THE VALUE OF WATER, PART 7--PRICING

Water utilities do not sell water. They provide water service. Their water service commonly may include withdrawal of raw water from a source, transport to a central treatment facility, treatment of the raw water to safe drinking water standards, storage of finished water in tanks which also may maintain desired pressure, and delivery of the finished water to users in a distribution network. They charge a price for their water service. Accordingly, water utility rates are not the prices of water delivered--such as the price of a bottle of water at a store--but are the prices of water service provided to customers.

From time to time, some have asserted that water utility rates should be based upon the "value of water" perceived by users. Such assertions are flawed and misplaced. It is unlikely that users of a water system could agree on a single definition, or measure, of such "value". Moreover, such perceived "value" has no correlation with the provision of water service and the costs incurred to provide the service. Simply stated, the value of water is incapable of an acceptable objective methodology for its calculation.

The only objective and fair methodology for water utility rate making is cost of service recovery. This fact has been confirmed repeatedly by numerous court decisions, statutes, regulatory commission polices and writings.

At times, some jurisdictions have attempted to adjust cost of service rate making to effect a particular goal or social engineering. For example, to encourage water use conservation, some agencies have modified rate structure to increase rates as water use increases. Others have suggested special rates for certain levels of low income users, with costs subsidized by other users.

Another example may be denial of the full cost of service recovery to reflect a finding that water service was not of an acceptable quality. In one case, an agency reduced a water utility's recovery in rates of its full cost of capital (rate of return on rate base) for such a reason.

In short, water utility rates do not, and cannot, measure or be predicated upon the perceived value of water.

THE VALUE OF WATER, PART 6--NEGATIVE VALUES

The assumed negative values of water can be illustrated by at least five examples.

First, water in excess, in the form of flooding, can have a substantial negative impact upon life and property. Indeed, during flood events, water can destroy life instead of sustain life. The measure of such negative value of water may equate to the often difficult and arbitrary value of lost life and the replacement cost of lost property, including economic losses.

Second, absence of water, in the form of drought, obviously can have a substantial negative economic impact, ranging from loss of crops to displacement of people. The Dust Bowl in the United States in the 1930s illustrates this effect. Further, the negative values of crop, home and income losses can include collateral impacts due to health, social and educational challenges.

Third, certain contaminates carried in water can have serious adverse health consequences if such contaminates are not removed by treatment before water is used. The costs incurred to heal illnesses or to suffer destruction of crops contaminated by polluted water can be measures of negative value.

A fourth example of negative value of water may be illustrated when sources of water become depleted. A recent Yale led research study sought to measure the value of natural capital assets such as water. The study demonstrated pricing of natural capital by focusing on the Kansas High Plains groundwater aquifer, which supports the region's agriculture-based economy. The study found that groundwater extraction and changes in aquifer management policies reduced the state's total wealth held in groundwater by a total of $1.1 billion in the period 1996-2005. (See Yale News, March 14, 2016, "What's Nature Worth. Study Puts a Price on Ground Water and Other Natural Capital.")

Finally, public perception of tap water appears to imply a negative valuation regardless of compliance with all applicable regulatory standards. It appears that people in the United States are willing to pay significantly more for bottle water than for tap water. A 2013 American Water Works Association study found that tap water costs only $0.004 per gallon, or 1/300 of the average price of a 16.9 oz bottle of water. Another survey found that the public was willing to spend from 250 to 10,000 times more for bottled water, although USEPA estimates 40% of bottle water actually is more highly treated tap water.* Does the greater cost and use of bottle water indicate a negative value for tap water? Should it?

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*Bui,"No Sacred Cows:Getting To The Crux
Of The Matter," Journal AWWA,June 2016,
p. 12

THE VALUE OF WATER, PART 4--SCULPTOR

Water is the great sculptor of Earth. It has many chisels available to the task--rain, snow, ice, vapor and flowing water in various environments. It uses all of these tools to erode the earth, to dissolve the earth, to move the earth, to deposit the earth, to lift the earth, and generally to carve the earth constantly into a myriad of features.

A well known example of water's sculpture in the United States is the Grand Canyon. It is carved by the Colorado River over endless time into a spectacle.

Another example are the moonscape Badlands in western South Dakota. Here, water has worked in several ways to build up and to tear down. Sediments were deposited when the area was under a shallow sea. Later, when the Black Hills uplifted, streams and rivers deposited more sediments from the Hills. Sediments became soft rock formations. However, when streams and rivers diverted away from the area, depositions faded in favor of erosion to now constantly carve away these formations.

The Great Lakes formed when global warming caused the glacial continental ice sheet to retreat, carving out the Lakes' basins. The same glacier also carved much of the features of such states as Wisconsin, Minnesota and Illinois, creating flat lands, hills, valleys and countless smaller lakes. Before the glacier, much of middle United States was under an extensive shallow sea, resulting in layers of limestone prevalent in the area today.

Water also floods from rivers, enriching some adjacent land , eroding other land and creating new land. However, not all of water's work is above ground. Consider caves and the interesting formations within them; and, of course, there are the sinkholes that pop up.

Even the absence of water can become a sculptor of earth. The lack of rainfall for several years in the 1930s created the Dust Bowl in the Great Plains, eroding topsoil and displacing farms and their residents.

We enjoy, and utilize, water's sculptures for recreation, commerce and sustenance--and even just to admire the scenery. So, what is the value of water as sculptor of Earth? What do you think?

THE VALUE OF WATER, PART 3--LIFE

A common saying is: "you never miss the water until the well goes dry." The plain fact is that life today--all life--would not exist without water. Earth would be barren rock.

Humans, of course, are mainly composed of water. So, water certainly is essential for human life. However, humans also need food to sustain life. Without water, there would be no food. Water is essential to grow crops and to sustain livestock. No water, then no grains, fruit, vegetables, poultry, meat and fish.

Humans cleanse with water. We wash our bodies, our food, our clothes, our dishes, our cars, our houses,etc. with water. Without water, cleansing essentially would not be possible.

Manufacturing is dependent upon water. Our products have some connection with water either in the process of production or in the ingredients. Without water, this would not be possible.

Water is a primary protection against fires. Further, our recreation depends upon water. One cannot swim, fish, go boating without water.

One is reminded that W.H. Auden put it this way: "Thousands have lived without love, not one without water." So, what is the value of water? Essentially, water equals the value of life on Earth. Our planet seems to have been specially deigned for life. The earth, and all living things on it, are fortunate to have water--in all its forms and in all its quantities and locations--sufficient to sustain life as we know it. In that reality, the value of water in invaluable, an unmeasurable, boundless treasure.

Such a conclusion, however, has consequences for humans charged with responsibility to protect water resources so that their value is not diminished by waste, misuse, and ignorance. If we do not show love for our water, we may be treading on life without it.

THE VALUE OF WATER, PART 2--ORIGINS OF LIFE

The story of life is the story of water. As discussed in my recent postings, scientists have derived differing hypotheses as to the origin of water on Earth. They range from ice-bearing asteroids and meteors colliding with Earth to water-bearing cosmic dust particles binding together to form the Earth. However, there does not appear to be any cogent evidence to support these assertions. In point of fact, no one really knows how water was delivered to Earth.

Nevertheless, the fact is that there is water on Earth, in aquifers below the surface; in oceans, lakes, rivers, ponds and puddles on the surface; and in clouds above the surface. And, this water is in all its various forms and states.

So, what does this water mean for us? In the first instance, it appears that animal life on earth originated in water--in seas and oceans. How this happened, again, no one knows for sure. One hypothesis is that life came from rocks. Water, as a solvent, over time eroded certain minerals from rocks, resulting in chemical formation of amino acids from the mineral mix, which in turn resulted eventually in formation of living organisms.

Assertions of chemical evolution, however, were criticized in the book "The Mystery of Life's Origin" by Thaxton, Bradley and Olsen. "They showed that attempts to explain the origin of the first living cell from simpler nonliving chemicals had failed and that these theories had specifically failed to explain the origin of the information necessary to produce the first life." (Meyer, "Darwin's Doubt", 2013, p. 341) In other words, chemistry alone could not produce information in DNA leading to life.

The oldest period in Earth history is called pre-Cambrian, perhaps a little over 4 billion years ago. The first forms of life appeared in the pre-Cambrian period, according to fossil records. They appeared in water, in seas and oceans. They were one-celled organisms and sponges, simple soft tissue organisms having few cell types.

After the pre-Cambrian period, the following period was the Cambrian, which began about 540 million years ago. The fossil record reveals that beginning about 530 million years ago, the "Cambrian Explosion" occurred. Literally, this was an explosion of a multitude of many different and complex animal forms in the seas and oceans. They include trilobites, jelly-fish like creatures, worm like things, shrimp like critters and shell bearing animals. Indeed some of the examples looked like something out of a 1950's science fiction movie. These Cambrian sea animals had sophisticated body plans, including such features as compound eyes, legs, outer skeleton, mouth, digestive system, stomach, reproductive organs, skin, wings and anus. In other words, these sea animals were characterized by features that we can expect to see in all forms of contemporary animal life.

The Cambrian Explosion appeared suddenly. There is no fossil record of any evolution or transition from the simple pre-Cambrian organisms to the complex body plans evidenced in the Cambrian fossils. Darwin's basic theory is that animals have evolved through the process of random mutations and natural selection. In his book "Darwin's Doubt", Meyer reviews Darwin's theory as well all of the off-shoots from that theory that have followed. Meyer concludes that Darwin and Neo-Darwin theories of evolution cannot explain how the genetic information and the novel proteins and systems to regulate expression of that information necessary to build the complex Cambrian body plans could arise. He concludes that the only supportable explanation for the source of the necessary genetic information to build the new body plans is "intelligent design."

The Earth is exceptional. It is designed for life. An important component of the design for life is water. And water was the environment for the beginning of animal life and its explosive Cambrian expansion into countless different and complex body plans. Clearly, water has had value.

THE VALUE OF WATER, PART 1--DEFINITIONS

In water utility rate making hearings and meetings,it is common to hear customer grumbling against rate increases because water they drink, like air they breathe, is perceived to be free. Why should I pay for water that is free? customers object.

If water is free, does it have "value"? In recent years, partially in response to such objections, some industry writers have urged water utilities to inform their customers of the "value of water". Some have gone further to claim that rates for water service should be calculated based upon the "value" of water service to customers, not upon the costs of service.

When applied to water, the word and concept of "value" is capable of many different definitions, sums objective, some subjective. In fact, efforts to describe the "value" of water can take on a metaphysical proportions. Without the particular context for use of the word, reference to the "value of water" in reality can itself become meaningless.

What is "value" and how can it be quantified? What are the possible contexts in which water has value? Does the term "value of water" refer to life;; or to economic activity; or to environment; or to history; etc.? How can value rate making for water service work? Does informing customers of the "value of water" provide any benefit?

In following postings, I will attempt to explore some of the possible meanings of the "value of water"; the contexts in which water may have "value"; whether "value of water" can be measured; and whether the term, in fact, is meaningful.