today, could well be seen as foolish and shortsighted by our children and grandchildren...
JB

P.S. I only bring any of this stuff up because I do have concern that the water wars are likely to get even uglier in the near future, not to stir the pot or disagree with anyone in particular. I sincerely hope we can find ways to both conserve, and minimize wasteful practices (by all parties), and to make prudent policy changes that reflect that the times have, indeed, already changed.

**Darian** · 04-07-2015, 07:16 PM

I share your concern about the ills of speculation, monopolies, etc., that could occur. However, if you consider what is happening in the sale of water to the LA MWD by rice growers in NorCal it sounds like it's already occurring. One article I saw reflected an offer price of $700.00 per ACF. If you're a grower with 10,000 acres of land (assuming an allocation of 1 ACF per acre) and sell off your entire allotment, you'll realize $7,000,000.00 guaranteed at almost no cost. As opposed to whatever you'll get by planting, harvesting, storing, transporting and selling on the market at whatever unit price is in force when sold. Pretty good incentive to sell to a giant monopoly who, in turn, will sell it to customers at increased rates and a tidy profit.

in at least one past instance, market speculation was attempted by the former principals of the now non-existent Enron. They established entities called Azurix and Water Desk in order to act as middle-men in buying/selling of water as futures contracts based on available water, similar to the commodities market and failed. Their final complaint was nobody out here wants to make money (paraphrased).

At any rate, market pricing by itself will still not change water rights (which IMO require some examination/revision) or the contract price for delivery of water from the CVP/SWP. So allocations will not change at the initial delivery/transaction level and whatever happens downstream is already happening. What should change is the contract price per ACF delivered by CVP/SWP.

Jason,.... This was a good exchange. Thanks for participating....

**JasonB** · 04-07-2015, 08:04 PM

Originally Posted by Darian

I share your concern about the ills of speculation, monopolies, etc., that could occur. However, if you consider what is happening in the sale of water to the LA MWD by rice growers in NorCal it sounds like it's already occurring. One article I saw reflected an offer price of $700.00 per ACF. If you're a grower with 10,000 acres of land (assuming an allocation of 1 ACF per acre) and sell off your entire allotment, you'll realize $7,000,000.00 guaranteed at almost no cost. As opposed to whatever you'll get by planting, harvesting, storing, transporting and selling on the market at whatever unit price is in force when sold. Pretty good incentive to sell to a giant monopoly who, in turn, will sell it to customers at increased rates and a tidy profit.

in at least one past instance, market speculation was attempted by the former principals of the now non-existent Enron. They established entities called Azurix and Water Desk in order to act as middle-men in buying/selling of water as futures contracts based on available water, similar to the commodities market and failed. Their final complaint was nobody out here wants to make money (paraphrased).

At any rate, market pricing by itself will still not change water rights (which IMO require some examination/revision) or the contract price for delivery of water from the CVP/SWP. So allocations will not change at the initial delivery/transaction level and whatever happens downstream is already happening. What should change is the contract price per ACF delivered by CVP/SWP.

Jason,.... This was a good exchange. Thanks for participating....

Thanks Darian, I completely agree with everything you're saying here (and for the most part everything else you've said here as well). I believe it was Mark Twain who once said that "Good whiskey is for drinking, and good water is for fighting" (paraphrasing a bit)... I wonder if he had any inkling of just how right he would someday be with those words?

JB

**Larry S** · 04-09-2015, 05:03 PM

I'm gonna sound like a one-trick pony; but here goes. Desal! Water to the west, solar energy to the east.
Expensive? Sure; but, consider the worst case scenarios; which may well be on the horizon. While building the de-sal
plants, communities can be building water re-cycle plants. The California Coastal Commission should be put on hiatus
during these times. For each acre of new almonds, pistachios, etc, growers should commit to "x" dollars towards de-sal plants.
Other countries have faced these shortages and survived. Take the politics out and put common sense back in.
End of rant.
Best, Larry S