The report finds that Cal Water’s investments in water efficiency have resulted in more sustainable per capita demand, lower water system costs and lower water bills for its customers

During droughts, water use often drops and water bills rise. Some blame water conservation for this. A new report shows that tiered rates and savings programs can actually save consumers money in the long run.

Before 2009, the California Water Service Company (Cal Water) had not equipped all of its water customers with water meters, there were no conservation tariffs and no comprehensive conservation programs, and per capita water use was stagnant or increasing. In 2009, Cal Water implemented conservation tariffs, specifically increased block rates, tripled its spending on conservation programs, and accelerated the transition of unmetered customers to water meters. Since then, per capita water use has steadily declined.

The report, prepared for Cal Water by the Alliance for Water Efficiency, A&N Technical Services, Inc. and M-Cubed, examines whether bill-paying customers benefited from these programs and what the economic impact would have been if Cal-Water had not implemented these programs.

The report points out that the link between water conservation and water prices is not always well understood. Many are confused by price increases when water use has decreased and blame water conservation and efficiency for higher prices. The report found that this is not the case with Cal Water: “Our analysis conservatively estimates that customer bills in the utility districts studied would have been 1.2 to 20.5 percent higher over the period 2010 to 2022 if Cal Water had not implemented water efficiency and conservation measures.”

The implementation of tiered rate structures sends price signals to customers about their consumption, providing the basis for making informed decisions about efficient water use. The implementation of tiered water rates, universal meters, efficient sanitation standards, and long-term savings programs have reduced Cal Water’s short- and long-term operating costs and ultimately lowered costs for customers. The report estimates that water bills from 2010 to 2022 would have been 1.2 to 20.5 percent higher than they actually were.

The analysis estimates the value of savings during the study period by using avoided marginal costs of water supply as a method of evaluating savings. Rather than raising prices, the report’s analysis found that the funds Cal Water spent on savings were more than offset by lower water production costs, deferred capital expenditures, and other cost savings. Cal Water’s investments in water efficiency have resulted in more sustainable per capita demand, lower water system costs, and lower water bills for its customers.

The most significant cost reductions occurred in the Hermosa-Redondo, Los Altos, Mid-Peninsula, South San Francisco and Westlake service areas, all of which rely on imported water. The reduced dependence on expensive imported water brought significant financial benefits to customers.

In Cal Water’s service districts that rely on groundwater, the analysis estimates substantially less costs avoided and, consequently, less savings. However, the report notes that in Cal Water districts that rely on over-used groundwater basins, such as Stockton, Salinas, Selma, and Visalia, the avoided cost estimate does not capture the negative costs of continued over-usage and therefore underestimates the value of demand management programs for those districts. The report also notes that long-term supply costs were not determined for districts in critically over-used groundwater basins; including the costs of complying with SGMA, such as purchasing additional supplies, would alter the analysis.

The report concludes that investments in water conservation reduce system costs in the long term. In regions with high water supply and infrastructure costs, water conservation is often the most cost-effective way to meet future water needs.

In addition, the report points out that other studies and analyses have reached the same conclusions: An analysis by LADWP found that rates were 27% lower because the city invested in water conservation over three decades. The city of Westminster, Colorado, found that water and sewer rates were 47% lower over 30 years because of investments in water conservation. And a study in Tucson concluded that the savings saved the city hundreds of millions of dollars in water and sewer operating and capital costs.

“Investments in water conservation directly benefit consumers by helping to slow the increase in water supply costs over time,” the report concludes. “Economic investments in water efficiency are critical to ensure that water utilities can continue to provide a water supply that is both affordable and sustainable.”