August 2012, Issue 63: Editors’ Notes

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Southern California’s main water wholesaler demonstrates that even large reductions in available supply can be resolved using active, comprehensive, creative management strategies.

“Shortage” is a word that tends to invoke anxiety, particularly when used in association with an important resource like water. However, as our recent editorials have shown, Arizona’s water shortages won’t necessarily be dire; not only will we have ample time for planning, but we also have a flexible legal and operational system for managing the cascading impacts of supply shortages. Furthermore, the Lower Basin already has experience dealing with these kinds of impacts.

Southern California’s experience provides an interesting example of how a long-term reduction in water supply can be mitigated. Over the past 20 years, a sequence of events has resulted in drastic reductions of Metropolitan Water District’s supplies. In the wake of the 1963 Arizona vs. California Supreme Court decision, MWD needed to relinquish “squatter’s rights” to an excess 800,000 AF/yr of Colorado River water that Arizona was planning to deliver to its customers through the CAP canal. This forced MWD to permanently reduce its importation of Colorado River supplies by about 50 percent. In the past decade, endangered species litigation in the Sacramento-San Joaquin Delta presented a second major supply constraint for MWD by reducing deliveries from the State Water Project.

In the two decades between 1985 and 2005, MWD responded with multiple initiatives that were designed to increase water supplies, as well as decrease demand. These initiatives included developing local sources, importing additional supplies, improving the efficiency of its infrastructure, constructing new water storage facilities, and increasing its use of reclaimed and treated water. MWD also increased its rates to reflect the cost of developing new, more expensive supplies. In addition, because traditional sources of inexpensive fresh water were unavailable, MWD and its member agencies acquired supplies through various innovative mechanisms: interstate storage credits, lining the All America Canal, and planning for future seawater desalination, for example. Agricultural water from the Imperial and Palo Verde Irrigation Districts, which together hold rights to about three-quarters of California’s allocation of Colorado River water, was acquired through long-term fallowing agreements.

MWD’s response demonstrates that supply-demand imbalances can be resolved through active management. In practice, active water management generally means acquiring more expensive supplies. Basic economic theory tells us that as more expensive supplies are added to a utility’s portfolio, overall cost of water to the consumer rises. In response to these rising costs, customers will reduce their water use. One result is that water demand in the aggregate falls, thus providing another element of the overall solution.

In light of this dynamic process, the question is not whether water will be available — because it will — but rather, how much will it cost, and how will the additional cost be distributed among water users?