improve the outlook for water availability for the next generation of
residents of Southern Nevada.
In the process of selecting a new manager to replace the current
Executive Director, Pat Mulroy, the SNWA Board has a chance to reform
an in-bred management culture that is the natural consequence of the
long-term leadership. Many of the water policies inherited by the
current board make no sense to your water customers.
At the same time, the water outlook for the region is too dire to
continue ignoring questions of rational water usage, while
simultaneously creating financial stability and even prosperity for
both SNWA and its member agencies.
Southern Nevada management and water policy, like all resource
utilization, is a matter of supply vs. demand. SNWA has the good
fortune of having “good” demand (indoor use which results in
one-for-one credits) and “bad” or at least “tenuous” demand (outdoor
consumption which results in assessments against our allocation of
300,000 acre-feet by the Colorado River Compact). Water rates, which
reflect the logic of stimulating “good” demand and regulating “bad”
demand, can produce wealth for SNWA while eliminating the unnecessary
heavy-handed and unpopular rate increases.
A comprehensive study of rate by a citizens’ committee, which is truly
representative of SNWA customers and which includes small businesses,
must be conducted in order to rationalize the existing rate structure,
which currently makes no sense.
The planned rate increase should be tabled until the rate structure
can be re-examined, with an eye toward a new structure that emphasizes
recyclable water over wasted water. Such a structure could potentially
generate enough new revenue to eliminate the need for rate increases.
Southern Nevada water policy, like all resource utilization, is a
matter of supply vs. demand. Water rates must reflect the logic and
utility in regulating outdoor demand for which the supply is limited,
while promoting indoor use for which the supply is unlimited.
No one disputes the need for regulating the demand for water in the
middle of a desert, especially in the throes of an unprecedented
drought that is bad even by desert standards. However, unlike most
water agencies, especially those located in the desert, SNWA operates
under two opposite rules of water supply: 1) While its allocation
under the terms of the Colorado River Compact is limited to 300,000
acre-feet per year, it has 2) permission to create an unlimited supply
of water by using Lake Mead simply to exchange one gallon (or one
million acre-feet or more) of treated water for one gallon (or one
million acre-feet or more) of fresh water. These two different rules
governing our supply—one limited and the other unlimited—suggest the
advisability of using two different approaches to regulating demand.
Since it is environmentally responsible and absolutely essential to
avoid the consumption of more than 300,000 acre-feet in any year, it
is necessary to discourage outdoor uses of water. The conservation
policies adopted by SNWA during the ‘90s—particularly limiting
watering days, paying homeowners for converting from grass to desert
landscaping, and increasing rates—resulted in a reduction of 200,000
acre-feet in gross water consumption during a 15-year period during
which the population of Southern Nevada doubled! That is an impressive
accomplishment by any measure and demonstrates SNWA’s firm grip on
regulating outdoor consumption.
On the other hand, everyone, including SNWA, has a strong interest in
encouraging economic prosperity throughout Southern Nevada, including
financial stability of our governmental institutions. This can be done
by encouraging through the rate structure and promoting through
advertising indoor uses of water. This is where SNWA has fallen down:
its rate structure actually discriminates against indoor users by
forcing them to pay as much as 12 times as much for water as outdoor
users! This is not rational as it actually discourages, not
encourages, indoor use, recycling, and conservation. It also makes
people angry and, instead of promoting sales of the unlimited side of
our water supply through return credits, it reduces revenue of SNWA
and converts SNWA both into the enemy of its customers and even
In Southern Nevada, reforming the water structure does not mean
penalizing high usage—it simply means discouraging wasteful usage
through a progressive rate system. Under current rate conditions the
opposite results occur: that is, those who conserve and recycle water
through our unlimited supply pay more than those who consume and even
waste the water of our limited supply!
A comprehensive study of rates by a Citizens’ Committee, which is
truly representative of SNWA customers and which includes small
businesses, must be conducted because the existing rate structure
makes no sense
All rate increases, like tax increases, damage business directly and
immediately. The extent of the damage is based on the obvious loss of
profit (or increased loss), but also on the loss of value of the
business or property equity. The dictation of rate increases, such as
that of 2012, by politics and in favor of powerful and/or organized
special interests, however, even dwarfs the profit and equity losses
to business: adding logic-defying and regressive 200 percent increases
to already high rates charged to small businesses and property owners
and 3 percent increases to resort hotels and golf courses sent many
messages, all negative, to the entrepreneurial and job-creating
segment of the Southern Nevada economy.
In addition to eliminating jobs, profits and values, and introducing
doubt into the decision-making processes of the most dynamic sector of
all economies in the world, the entrepreneurial sector, SNWA harmed
its own finances by not providing incentives for these businesses and
properties to buy and use more water, nearly all of which is recycled
through Lake Mead. In fact, SNWA actually sold 4000 fewer acre-feet
during the first year of the rate increase than it did during the
previous year despite 1) the economic recovery and 2) an equal number
of visitors, all because of political opportunism and its inability to
see the opportunity of selling more water to users who use the
unlimited side of its supply. This is not a healthy environment for
growing existing small businesses, for encouraging establishment of
new businesses, for the health of our economy, or for the long-term
financial health of SNWA.
Even though a Citizens’ Committee formed by SNWA spent 14 months
vetting the 2014-2017-rate increase, which is on the verge of
approval, the process was defective for several reasons:
The vast majority of water users in Southern Nevada, low-income
customers, were not represented on the 31-person committee. In fact,
the committee was selected almost exclusively from representatives of
large companies, construction interests and unions, outdoor users of
water, and political interests likely to support the rate increase
structure already designed by SNWA.
Even though the committee was charged with the responsibility of
studying both the current rate structure and the 2012 increase, no
real opportunity or data was provided to the committee to make a
serious study possible.
Therefore, without even seriously considering the existing rates or
the 2012 increase, a handpicked committee of SNWA is made to appear as
if it has ratified the current rate structure and the 2012 increase.
The current rate structure is founded on dozens of arbitrary values
spread over at least three semi-arbitrary categories, which are then
assessed to different pipe sizes. This is neither rational nor
understood by anyone and cannot even be explained by SNWA itself. The
committee was never given the opportunity to consider a rational,
easily explained and equitable rate schedule based on treating every
Southern Nevada family equally, while encouraging conservation of
water. For example, by charging every family the same price for the
same low-cost tier of water use (e.g., 10,000 or 15,000 gallons) and
then increasing the cost of each additional tier under the assumption
that that water is being consumed outdoors would be fair, easily
understood, encourage conservation and provide more income to SNWA.
The higher cost of servicing larger pipe sizes could be calculated
mathematically and established as a reasonable fixed meter charge to
eliminate current disparities, which have no relationship to the
maintenance of SNWA and agency pipelines.
The planned rate increase should be tabled until the rate structure
can be re-examined, with an eye toward a new structure that ends
subsidies of low-income customers to wealthy customers and favors
recyclable water over wasted water. Such a structure would generate
enough new revenue to eliminate the need for rate increases. SNWA is
currently using only about 3/4 of the 300,000 acre-feet of water
allotted to it. A new rate structure that rewards recyclable water
usage, while penalizing non-recoverable usage, could result in,
ironically, increased water revenues, increased usage, and increased
The key is to focus on water that, once used, can be recycled back
into Lake Mead. This includes nearly all-indoor uses, but excludes a
number of outdoor uses. Water that is recycled is in a sense never
used, or at least, can be used again as if it were never used.
This strategy will probably require some research into the exact
recovery percentages, and what processes result in the best recovery
With that data in hand, we can fine-tune this strategy to maximize
revenue and recoverable usage.