The Cost of Conservation: When Do Alternative Supply Investments Make Sense?

California has always been a leader in conservation and alternative technology efforts for water, electric, and utility service issues. While supply alternatives and conservation measures are always important and potentially beneficial to all service users, we should ask whether the time is right to spend ratepayer money on these projects.

On the electric side, there are programs to upgrade lighting fixtures that cost much more than supplying the electricity to operate the existing systems. At some point, this will make economic sense. In the meantime, there is a fair argument about whether we should spend the money to do this when it is not economical to do so.

On the water side, we should ask whether it makes sense to incentivize super-efficient appliances and pay for turf removal when the cost of those measures is significantly greater than the cost of supplying water from existing sources. The same question applies to alternative water supplies like ocean desalination and treatment of wastewater (sewerage) to drinking water.

When we look at our utility bills, we see a set of fixed charges that cover the cost of maintaining the delivery system that brings electricity, water, and natural gas to our homes and businesses. We also see a commodity cost for the actual amount of electricity, water, and natural gas we have used. These costs are inflated by the cost of conservation and alternative supply programs. These programs are beneficial, but their timing is important.

The underlying question is whether we should pay extra for conservation programs when there is not a shortage of a commodity, and whether we should pay extra for development of more expensive alternative supply sources before they become economic in themselves.

It is important to recognize that the development and implementation of new technologies and projects take time and that we need to invest now in things that will benefit us in the future. Will ocean desalinization, toilet-to-tap, and similar programs need to be funded now to meet near-term needs? Should we pay for turf removal programs at a cost greater than the cost of supplying the water that the program will save? Similarly, should we pay more for electricity and natural gas conservation programs than the cost of supplying the electricity or natural gas the programs would save?

This is not an easy question, and there are no absolute answers. We should always use resources wisely and not be wasteful. On the other hand, perhaps we should not push uneconomic and, in reality not necessary, programs and projects before they are needed.

This is particularly true on the waterside. In years when we have plentiful supplies, we should ask whether it makes sense to fund expensive conservation measures like turf replacement or whether those programs should be suspended until dry years when they have an immediate benefit. There is a long-term benefit to demand reduction even if it occurs in times when it is not immediately needed, but as a ratepayer, it is fair to ask about the cost-benefit of the timing of such programs and projects. Let your providing utilities know what you think about this issue. It does have an impact on your current and future bills.