Topic Area: Water Pricing
Geographic Area: Marin County, California
Focal Question: How the pricing scheme instituted by the Marin Municipal Water District addresses the issue of full-cost pricing for water.
Sources:

“Marin County, California.” State and County QuickFacts. Jan. 2008. U.S. Census Bureau. 17 Apr. 2008 <http://www.marincountyguide.com/go.shtml?http://quickfacts.census.gov/qfd/states/06/06041.html>.

Marin Municipal Water District. 6 Apr. 2008. Marin Municipal Water District. 6 Apr. 2008 < http://www.marinwater.org/>.

“Marin Municipal Water District, California: Supporting Sustainable Pricing with Water Conservation.” EPA Case Studies of Sustainable Water and Watershed Pricing. Dec. 2005. 6 Apr. 2008 <http://www.payingforwater.com/wp-content/uploads/2007/05/case-studies-of-sustainable-water-wastewater-pricing-full-cost-pricing.pdf>.

Woolsey, Matt. “America’s Richest Counties.” Forbes.com. Jan. 2008. Forbes.com. 17 Apr. 2008 <http://www.forbes.com/2008/01/22/counties-rich-income-forbeslife-cx_mw_0122realestate.html>.

Reviewer: Austin Ross, Colby '08
Review:

Created in 1912, the Marin Municipal Water District (MMWD), serving Marin County, California, is the oldest municipal water district in the state. Just north of San Francisco, the MMRD is a publicly owned water system that serves roughly 190,000 people, maintains 21,250 acres of watershed, and promotes an extensive water conservation program (EPA 2005). The pricing scheme employed by the MMWD covers the entire cost of providing water to its customers, and in combination with its water conservation efforts, it has helped the MMWD move toward sustainable water allocation. The MMWD has also created a water recycling program that reuses wastewater for irrigation, toilets, commercial carwashes, commercial laundries, and air conditioning cooling towers (EPA 2005). Recycled water is sold at a discounted price.

The costs associated with providing water include withdrawal and purchase costs (source water costs), treatment, storage, and distribution costs, and watershed maintenance costs. This is comprised of maintenance of natural resources, roads, and trails, as well as assisting visitors and managing fire risks. Depreciation and debt service are also paid for by operating revenues (EPA 2005).

Revenue is collected from residential, commercial, and agricultural customers following an increasing block-pricing format, with rates varying on a seasonal basis (Increasing block pricing involves per unit fees that increase in steps with the amount consumed in a month). Residential customers are billed a per-unit rate on a bi-monthly basis in addition to a service fee based on meter size (MMWD 2008). Different classes of residential customers are billed at different rates and the block schedule differs between winter and summer months. Under this scheme water is more expensive (the ranges of water consumption within each block are smaller) in winter. This is somewhat counterintuitive because typically demand for water is higher in the summer, which would indicate a higher price during these months. However, the MMWD has opted to defy this market incentive in order to ensure a consistent flow of revenue throughout the year. They are able to do this because of the high inelasticity of demand for water during the winter.

For non-residential customers and customers who purchase recycled water, the increasing block schedule is determined by the percentage of consumption of a baseline water usage predicted for each client. The water recycling program, which has the capacity to recycle up to 2 million gallons of water a day, distributes water to more than 250 customers (EPA 2005).

Water conservation incentives include rebates for landscaping that mimics local habitats and requires less irrigation and rebates for the purchase of high-efficiency, water conserving appliances (MMWD 2008).

Through its practices, the MMWD has been able to stabilize demand for water near 1980 levels despite significant population growth over the last few decades (EPA 2005). Looking to the future, a desalination facility has been constructed to test the feasibility of this process as a new water source (MMWD 2008).

The success of the full-cost pricing program in Marin County demonstrates that this method of pricing water can be effective in educating consumers about the value of water conservation and in maintaining a sustainable level of demand for water. However it is noteworthy that on the 2000 census, Marin County had the highest per capita income ($44,962) and the fifteenth highest median household income ($81,761) in the nation (Woolsey 2008; U.S. Census Bureau 1999). This affluence could be affecting the ability and willingness of consumers to adopt a full-price system. From a policy standpoint, it may be more difficult to institute such a program in less wealthy communities.