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Show SUMMARY OF FINDINGS For example, utilities using California Water Project water are required, under state law, to develop water conservation plans for dealing with drought situations. 5 Contained within the CUP Completion Act are examples of conditions of service that provide incentives ( and disincentives). Under the Act, the CUWCD can reduce repayment requirements through increases in the amounts of water left in- stream. The Act also includes requirements for the surcharge of irrigators using project water on lands or for crops covered by land set- aside or crop subsidy programs. These types of ( dis) incentives can be provided through wholesale pricing arrangements. Conditions of service must be carefully developed. Overly stringent conditions could cause retail agencies to bypass the wholesale agency entirely for other supply options. In addition to the negative impact this could have on the wholesaler's revenues, it could also result in an inefficient allocation of the region's water resources by forcing the development of more expensive alternative water sources. If the alternative is to draw more heavily on groundwater resources, it is also possible that groundwater levels and water quality may be negatively impacted. Another condition of service that merits review is " take or pay" contract provisions. Take or pay provisions state that the buyer will pay for the contracted amount of water whether the buyer uses the water or not. This type of provision does not promote the conservation of water. In essence, as long as you must pay for the water you might as well use it; you definitely do not want to pay for water conserving technologies and then pay for the contracted amount of water anyway. Take or pay contracts are a risk management tool that is attractive to risk averse water wholesalers. Other risk management options should be considered that are likely to be risk neutral, or at least less risk averse, in order to allow retail agencies to more effectively conserve water. RETAIL WATER PRICING Most discussions of conservation water pricing refer to ( or at least focus on) retail pricing to municipal and industrial ( M& I) customers. While this study also examined wholesale, wastewater, and agricultural water pricing policies, the evaluation of rate structures focused on rate forms available to retail utilities. Most retail rate structures could be implemented for wholesale, wastewater, and agricultural water if that water can be measured effectively and at a reasonable cost Measurement of consumption is often, however, a limiting factor, particularly in the case Phone conversation between RMI staff , and Jonas Minton, Chief of Water Conservation Office, California Department of Water Resources ( 916/ 653- 9167). February 3, 1992. ES- 11 Executive Summary |
