Water is too precious to be so cheap

Me at the Dom Post on Auckland's water shortages:

Residential users in Auckland at least are charged for water use – something not true in all cities. But there is no difference in the price of water in a dry year as compared to a wet one. A thousand litres of water in Auckland, from July 1, costs $1.594; WaterCare assumes that 78.5 per cent of that water finds its way to the wastewater system and adds additional wastewater fees.

All up, a thousand litres of water costs $3.77 – less than a flat white. Filling up a 60,000 litre swimming pool, in the middle of a drought, costs a bit more than two full tanks of petrol – unless the neighbours notice and dob you in and you’re fined for breaking the water rules.

The same water shortage affects power generation and residential water use. But because electricity prices rise in dry years, councils find no need to try to police households to make sure that electricity is only used for the most important purposes.

Instead, Government just makes sure that poorer households are not too badly affected by rising power prices through things like Winter Energy Payments.

Moving to a more responsive water pricing system would not just encourage households and businesses to conserve when conservation is most important. It would also provide incentives to build water storage facilities, filling them when water is cheap and selling the water when shortages make water more valuable.

Prices that do not reflect underlying scarcity are a recipe for shortages. Water is too precious to be sold so cheaply.

My earlier report on cap-and-trade systems for water is here.