atlanta: So Much For The Laws of Supply And Demand

One Smart Blonde . . . no, really!! (

1smart1) wrote in

atlanta,
@ 2008-03-24 10:33:00

So Much For The Laws of Supply And Demand
Simple economic theory says that when demand goes up, price is supposed to go up; when demand goes down, price goes down.

Apparently that's not true in the City of Atlanta. Because Atlantans have been so effective at water conservation, water rates are being increased to make up for lost revenue.

Only in government does this make logical sense.

(Post a new comment)

	Gah! pickmansraven 2008-03-24 02:34 pm UTC (link)
	Seriously?!?!? That's insane - if usage goes down, then the associated costs with making water available go down as well. (At least that's how I understand it.) Was this in an article in the AJC or something? Or in the latest Water Bill? (Reply to this)(Thread)

	Re: Gah! 1smart1 2008-03-24 02:37 pm UTC (link)
	Mayor Shirley Franklin gave a press conference over the weekend explaining why water rates were being increased. (Reply to this)(Parent)(Thread)

	Re: Gah! pickmansraven 2008-03-24 02:41 pm UTC (link)
	Wow - I agree with you, what they're doing is just crazy. Thanks for the info! (Reply to this)(Parent)

	Re: Gah! laurent_atl 2008-03-24 02:53 pm UTC (link)
	"if usage goes down, then the associated costs with making water available go down" This is all well and good from a theoretical point of view. However water is in finite supply. When it runs out the price of making water available will grow catastrophically. (Reply to this)(Parent)(Thread)

	Re: Gah! pickmansraven 2008-03-24 03:16 pm UTC (link)
	The water itself is a finite resource, agreed - but the absence of that finite resource isn't the focus right now. (Though it will become an issue in the future.) The question is why the price has increased while both usage and availability has increased. (Reply to this)(Parent)(Thread)

risk management

laurent_atl
2008-03-24 03:31 pm UTC (link)

It might not be your focus right now but it is very much the focus of the city administration. The perspective of running out of water is a major risk for the city. Raising the price of water will:
-free funds for upgrading the infrastructure and cut the leaks from aging water mains
-provide an incentive for users to adopt conservation practices. a high water bill will make those rain barrels more attractive.

(Reply to this)(Parent)

	Re: Gah! dwivian 2008-03-24 03:04 pm UTC (link)
	Down to a point, yes. Some infrastructure costs remain no matter how litle water is created. (Reply to this)(Parent)(Thread)

	Re: Gah! pickmansraven 2008-03-24 03:07 pm UTC (link)
	heh - you read my mind. After thinking about this, I was starting to think about that angle myself. But then why wouldn't the infrastructure costs be built into a base "Service Fee" (similar to what AGL charges) that would cover that? Curiouser and curiouser... (Reply to this)(Parent)(Thread)

Re: Gah!

laurent_atl
2008-03-24 03:43 pm UTC (link)

Let's assume for a moment that you could do that (separate infrastructure cost from water cost).

Now take two neighbors, one of which uses twice more water to maintain his lush lawn and hottub. One of them pays $50 for his water a month, the other $100. If we change the pricing so that 50% of the water budget is billed as a service fee and 50% as a usage fee. The guy who wastes water will now pay $37.5 service fee and $50 usage fee, a 12% saving. The guy who saves water will now pay $37.5 service fee and $25 usage fee, a 24% cost increase.

Does that look like a good idea?

(Reply to this)(Parent)(Thread)

	Re: Gah! lorigami 2008-03-24 03:53 pm UTC (link)
	but the end result looks a lot like what the city is doing now. =/ (Reply to this)(Parent)

Re: Gah!

pickmansraven
2008-03-24 05:21 pm UTC (link)

Interesting - but I think your math might be a bit off. You're basing your "service fee" on the highest amount possible in your 50% figure, rather than a potential average of the costs. (See below)

Let's take, for example, how Natural Gas is currently handled.

Atlanta Gas/Light gets paid $8.95/month from every customer for the cost of providing the pipeline, maintenance, etc.
Then the marketers tack the gas charge on top of that, and offer either a fixed rate or fluctuating rate.

So using that example, let's say that water runs $10 / 1000 gallons. Of that, let's say that the city figures that $2 (based upon average usage) is allocated for "maintenance and infrastructure", with the remain $8 being the cost of the resource.

So in your example, if a house with excessive usage uses 10,000 gallons a month, then they're currently paying $20 in infrastructure cost and $80 in water fees. If the Average person is using 5,000 gallons a month, they're paying $10 in infrastructure fees and $40 in water costs.

Now let's figure that the city is averaging $20/household for those fees, and determines that is the number needed. So then everyone is charged that average fee of $20, and then their usage is tacked on top.

And now I come to your point - and I see it and think you're right. The trick/key here is going to be the "average cost per household" that's going to be determined by the city.

Hrm, it's a bit of a conundrum - How to maintain the infrastructure in light of decreased usage. The only fair way I can see is by this service fee, though ADDING one on top of current prices would be ludicrous, especially if it was originally part of the fee charged. Replacing the entire fee structure with tiering (much like

mfree suggested below) would be the optimal solution.

Still ... GAH.

(Reply to this)(Parent)

	goodjoan 2008-03-24 02:39 pm UTC (link)
	We should all protest by drinking all that milk we bought every time the weather got chilly! (Reply to this)(Thread)

	1smart1 2008-03-24 02:42 pm UTC (link)
	LMAO!!! That's great. We've been feeding all the bread we bought to the ducks lately. (Reply to this)(Parent)(Thread)

	mpceccato 2008-03-24 02:45 pm UTC (link)
	Where do you feed the ducks? (Reply to this)(Parent)(Thread)

	1smart1 2008-03-24 02:56 pm UTC (link)
	We go to several local Gwinnett County parks. Our favorite is Rhodes Jordan in Lawrenceville. Little Mulberry is also nice. (Reply to this)(Parent)

	sysd 2008-03-24 03:09 pm UTC (link)
	The law of supply and demand apply to marketplaces. They don't apply to monopolies and cartels; they don't apply well to necessities, particularly those associated with monopolies. Our water supply is a monopoly. Also, perhaps that the rate isn't just to help recover lost profits, but to also continue to encourage water conservation? (Reply to this)

	baldsug 2008-03-24 03:13 pm UTC (link)
	I don't think that applies to liquids. (Reply to this)

	mfree 2008-03-24 03:30 pm UTC (link)
	The "fairest" thing to do IMHO is have a stepped or prograssive scale... over a certain amount of use per private household the rate increases. I'm all for using price to instigate usage controls, but make sure that doesn't punish those who are actually conserving. (Reply to this)(Thread)

	lorigami 2008-03-24 03:55 pm UTC (link)
	exactly. our water bill is already insane compared to what it used to be. we have done just about everything possible to conserve too. I can't imagine what it must be like for our fixed-income neighbors. (Reply to this)(Parent)

	noelleleithe 2008-03-24 03:54 pm UTC (link)
	It's because the city failed to do basic math: less water use = lower revenue. No one thought that far ahead when they imposed restrictions and encouraged conservation, so the city's facing a big budget shortfall. As usual, the residents have to foot the bill for their elected leaders' lack of foresight. (Reply to this)(Thread)

	1smart1 2008-03-24 03:58 pm UTC (link)
	I don't necessarily blame the current Administration. At least not solely. This is a problem that has been brewing for generations, but the previous elected officials didn't have the balls to do what was necessary to fix the system - they just continued to stick their corrupt heads in the sand (or in some other hole) and allow the problems to get worse. (Reply to this)(Parent)(Thread)

	noelleleithe 2008-03-24 04:04 pm UTC (link)
	The water problem has been brewing for many years, yes. But that's not what I was talking about. It's pretty simple to figure out that limiting/reducing water use means less consumption, which means less revenue. That's what they didn't plan for. (Reply to this)(Parent)

lorigami
2008-03-24 03:59 pm UTC (link)

they also didn't think about how a total outdoor watering ban was going to affect all those big trees. I agree with not watering grass, but I do wonder how many of those big trees fell in the storms because of the drought. (and how many more are going to fall as spring progresses) Last summer I hauled every bit of leftover shower and dish water out to the oak in my backyard because I had no desire to see it land on my roof.

(Reply to this)(Parent)(Thread)

	1smart1 2008-03-24 04:00 pm UTC (link)
	Last summer I hauled every bit of leftover shower and dish water out to the oak in my backyard Watch out. They've declared that illegal too. No use of "grey water." (Reply to this)(Parent)(Thread)

	lorigami 2008-03-24 04:01 pm UTC (link)
	what? where did you see that? that is about the stupidest thing I've ever heard! (Reply to this)(Parent)(Thread)

	1smart1 2008-03-24 04:09 pm UTC (link)
	Yep. It's true. And stupid. It's been all over the news. (Reply to this)(Parent)

	lorigami 2008-03-24 04:06 pm UTC (link)
	ok, I saw this: http://content.times-herald.com/291277348365597.bsp which sorta explains it. I knew people were having some issues with outdated codes on installing actually plumbed-in greywater recycling systems, but I didn't realize this stupidity was going on. I'm glad it's being worked on. (but I'm still using my buckets, law be damned) (Reply to this)(Parent)(Thread)

	1smart1 2008-03-24 04:09 pm UTC (link)
	You rebel, you! Go for it!!!! (Reply to this)(Parent)(Thread)

	lorigami 2008-03-24 04:10 pm UTC (link)
	lol (Reply to this)(Parent)

	pickmansraven 2008-03-24 05:24 pm UTC (link)
	And you'd think that with everyone from the Governor to a good chunk of the Atlanta Media urging folks to use Grey Water that this would have come up sooner. Thanks for the article, and keep on fighting the power! :) (Reply to this)(Parent)(Thread)

	1smart1 2008-03-24 06:34 pm UTC (link)
	What's been funny is watching the media scurrying around to correct themselves on this. They got busted on encouraging people to break the law so they're doing all they can to cover their butts. (Reply to this)(Parent)

	sysd 2008-03-24 06:18 pm UTC (link)
	The city's facing a budget shortfall in general, what with the recession driving down property values and sales taxes. They're scrambling like mad to plug the hole; the drought is one more piece of misery. (Reply to this)(Parent)

Think about it

rick_day
2008-03-24 08:57 pm UTC (link)

1. Don't let these doofuses tell you water is a finite resource. one can not 'destroy' water, you can only limit its availability through monopoly. There is just as much water on this planet as there was millions of years ago.
The problem is the infrastructure has not kept up with growth, not a lack of a finite resource.

2. Wait until the state of GA does the same thing with

gasoline taxes

(Reply to this)

	ONE DAY jolefay 2008-03-24 09:17 pm UTC (link)
	Someone will explain to me WHY Coca Cola is allowed to bottle the hell out of water and sell it INTERNATIONALLY while we are almost out of water. Now I have to pay more for water because we are running out while they are bottling not only water but soda and other drinks. *miffed (Reply to this)(Thread)

	Re: ONE DAY 1smart1 2008-03-24 09:21 pm UTC (link)
	I thought that exact same thing and went off on a rant about it. Then I learned that being the responsible corporate citizen that they are (no, really!), they shifted the primary operations of their bottling plant - and therefore their water usage - out of the drought-stricken areas. (Reply to this)(Parent)(Thread)

	Re: ONE DAY jolefay 2008-03-24 09:23 pm UTC (link)
	Really? You would think they would demand more press for that. "Look at us-we care" LOL. (Reply to this)(Parent)(Thread)

	Re: ONE DAY dwivian 2008-03-25 11:04 pm UTC (link)
	You can only get as much press as those that own the media allow. The press statements were released, but only picked up in limited areas. TCCC also siphoned off all the water from their water features for irrigation, rather than use new water. (Reply to this)(Parent)

	Re: ONE DAY dwivian 2008-03-25 11:05 pm UTC (link)
	Because they bottle the water ITNERNATIONALLY, and not just here? The insertion of water into each product (TCCC sells concentrate, which has very little water) is done by regional bottling companies, as appropriate to any restrictions or limitations. Dasani is filtered, enriched, and bottled just like everything else -- by the local bottler. (Reply to this)(Parent)

	Re: ONE DAY dwivian 2008-03-25 11:06 pm UTC (link)
	And, one day I will learn to spel. But, not today. :) (Reply to this)(Parent)

aubieturtle
2008-03-24 11:06 pm UTC (link)

In ECON101, they tell you about the law of supply and demand.

In ECON102, they tell you about things like fixed costs.

If you buy a car, the insurance and car payment stay the same no matter how much you drive. Upkeep and fuel costs go up the more you drive. So by driving less, you lower your upkeep and fuel costs but your per mile cost goes up because the fixed costs are spread over less miles.

There is more to a water distribution system than just the water that flows through it. When you think about it, the actual water is probably the least expensive component of the system and thus lower usage would do very little to change the overall system cost.

(Reply to this)

	joewent 2008-03-25 01:02 am UTC (link)
	Sigh... I think the term y'all are looking for is Common Pool Resource. (Reply to this)

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