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The Three Paradoxes that Obstruct Water Conservation, and How We Can Resolve Them through H2Ownership

Here’s part 3 of the series on water conservation by global expert James Workman, pictured here.

Last installment: next Friday!

James Workman is author of Heart of Dryness: How the Last Bushmen Can Help Us Endure the Coming Age of Permanent Drought. He is a visiting professor at Wesleyan University’s College of the Environment and co-founder of SmartMarkets LLC, an online utility-based platform that unlocks equitable water and energy markets for cities using the system that has sustained the Kalahari’s indigenous people for 30,000 years.

III. The Third Paradox of Water Conservation: Monopoly
Why must solvent utilities encourage and reward waste?

Let me introduce you to my friend – a professional schizophrenic – who manages conservation programs at a local urban water utility in the US.

She’s hardly alone in her mental instability or 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 from split personality in the US alone. Her symptoms remain mild – a nervous twitch, sweaty palms and rolling eyes – but worsen as water scarcity puts competing stresses on her utility’s ageing system.

The roots of her disorder 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 psychological complications.

Perverse Priorities
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 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 modern schizophrenia? 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 politically impossible. 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 schizophrenic 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 US soldier hoping to justify his schizophrenic decision against a peaceful village in the Vietnam War, the paradox means we must destroy a monopoly’s water in order to save the utility.

The converse is that we find a way to unlock the monopoly in order to save both water and the utility.

[And that resolution to the Three Paradoxes of Water will come next Friday in the fourth and final blog post of this series.]

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