It is good to be the monopoly provider of an essential product. It enables you to turn the ugly laws regarding supply and demand on their head.
Exhibit A is the Denver Water Board, which, as a spokesperson conceded, recently raised its rates for the 25th consecutive year.
Thanks to a wet spring and early summer, the Denver water department’s 1.3 million customers — in many suburbs as well as the city itself — used less water last year. But the board voted a 3.8 percent revenue increase, which would make its 2016 budget $397.5 million. Why? Because they can. Nobody can undercut them and steal their business.
In the oil business, supplies are also up and demand is down. But gasoline prices have dropped precipitously. That’s because suppliers have to compete.
The 2016 water rates, which become effective April 1, include a new structure which lowers the cost of water used inside the home somewhat, but raises the fixed monthly fee and the cost of outside water to more than make up for any revenue drop.
The internal rate will be based on your water use from January through March, when nobody is irrigating lawns. The rate for Tier 1 will drop by 15 cents to $2.60 for 1,000 gallons, but that’s only for roughly the first 5,000 gallons (depending on your inside use) instead of the current 11,000. Then it’s $4.68.
Is this fair? Supposing a homeowner is proud of his lawn — or his organic vegetable garden — and has installed low-flow toilets and shower heads so he can afford to use more water outside. Meanwhile another homeowner hasn’t bothered to install water-saving fixtures and gets to pay less per gallon for a lot more water.
Water board President Penfield Tate III concedes there will be “outlier” cases like that but says the board needs to cut down on water use outdoors.
But many Denver neighborhoods, especially west and southwest, have relatively small homes on large lots — and zoning doesn’t permit subdividing. If outside water rates are raised substantially, homeowners are less likely to water. Sure, they don’t have to water at all — they can “xeriscape”. But that’s an art not easily mastered and pouring rocks on your yard to cut water use looks bad and lowers values.
It’s also worth noting that having lawns and greenery cuts the temperature a bit. A concrete downtown is hotter than the neighborhoods. If you’re worried about global warming, ponder that.
Why shouldn’t customers use water the way they want, and not have judgments on its use made for them by the water board? Different fees for different uses is neither fair nor rational.
The water board has a schizophrenic approach to its product. Instead of promoting its use and trying to sell as much as it can, as private businesses do, it constantly urges customers to conserve. When they do — and inside water use dropped in the last 20 years from an estimated 9,000 gallons a month to 5,000 gallons — the water board complains that they have to raise rates because it needs more money to replace old pipes and maintain 19 reservoirs, 22 pumping stations, 30 underground storage tanks and four treatment plants. Customers are punished for heeding the pleas to cut usage.
Oil companies have similar maintenance and capital issues, but they can’t raise prices arbitrarily to cover them.
What the water board doesn’t mention in recent releases is that it is also planning to spend $195.8 million on the redevelopment of its 34.6-acre “campus” at 1600 W. 12th Ave. It will be funded by bonds paid off by revenues.
Most of all, the water department wants more “stability” in its revenues, which fluctuate from month to month. To get it, the board is raising the fixed monthly charge by 30 percent, from $6.74 a month to $8.79.
Think of the fixed charge as like the membership fee at Costco. But at Costco you are rewarded with volume discounts, so you can fill your basement with toilet paper. At the water department, the monthly fee gets you volume premiums: The more gallons you buy, the more per gallon you pay.
As for revenue “stability,” no doubt HoneyBaked Ham would also like to spread its sales more evenly throughout the year instead of having to rely so much on Christmas and Easter. But it’s learned to adjust.
The water commissioners aren’t personally greedy. They are public servants and paid a pittance: a mere $600 a year. But they’re appointed by the mayor, not elected, and thus fairly immune to public pressure to cut costs.
They’re not legally required to minimize costs, like public utilities commissioners, and like many regulators they tend to become captives of the industries they oversee.
Perhaps their pricing recommendations should be reviewed by Denver City Council, which does have to answer to voters. Council members will start earning $91,915 a year starting this summer — a handsome sum indeed for basically following the mayor’s orders and rubber-stamping huge payouts to victims of abuse at the hands of the sheriff’s department.
Give them a little heartburn; make them approve water rates. The Aurora city council has to do that — and its members make a lot less money. Aurora’s water rates are not rising next year.
Longtime Rocky Mountain News political columnist Peter Blake now writes twice a month for CompleteColorado.com. Contact him at pblake0705@comcast.net You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com.
