When conservation doesn’t pay

WaterPipe

This must be a bit awkward:

[O]ne thing is certain: Conservation is putting cash-strapped municipalities in a bit of a pickle.

Tougher … regulations, growing communities and a rising backlog of crumbling pipes needing to be fixed are driving up costs even while diligent consumers are lowering their consumption and the size of their bills.

Toronto alone is facing about $800 million worth of repair and replacement work, since half of the city’s water mains and 30 per cent of its sewer pipes are more than 50 years old. But last year, total revenue was only $604 million.

Other regions are hurting, too.

Peel Region treasurer Dan Labrecque estimates his region has lost $7 million to so-called “revenue or billable flows shortfall.” The need to make up for that lost money accounts for nearly half of Peel’s proposed 16 per cent water rate hike (expected to be phased in at 12.5 per cent).

Water and sewer systems bring with them extremely high fixed costs, which is one of the major arguments for conservation. If, for instance, you can get everyone in town to use a few gallons less each day, maybe your peak demand will stay low enough that you won’t have to replace one giant watermain with an even more gigantic one. That’s good for everybody.

But of course, the stuff you’ve already got in the ground needs regular fixing and, eventually, replacement because it’s worn out. If you’ve actually succeeded in making your peak demand not just stabilize, but actually retreat, then you’re going to have a shortfall in revenues and you’re going to have to jack up the prices for the use that remains. The result: people paying nearly the same amount for their water even if they’re using quite a lot less.

At least the balance isn’t getting any further out of whack, if they’re not having to install ever-larger and -longer pipes. But yeah, this is a kick in the slats for everybody involved and there’s not much to be done about it.

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One response to “When conservation doesn’t pay

  1. I doubt water usage has much to do with the shortfall. Sure, using less water will reduce revenues. But not enough to cause such shortfalls. Most likely the problems are not conservation but that prices were artificially low, in the past, because:

    1. prices were not adjusted over time for inflation
    2. capital spending was kept too low

    This is not a conservation problem so much as mismanagement of the local utility. Maybe political pressure had been brought to bear on managers over the last four decades to avoid costly capital projects. Maybe depreciation expense was underestimated to increase profit margins and executive bonuses. Hard to tell from here.

    But to blame decades of neglect on recent conservation doesn’t seem logical. The problem would only be worse without the conservation.

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