In 1990, the average monthly residential bill for
7,480
gallons of water in Austin was $17.84, second only to Houston among Texas
cities, and almost double the rate of Dallas and San Antonio. But it is
difficult to compare water rates between cities, according to city officials,
because of complicated factors like differences in construction costs, soil
conditions, and whether rates are designed to promote conservation.
Revenue from Austin water sales goes into the city’s
General Fund, and thus water rates might be higher than those of a city which
uses tax money from its general fund to subsidize utilites. Craig Bell,
Austin’s Manager of Planning for Water and Wastewater, notes that San Antonio
has a widely dispersed system of wells from which it derives water from the
Edwards Aquifer. The water requires little treatment and only a localized
distribution system of small pipelines. By contrast, Austin has a centralized
system of three treatment plants with large pumping stations that distribute
water throughout the region in big four- and five-foot diameter pipes. This
massive infrastructure is expensive, and expenses mount even more from debt
service on bonds required to extend water to outlying areas before they develop
a dense enough population to provide a return on the investment.
“We have a lot of contract revenue bond debt having to
do with oversizing of pipes we’ve done in part to serve some of the MUDs and
future customers in outlying areas,” says David Anders, Financial Manager of
Rates and Charges for Water and Wastewater. The city’s attempts to charge MUDs
higher rates to defray debt service on excess capacity were squelched by the
Texas Water Commission, which overruled the city’s contracts with the MUDs and
now requires that it charge them cost-of-service rates.
The city finds itself continually in the position of
trying to wholesale water to defray expenses on excess capacity, a stance that
works against conservation and fuels urban sprawl. Residential users are likely
to see increases in water bills as the city moves toward cost-of-service rates.
Under pressure from commercial users who complain that they pay more than
cost-of-service while residential consumers pay less, the city is gradually
evening out rates between the two classes. This move could stimulate more
conservation among residential users, who consume 38 percent of Austin’s water,
but that may be more than off-set by the corresponding disincentive to conserve
among commercial users, who consume 52 percent.
Current methodology for pricing water emphasizes that
infrastructure capacity must be designed to handle peak demand. Wholesale
users, such as MUDs and big commercial users, who can pump water during
off-peak hours, may be charged lower rates because they require less
infrastructure capacity per volume of water consumed. Such methodology can
perpetuate an attitude toward water as un unlimited resource to be marketed in
volume rather than conserved. – N.E.
This article appears in June 2 • 1995 and June 2 • 1995 (Cover).