We win EPA’s Campus RainWorks Challenge

A big round of applause for our students Lawrence Vulis, Agata Bugala, Uziel Crescenzi, Alexander Fenichell and Deanna Greene for winning the 2016 EPA’s Campus Rainworks Challenge. They developed a master plan (Castor Project) for our Campus to capture rainwater. The Castor Project design is a novel climate-informed, optimal system for campus-wide stormwater management. It gives options to reduce stormwater runoff between 10% to 20% and increases permeable area from 8% to between 9-10%. They also plan to teach college and high school students about stormwater and water conservation. This project is a significant step towards improving stormwater management for New York City and campus sustainability for CCNY.

You can look at the master plan and the design boards here.
We welcome any comments.

 

The History of New York City Water

pepactonArun Ravindranath has published his work on the history of New York City Water supply and the Delaware River Basin Compacts in Water Policy Journal. His work is focused on understanding water risks and how the reservoir systems perform under changing climate and political and institutional constraints. He is developing a framework to assess the dynamics of natural and human systems to inform water allocations and policy. We welcome any comments. Here is a quick summary of the work.

The Delaware River is the longest continuous river in the Eastern United States. The river basin encompasses four states, New York, New Jersey, Pennsylvania and Delaware, covers roughly 13,000 square miles, and supplies more than 15 million people with water for drinking, agriculture and industrial use. The Delaware water release policies are constrained by the dictates of two U.S. Supreme Court Decrees, 1931 and 1954, and the need for unanimity among four states and New York City. Critical stakeholder groups include New York City, a variety of environmental interests, and key water organizations from the four states. The reliance of several entities on upstream water sources has led to competing interests, conflicts, and disputes over the years. Arun, through this investigation, has explored important changes in the allocation rules, key implementation issues surrounding drinking water supply and environmental impacts on the downstream ecosystem, wildlife, and fisheries, and provided context for social value changes.

Image - courtesy of nyc.gov.

A New Demand Drought Index

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Elius Etienne has published his work on droughts in Journal of Hydrology. He led the entire project from data collection on agriculture, climate and water use, to quality control, to developing the drought indices and validating them. The indices that he designed are an improvement over the standardized indices which do not consider water demand. This Demand-Sensitive Drought Index can be used with aggregate demand (like all agriculture) or can be utilized as a disaggregated index for a particular sectors’ water demand. He also derived drought resilience and recovery estimates for the United States. In the context of the current droughts in various parts of the country, this work can aid the policy experts in mapping the potential duration, severity, and recovery of the drought to proposed changes in demand such as agricultural water use changes and domestic supply restrictions. He has developed a website for sharing these findings. The Project App provides the background, databases and the tools and simulation modules for public understanding. He also created a quick five-minute audio slideshow on the demand sensitive drought index and its utility.

Time to Revisit Water Privatization?

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CNN Money recently reported seven publicly traded water utilities that have seen new highs and an average year to date performance of at least 7%. The anticipation that the recent water pollution crisis in Flint, Michigan would initiate several states and municipalities to involve private water utilities for managing their water supply may have motivated the investors to long these stocks. Several of these publicly traded companies are part of the National Association of Water Companies, a consortium of private water companies that provide a broad range of water services. Private water companies serve almost one-quarter of the countries population.

Shika Dalmia of Reason magazine has a comprehensive coverage of the water crisis and the mishaps of the governance at various levels. It started with choosing the less expensive Karegnondi Water Authority (KWA) over the Detroit Water and Sewage Department (DWSD) for a new contract and re-opening the Flint water treatment plant in the interim. Cash-strapped cities like Flint can benefit from privatizing their water utilities as private enterprises would make investments needed to meet the stringent water quality standards. Their long term infrastructure investments would perhaps compensate for the past under-investment in the water infrastructure. Flint particularly has a receding population base with at least a billion dollars in unfunded liabilities.

Perhaps, the first modern privatization of waterworks dates back to 1989 when England and Wales, under the leadership of Margaret Thatcher, sold ten public water utilities. Caroline Van den Berg from the World Bank, in her article in viewpoint in 1997, reported that these reforms delivered a volume of new investments in water supply systems, full compliance with the drinking water standards and have lead to a higher quality of river water along with more transparent water pricing system.

Privatizing water comes with resistance. The two primary arguments against privatization are the public good and the natural monopoly ideas. Public good by definition has to be non-excludable and non-rival in consumption. Non-excludable for water as good is the fact that the entity providing it cannot exclude the access of water to people who do not pay for it. Nonrival in consumption of water is the fact that one person’s use does not reduce somebody else’s.

Recently, DWSD and Baltimore Water Department (both public water utilities) shut off water for customers with delinquent accounts. Clearly, water as a commodity in not non-excludable in the eyes of public water utilities, especially when they are up against decreasing revenues. Water is also rival in consumption. If I use X gallons of water for my lawn, those gallons of water are not available for my neighbor. One could argue that water supply is unlimited, making it practically non-rivalrous, and hence, the marginal utility of water is zero. Try winning that argument with a farmer in Central Valley, California or resident in San Fransisco. Hence, on both accounts, water as a public good fails.

Monopoly-Man

The nature of water industry, some argue, necessitates a natural monopoly since it requires massive fixed costs and economies of scale in the production of the good. Hence, in the long run, two or more companies that started off operating as competitors, would eventually have to yield to either one that could expand and achieve lower unit costs with increasing output. The inconvenience caused by having to deal with many water and sewer lines underground further supports this argument. It is reasonable for anyone to, therefore, think that there will be one company that will capture the entire market and start exploiting the consumers with higher prices.

Assuming that the monopolistic company has in fact raised the water rates, a rational customer, in the absence of any competing companies (for the time being) will respond to this rate increase through under consumption and rationing –thereby decreasing the revenue for the monopolistic utility. Residents of California, in 1976, have demonstrated a rationing of 40% to 50%, thus drastically reducing the revenues of their respective water districts. ┬áThe customer will prioritize his needs and budget the super expensive water supplied by the monopolistic company for essential needs. The client would respond to price increases in the same way as he would to water supply shortages — “conservation.”

He will consider purchasing bottled water if it is cheaper that the current water rate. The price signal is already out, and a different company can provide water trucks to the community at a more competitive rate. Recall that the customer is only stuck with this company as there is no one else who can come into the market, lay the pipes and start providing water. Bottled/truck water is rather mobile for any new company to come into the market. If the rates are exorbitant, to the point that the customer cannot afford any water, he is then compelled to create his own by rainwater harvesting and traditional water purification techniques. Remember, at that price level, his time value of developing water resource for survival is still much cheaper than the water rate he was offered. Price gouging so-called natural monopolies can seldom sustain. Economist Thomas DiLorenzo, in his article on “the myths of natural monopoly” has a comprehensive treatment of this concept, starting with the origins of the term “natural monopoly” in economics.

In the last two years, Flint switched three utilities (all three public) for providing water. DWSD whose contract expired on 2014, the new KWA, which was supposed to provide water from Lake Huron in two years time and the interim water supplier from the Flint River. Suffice to say that this is proof enough to bring in private utilities who would compete for market by providing lower rates and better services. The Department of Environmental Quality of Michigan and the Environmental Protection Agency, responsible for ensuring quality checks, might, in fact, be more vigilant on the private companies than their public counterparts. The private companies are also liable to class action lawsuits in the event of such incidents. The municipality, on the other hand, may claim sovereign immunity.

Steve Hanke and Stephen Walters, in 1987, presented the ideas of how a privatized water system can work. They proposed a franchise bidding system where the company wins based on the water rates and services it offers. They also provided examples of private waterworks from France. In the United States, economist Charles Howe, in his national academy of press’s open book in 2002, presented a comprehensive assessment of issues and experiences from privatization of water services.

It is time to revisit these issues and reflect on private water provision in the US.