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Show WATER PRICING POLICY STUDY Opportunities for Alternative Irrigation Pricing Many critics of the Bureau of Reclamation advocate imposing restrictions on the use of water for specific crops, primarily those crops that are covered by acreage limitation, direct subsidy, or other governmental program. As discussed earlier, this policy was included in the CUP Completion Act A variant of the previous pricing policy is provision of incentives targeting specific crops. The idea is that pricing can be used as a means of providing incentives for low- water using or permanent ( and presumedly, lower- water using) crops such as orchards or disincentives for high- water using crops. One specific proposal would provide assurances of higher- than- average priority service in terms of water deliveries during drought years. 9 Many critics focus on the fact that irrigators use Bureau of Reclamation water to raise " low- value" crops like alfalfa rather than higher value crops. This view of water conservation pricing overlooks some basic facts. First, even with low water prices, farmers have an economic incentive to grow crops that provide the greatest net income. Low- cost water allows farmers to earn greater net income than otherwise would have been the case from crops like alfalfa. Low- cost water does not somehow inspire farmers to grow alfalfa rather than more profitable crops. Another overlooked factor is that alternative crops require alternative markets. Thus, if a farmer shifts to production of a lower- water using crop the farmer must also shift to a new marketing chain to sell the crop. A related third element is that alternative crops require alternative factors of production ( machinery and equipment, land improvements, and farmer's skill, financial resources, and experience). Different crops also entail different risks, different levels of market price fluctuations, different soils, and different lead times. Unless alternative crops produce significantly greater net income, shifts are difficult for individual farmers to justify. A conservation pricing policy frequently advocated is increasing block rates. The first block would be set at a level representing a per- acre level of irrigation that reflects efficient irrigation technologies. 10 Insofar as it applies to " new" water for which irrigators currently have no vested " water rights," this policy presents the opportunity for cost- effective conservation without intruding into irrigators' decision- making or stripping farmers of water rights. Interruptible rates have been used successfully by utilities across the country for years. A recent experimental program tested the willingness of farmers to participate in a land 9 Reisner and Bates, page 126. 10 Reisner and Bates, page 128. Executive Summary ES- 30 |