The Third Paradox of Water: Monopoly (Part 3)
James G Workman
In a four-part series, James G. Workman explains the three paradoxes that obstruct water conservation: value, efficiency, and monopoly. In this article, Workman writes about the third paradox: monoply. Water conservation erodes a private or public utility’s revenues. To remain solvent, or grow, providers are forced to encourage and reward waste.
Let me introduce you to my friend – an extraordinarily conflicted professional – who manages conservation programs at your local urban water district.
She’s hardly alone in her anxiety, or unique in facing the predicament that caused it. Using her name would jeopardize her career. But based on 53,000 American water utilities, I estimate at least 100,000 people like her suffer in the U.S. alone. Her symptoms remain mild – a nervous twitch, sweaty palms, and mild headaches – but worsen as water scarcity puts competing tensions on her utility’s aging system.
The roots of her trauma are simple. Nearly a decade ago she was hired, given a small staff, budget and discretionary funds to promote ambitious conservation programs and rebates throughout the service area of her water utility. It was the ideal job to match her ideals, a rare opportunity that pays you to do what you love. But there was, alas, a deep and hidden problem, which gave rise to mental health complications.
It soon became clear that, the more she succeeded at a noble cause while saving nature, the more she would wreak havoc on her institution’s foundation, destroy the revenue base of operations, and force herself and her team out on the streets and into the welfare lines.
Conversely, if she utterly failed at her job, and proved hopelessly incompetent at the task defined, everyone wins and loves her. She would boost sales, generate high returns on almost no investment, and likely land herself a series of promotions, salary hikes, bigger team, and longer vacations until she ran the show.
The only problem with that second route was that she would have to sacrifice her just original soul, sense of pride, and drive endangered species to extinction.
What’s forcing this professional anxiety? It’s not a matter of ‘public’ versus ‘private’ water utilities. That’s a red herring. Whether investors or voters own a water district, it remains a natural monopoly. That monopoly needs more money each year just to operate – to pay its staff, invest in repairs, maintain the system, cover health care and pensions etc. Increased funds depend on increased revenues, higher sales, and thus escalating water use by all end users – residential, commercial, industrial or municipal.
In theory, a monopoly should be able to increase revenues by selling ever-less water at ever-higher rates. In reality, that’s political suicide. Private and public utilities are regulated by officials elected to act on behalf of voters; voters rarely demand the right to pay more for less of something they depend on in every aspect of their lives, especially something many believe they should get for free.
Walking the tightrope
Hence the fine monopolistic line my strained friend must walk, and the tightrope beneath her, is beginning to fray. The current recession makes families and firms consume less water. That’s wonderful for nature, but horrible for her utility’s bottom line. She is, professionally, both pleased and tormented. Her job is to lock in more efficiencies but her boss visits daily with thinly veiled threats if she does. Unless she backs off on conservation, her position, team, and budget will be at risk of being eliminated first as part of austerity. If she saves more water, she slits her own throat. Then her skills become worthless in the marketplace; who hires someone good at eroding the bottom line?
This is the Third Paradox of Water: conserving water destroys revenues; a thriving monopoly must reward waste.
Frugal utilities have less room to negotiate. Those who encourage water saving today must punish it tomorrow with higher rates. These perversions remain true at the household level, the building level, the neighborhood, the municipal district and the river. Perversely, the existence of a water monopoly means that all people involved in it – from the person flushing the toilet to the State Water Board setting targets for water allocations – are left with no choice, no competition, and no incentives to conserve.
Indeed, the Third Paradox ensures that the most frugal, responsive, and equitable users and managers in the vertically integrated water monopoly can only succeed through subterfuge or martyrdom. As this paradox undercuts performance and customer relations it is known throughout the water industry as ‘the death spiral.’ After all, to paraphrase the U.S. soldier hoping to justify his extreme decision against a peaceful village in the Vietnam War, the paradox means we must destroy the monopoly’s water in order to save the utility.
The converse is that through the principles of H2Ownership, we can find a way to unlock the monopoly in order to save both water and the utility.
About the Author
James G. Workman (2005 Fellow) is a leader in the design and execution of natural resource conservation markets for water, fisheries, forest and energy. He is author of Heart of Dryness: How the Last Bushmen Can Help Us Endure the Coming Age of Permanent Drought, which won the prestigious Rachel Carson Award for best book of the year from the Society of Environmental Journalists, and co-author with Amanda Leland of the forthcoming The Quiet Sea Change: How America’s Hunter Gatherers Are Transforming the Rules of the Wild. He has been a visiting professor at Whitman Colleague and Wesleyan University’s College of the Environment, and co-founded AquaJust, an online utility-based platform that unlocks equitable water markets for cities using the system that has sustained the Kalahari’s indigenous people for 30,000 years. James is a Kinship Conservation Faculty member.
Perversely, the existence of a water monopoly means that all people involved in it – from the person flushing the toilet to the State Water Board setting targets for water allocations – are left with no choice, no competition, and no incentives to conserve.