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Headline: Why districts are slow to charge market rates for water." P1: Why don’t districts pass the marginal costs of water on to their constituents? P2: HAH

Headline: Why districts are slow to charge market rates for water." P1: Why don’t districts pass the marginal costs of water on to their constituents? P2: HAH! Do you see what I did there? [switch constituents with customers] Me: Actually, the thing I notice is the switch from "market costs" to marginal costs. It should be obvious that "market costs" are fiction for water districts since these districts are virtually always a monopoly charging the prices they choose. On the other end of this, water districts are created by municipalities to foster the development of a town or city as a whole. Sure, you can argue that "marginal costs" are the same as "market rates" but that's a long argument that makes the agenda involved much more clear. I'd say in contrast, water fees are fundamentally taxes and so water districts are inherently supported by taxes and the talk are "market rate" is basically neoliberal ideology that aims to squeeze the average rate-payer/tax-payer in the name of "markets" but which doesn't actually use real markets. That's not saying that municipal water districts shouldn't have fees to restrict usage - but they should be like other taxes, self-consciously charge people what's needed. The average person gets a low rate for what they need to consumer and the huge mansion pays a huge rate and appropriately so. How could "market rate" mean anything for water?

Spivak 3y ago
Because it's not the market rate for water, it's the cumulative market rate for the goods and services purchased by the company needed to get that water to you. Is the same "market rate" restaurants charge for fish sometime. Inside their restaurant they are the monopoly provider of fish to you and hence there's no market -- they're not competing with other restaurants in this moment. They are directly passing on cost of fish to you.
- joe_the_user 3y ago
  Because it's not the market rate for water, it's the cumulative market rate for the goods and services purchased by the company needed to get that water to you. Actually, it's not. That would be the average costs. The marginal cost of a good is essentially the cost to add one more final user, which can be higher or lower that the average costs provider pays to supply all their customers. The author mentions the marginal cost in particular because by some theories, that's the price that would develop in a competitive market. But it's just a fiction. There's no reason for municipalities to charge either of these prices. There might be a beautiful lake that could be cheaply drained to everyone's water but that may well be undesirable in many other ways.
eru 3y ago
Your argument could just as well be used as one against local water monopolies. See how eg the electric grid manages to have multiple suppliers for end users in many places around the world, despite there being only a single grid. And, even with a single supplier only, you can still set market clearing rates. Those are not necessarily marginal rates. (If you are worried about poor people: give them money.) > The average person gets a low rate for what they need to consumer and the huge mansion pays a huge rate and appropriately so. That's only 'appropriate' by fiat.
- joe_the_user 3y ago
  See how eg the electric grid manages to have multiple suppliers for end users in many places around the world, despite there being only a single grid. See how this system manages to be a fiction to support higher rates.
  - simfree 3y ago
    Most utilities are natural monopolies, running water, sewer, gas, electric, telephone, cable and internet to a premise are expensive, generally thousands to tens of thousands per home passed. Utilities celebrate when they can service an address for less than a grand in their public filings. For coaxial TV service the cable company is often required to cover the first $4200 in build out costs to a given address here in the USA. Running parallel infrastructure of the same type is very expensive and damages the cost model of both providers, as they are forever fighting for market share. Open access to shared infrastructure can work for some types of infrastructure like internet, but water, sewer, gas and electric where real time need needs to always be met with quality supply otherwise the infrastructure is damaged permanently makes it impractical to have multiple operators pushing water, gas, or electrons into a shared grid. Reseller models like what Texas has developed disintermediate the customer from their actual electric provider. It's just a legal fiction effectively.
    - joe_the_user 3y ago
      Most utilities are natural monopolies Yes, and they should be treated as such - regulated according good policies. Reseller models like what Texas has developed disintermediate the customer from their actual electric provider. It's just a legal fiction effectively. Indeed, moreover, the Texas system got "interesting" in a not-good way during the huge blackout a couple years ago when charges jumped to a $1000+/hour for retail customers gambling on the raw market rate systems, (in my memory of the events). I don't think the legal fiction helps anyone here but well connected scammers (remember Enron?).
mindslight 3y ago
> I'd say in contrast, water fees are fundamentally taxes and so water districts are inherently supported by taxes and the talk are "market rate" is basically neoliberal ideology that aims to squeeze the average rate-payer/tax-payer in the name of "markets" but which doesn't actually use real markets. Thank you for this comment. The disingenuous invocation of "market rate" is the first thing that hit me about this article too. From most everyone's perspective, "market rate" implies a competitive market. But to a monopolist, it means the maximum amount of wealth they can extract from captive customers. eg the peak of the Laffer curve. Or in the world we're headed towards, surveillance driven fine grained price discrimination.
RobinL 3y ago
Economist here. Imo the market rate would be the price at which supply and demand were equal. In this case, the government should choose the supply such that it's ecologically sustainable. So the price is the price at which that sustainable level of water usage is demanded by the market. That would not count as monopoly pricing, which would instead set the price to maximize revenue
rocqua 3y ago
> How could "market rate" mean anything for water? Water is limited. And water use above basic needs has clear economic value. Besides water is a commodity. Water should be one of the easiest things to price. There is a base level of water each person needs. That is inelastic demand, and an abomination to price gouge. But most water usage isn't these basic needs. That makes it decently easy to protect these basic needs.
- eftychis 3y ago
  Not true. Water is "burdened" by pile of rights, where using more water reduces future cost for big entities. Individual citizen consumption has nothing to do with prices, and their average usage is meaningless. States and large water rights ventures fight over all these, and farmers are extremely incentivized to keep growing anything year round to consume at or above but never below their water allocation and right.

Spivak 3y ago

Because it's not the market rate for water, it's the cumulative market rate for the goods and services purchased by the company needed to get that water to you. Is the same "market rate" restaurants charge for fish sometime. Inside their restaurant they are the monopoly provider of fish to you and hence there's no market -- they're not competing with other restaurants in this moment. They are directly passing on cost of fish to you.

joe_the_user 3y ago
Because it's not the market rate for water, it's the cumulative market rate for the goods and services purchased by the company needed to get that water to you. Actually, it's not. That would be the average costs. The marginal cost of a good is essentially the cost to add one more final user, which can be higher or lower that the average costs provider pays to supply all their customers. The author mentions the marginal cost in particular because by some theories, that's the price that would develop in a competitive market. But it's just a fiction. There's no reason for municipalities to charge either of these prices. There might be a beautiful lake that could be cheaply drained to everyone's water but that may well be undesirable in many other ways.

eru 3y ago

Your argument could just as well be used as one against local water monopolies. See how eg the electric grid manages to have multiple suppliers for end users in many places around the world, despite there being only a single grid. And, even with a single supplier only, you can still set market clearing rates. Those are not necessarily marginal rates. (If you are worried about poor people: give them money.) > The average person gets a low rate for what they need to consumer and the huge mansion pays a huge rate and appropriately so. That's only 'appropriate' by fiat.

joe_the_user 3y ago
See how eg the electric grid manages to have multiple suppliers for end users in many places around the world, despite there being only a single grid. See how this system manages to be a fiction to support higher rates.
- simfree 3y ago
  Most utilities are natural monopolies, running water, sewer, gas, electric, telephone, cable and internet to a premise are expensive, generally thousands to tens of thousands per home passed. Utilities celebrate when they can service an address for less than a grand in their public filings. For coaxial TV service the cable company is often required to cover the first $4200 in build out costs to a given address here in the USA. Running parallel infrastructure of the same type is very expensive and damages the cost model of both providers, as they are forever fighting for market share. Open access to shared infrastructure can work for some types of infrastructure like internet, but water, sewer, gas and electric where real time need needs to always be met with quality supply otherwise the infrastructure is damaged permanently makes it impractical to have multiple operators pushing water, gas, or electrons into a shared grid. Reseller models like what Texas has developed disintermediate the customer from their actual electric provider. It's just a legal fiction effectively.
  - joe_the_user 3y ago
    Most utilities are natural monopolies Yes, and they should be treated as such - regulated according good policies. Reseller models like what Texas has developed disintermediate the customer from their actual electric provider. It's just a legal fiction effectively. Indeed, moreover, the Texas system got "interesting" in a not-good way during the huge blackout a couple years ago when charges jumped to a $1000+/hour for retail customers gambling on the raw market rate systems, (in my memory of the events). I don't think the legal fiction helps anyone here but well connected scammers (remember Enron?).

mindslight 3y ago

> I'd say in contrast, water fees are fundamentally taxes and so water districts are inherently supported by taxes and the talk are "market rate" is basically neoliberal ideology that aims to squeeze the average rate-payer/tax-payer in the name of "markets" but which doesn't actually use real markets. Thank you for this comment. The disingenuous invocation of "market rate" is the first thing that hit me about this article too. From most everyone's perspective, "market rate" implies a competitive market. But to a monopolist, it means the maximum amount of wealth they can extract from captive customers. eg the peak of the Laffer curve. Or in the world we're headed towards, surveillance driven fine grained price discrimination.

RobinL 3y ago

Economist here. Imo the market rate would be the price at which supply and demand were equal. In this case, the government should choose the supply such that it's ecologically sustainable. So the price is the price at which that sustainable level of water usage is demanded by the market. That would not count as monopoly pricing, which would instead set the price to maximize revenue

rocqua 3y ago

> How could "market rate" mean anything for water? Water is limited. And water use above basic needs has clear economic value. Besides water is a commodity. Water should be one of the easiest things to price. There is a base level of water each person needs. That is inelastic demand, and an abomination to price gouge. But most water usage isn't these basic needs. That makes it decently easy to protect these basic needs.

eftychis 3y ago
Not true. Water is "burdened" by pile of rights, where using more water reduces future cost for big entities. Individual citizen consumption has nothing to do with prices, and their average usage is meaningless. States and large water rights ventures fight over all these, and farmers are extremely incentivized to keep growing anything year round to consume at or above but never below their water allocation and right.