Conservation Posed $673 Million Threat To Cali Water Districts

Water utility revenue was a factor in California’s decision to relax strict conservation rules.

Regulators saw that maintaining stringent water-usage cuts would bring financial consequences to utilities, The Sacramento Bee reported. Urban districts stood to lose $673 million in revenue from water sales if the restrictions continued into the fall, the report said, citing an analysis commissioned by the State Water Resources Control Board.

In May, state regulators ended “a 25 percent reduction rule that had applied to all residents after a roaring El Niño winter... eased drought conditions,” the San Francisco Business Times reported. California Governor Jerry Brown issued an executive order relaxing the restrictions. In a statement, he pointed out that “the severity of the drought has lessened in some parts of California after winter rains and snow.”

But the rain was not the only factor that prompted regulators to relax the rules. A strain on utility revenue as a result of conservation was also a big concern, the Bee reported, noting that brown lawns mean revenue cuts at utilities:

As water use plummeted because of the statewide conservation orders implemented last summer, many water agencies found themselves struggling to cover operating costs. Less water use has meant lower monthly utility bills, and for most utilities, there has been no correlating decline in basic operating costs, such as payroll, debt obligations and maintenance of pipes and treatment plants.

Carol Margetich, business services administrator for Roseville’s environmental utilities department, explained the challenge of conservation: “We have to pay that whether we sell one drop of water or a million drops of water,” she said, per the report.

The Bee detailed just how much revenue utilities lost as a result of conservation:

The Sacramento Regional Water Authority reported that from January 2015 to September 2015 local water districts lost $25 million to conservation, representing a 12 percent drop in revenue. That includes the city of Sacramento, which saw revenue fall by about $4 million in fiscal year 2015; the San Juan Water District, serving Granite Bay, which reported losses of almost $1 million in fiscal year 2015; Roseville, which lost $1.6 million during that period; and Placer County Water Agency, which saw a $3.8 million decline.

State Water Resources Control Board Chair Felicia Marcus said revenue was one factor in the decision to relax regulations, but not the “primary” factor, according to the Bee.

“The most important thing was just the hydrology had changed substantially. We wanted to give folks a chance to factor in water supplies and the extra amount they saved because they conserved. It just seemed the responsible thing to do. We'll see how it plays out,” she said.

To read more about drought issues visit Water Online’s Water Scarcity Solutions Center.