Subsidized Water

(Originally posted on waterefficiency.net)

By Elizabeth Cutright
Editor
Water Efficiency

Water and Energy—two forces forever bound together … it’s a relationship we’ve discussed many times. Because of the delicate balance between these two elements, conservation of one ultimately leads to conservation of the other (usually with the added bonus of reduced operational costs). But when there’s disturbance in this interplay, inefficiency takes hold, and we are left with a costly and wasteful delivery system. At other times, a surplus at one end of the spectrum can supplement a shortfall: But, does this kind of overcompensation really serve our ultimate goal of an efficient system that promotes conservation of all our precious resources?
Case in point: Arizona’s Salt River Project (SRP). The SRP—one of the state’s largest water suppliers—supplies water to farmers and 10 cities in and around the Phoenix area. But the SRP’s water delivery system has been operating with a financial deficit for years. According an article published this week in the Arizona Republic, the SRP ended the last fiscal year with a $33 million deficit. How does the SRP make up the difference? Electricity.
It costs the SRP $47 million deliver all of its water, and, while SRP customers pay $14 million of that bill in water assessments, electricity customers pick up the remaining $33 million. Using an energy surfeit to subsidize water delivery is nothing new for Arizona—for the past 100 years, power revenue has filled the gap between the cost to deliver water and the amount customers are charged on the receiving end. This quid-pro-quo started in 1909, when the Roosevelt Dam was paid for, in part, by the electricity revenue received from the energy generated by the dam. Once the SRP took over dam operations from the federal government, three more dams were built downstream using the same sort of energy-funding setup (with the added bonus of water storage). In fact, SRP officials have said that it’s this ability to store water and sell electricity that’s allowed for widespread development in Arizona.
So what do you think? Should electricity revenue subsidize water delivery? By artificially stabilizing water rates (and keeping those rates low despite increased demand or reduced supply), is the SRP encouraging water waste? According the SRP, only 1.4% of a customer’s energy bill goes funds water operations, but that figure does not take into account that all water users are not created equally—a single-family home, for example, uses less water than a even the smallest farm. It’s a complex issue, with many competing interests, but, in the end, as long as water customers are not paying the true cost for the resources they are con