Blog Post #10 – Pricing BC’s Water: what do you think?



After four years of development, Bill 18 – Water Sustainability Act was introduced into the Legislature on March 11, 2014.  Before becoming law, the Bill must pass several more stages including second reading, committee, report and third reading before receiving Royal Assent. You can follow the progress of Bill 18 here.

Throughout development of the new Act, British Columbians have consistently ranked water as one of the province’s most valuable natural assets. To implement the new Act and fully realize its benefits, government is contemplating changes to water pricing. Throughout the public engagement process, many British Columbians expressed support for increasing water rates to better reflect the value of water to people, the environment and the economy, including new fees and rentals for large groundwater users. Pricing water is complicated and specific rates have not been determined yet. The last major review was conducted over ten years ago and there are lots of factors to consider in setting rates.

The detailed Legislative Proposal that we released last fall included a short discussion of water pricing (page 71) and we also provided some additional background in an October 2013 Blog Post.  We’ve taken your feedback and further refined a set of principles, described in the short paper Pricing BC’s Water. Over the next four weeks, we invite British Columbians to comment on the principles which are also reproduced below.

Which principles are most important to you? How should they be used to shape water prices? The principles and your comments will be used to guide the development of pricing options that will be presented to Government later this year for decision. Telling us what’s most important to you will help us develop balanced, practical options that have the potential to do the most good for British Columbia and our precious water supply.

Share your thoughts below by leaving a comment on the Blog.

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Principles to inform water pricing

  • Simplicity: The approach and rationale for water pricing should be easy to understand and predictable. Individuals and businesses should know how and when pricing could change so they can plan and budget their costs accordingly.
  • Fairness and equity: Fairness should be reflected in surface and groundwater being treated as one resource and subject to the same pricing structure.  In addition, similar uses of water should be subject to similar pricing.  Equitable pricing should reflect differences in the value of water based on the type of right granted, intended use, location or scarcity of water.
  • Implications for water users: All British Columbians benefit directly and indirectly from B.C.’s water resources. Pricing of water should distribute the costs of water management across users so that the effect on licensees and citizens is reasonable and manageable and enables business competitiveness.
  • Impact on the water resource: Water pricing should reflect the impact of the intended purpose or activity on the resource. For example, water that is consumed and removed from the watershed or aquifer should be assessed differently than non-consumptive uses.
  • Cost recovery: Water pricing should support sustainable water management and generate sufficient revenue to recover the costs of managing the water resource.  This includes science, monitoring, planning and facilitating community involvement, regulation and enforcement.  Costs to users should also reflect a fair return to the Crown for use of a public resource.
  • Efficiency: Water pricing should motivate users to demand only the amount of water that is required for the intended purpose.  Pricing should incent the use of non-potable water, encourage freshwater conservation, promote innovation and also facilitate government’s efficient administration and management of the resource.
  • Food security and public health: Water pricing should recognize the essential contribution of water to food security.  Food security is a prerequisite for healthy nutrition and foundational to human and community health.

13 responses to “Blog Post #10 – Pricing BC’s Water: what do you think?

  1. Nelson Jatel

    An arms-length commission to manage water use data and collection of rental rates: A proposal.

    Healthy water and watersheds are vital to B.C.’s economy. The problem is that today, surface water use is not adequately measured and reported, and often groundwater use is not measured or reported in any way. Our ability to plan for a prosperous water future with efficient resource use is suffering as a result. Combining water license and use reporting in one integrated service is an important part of a sustainable solution.

    Building on the $400,000 senior government investment, the B.C. Water Use Reporting Centre (www.bcwurc.ca), successfully piloted in the Okanagan valley and Nanaimo Regional District, can provide the needed water reporting system and improve the efficiency of collecting of water rents by the Provincial Government. It is a useful exercise to explores the creation of a new Service Crown Corporation responsible for water use reporting and water rent collection – and a business case is being developed by the OBWB for consideration.
    Water use reporting and water license rent collection are linked services, as rents are based on water use. However, there is no system in place to collect detailed water use data, water use is given only as total volume extracted per year, and the data is not easily accessed from the licence rent collection program. Also, there is no system in place to collect groundwater use. This information is extremely valuable for water management by all levels of government, but is now unavailable.

    The proposed new interface for water reporting would serve the private sector and local governments much more efficiently than existing processes, and improve the communication of water use information. The Centre provides high quality, practical information back to water licence holders and also to decision-makers in government ministries.

    A new arms-length commission will provide the appropriate level of independence and efficiency to serve a range of ministries, including: Natural Gas Development; Forests, Lands and Natural Resource Operations; Environment; Agriculture; Energy and Mines; Health; Aboriginal Relations and Reconciliation; and Community, Sport and Cultural Development. There could be a perceived conflict of interest if an industry sector, such as an irrigation industry group, or the Oil and Gas Commission, were to manage this public service. An independent Crown Corporation would allow transparency, and public trust.

    Expanding the Centre to create an arms-length commission would streamline water use rent collection while providing an integrated water demand information collection hub. A concept paper under development by the OBWB documents the history of the Centre and makes a case for the B.C. Forest, Lands and Natural Resource Operations ministry – currently responsible for water licence billing – to propose the formation of a new crown corporation responsible for water use reporting and management of water licence rents, that would benefit all British Columbian’s today and for future generations.

  2. Keith Veerman

    The Cost Recovery principle begins “Water pricing should support sustainable water management and generate sufficient revenue to recover the costs of managing the water resource…”
    However the information on water fees deliberately excludes the royalties collected from hydro-electric generation. FortisBC alone pays about $10m per year for the use of water passing through its four relatively small dams. No doubt BC Hydro pays several hundred million per year.
    Why is this “water license” revenue excluded from the Bill 18 considerations? It looks like Bill 18 is designed to increase indirect taxation. If these monies were redistributed (fully) to improve water quality, whether in watershed protection or grants to municipal water authorities (to improve either water supply or wastewater treatment) then perhaps the additional revenue would be used appropriately. However the increased water fees should not flow into general revenue, as does the hydro-electric water licensing millions.

    1. Living Water Smart Team

      Hi Keith,
      Thank you for your comments.

      Waterpower fees and rental rates are outside of the scope of this current pricing review as these rates are adjusted on an annual basis by the BC Consumer Price Index (Schedule B of the Water Regulation).

      B.C.’s Financial Administration Act (Section 12) requires that all public money go into one consolidated revenue fund except where trust funds have been established, e.g., Habitat Conservation Trust Foundation. Although water revenue goes into a general fund, the Cost Recovery principle, and the pricing options to be developed, are tied directly to the new costs associated with implementing the Water Sustainability Act.

  3. Peter Kane

    ” A fair return to the crown”. Mister and Missus home owner should not be burdened by a further tax increase which may happen with this proposal. It has been widely reported that a multi national food conglomerate in the Hope region is drawing and bottling large amounts of public water and paying nothing to the province in return. Will this bill see the individuals paying more than there fair share while the business sector laughs all the way to the bank?

  4. Ian Stephen

    Are comments on pricing only being taken through the blog? Or can comments be submitted by email also?

    There is no mention either here or on the ‘Pricing B.C.s Water’ document of commenting by email. I would expect that for some people email would be more accessible than this blog.

    1. Living Water Smart Team

      Thank you for your comment Ian.
      We are encouraging the use of the blog to post public input that others can build on or respond to. We also welcome comments by email at livingwatersmart@gov.bc.ca. If sending an email, just let us know if you would like us to post your comments on the blog.

  5. David Zetland

    I’m glad to see this public forum for comment. I have a few:

    1) There’s a big difference between metered pricing for drinking (treated) water to households and industry and pricing of natural (raw) water to bulk users (usually agriculture and industry).

    2) No water should be allocated to either in (1) until environmental flows (quantity) and standards (quality) are specified for ground and surface sources. These calculations may be complex. Traditional and existing users (e.g., BC Hydro or fracking operations) may already be exceeding consumption/pollution standards that the public may want. Grandfathering should not be used to cover over past mistakes and permit activities that would not be permitted today. Phase out might be symmetric to use, e.g., “two seasons” for farmers or frackers. Some phaseouts may lead to stranded infrastructure (dams, irrigation canals, power plants). These will need a longer phaseout or perhaps an offset of damages.

    3) Retail water for households should be metered and priced per unit. Increasing block rates do not add many benefits and they are often unfair. The price of metered water should cover the operating costs of the system as well as some value of environmental damages (see 5). Fixed revenues from customers should cover fixed costs (this helps with revenue stability), which include the usual suspects (equipment, pipes) as well as watershed protection.

    4) Commercial customers can pay higher fixed costs based on their meter size, but they should pay the SAME price as households using the same utility. There should be NO “fairness” adjustments to prices, as these invite lobbying, corruption and conflict.

    5) Bulk water can be allocated by beauty contest, potential tax revenues, lad mass, first in right, etc., but all these methods are opaque. As an economist, I suggest that the BC government auction water extraction permits every year to agricultural, industrial and municipal (utility) users. Every one of these users will have a reason why they should not pay. That’s not relevant, given their desire for the same resource. Farmers, industry and households pay the same price for gasoline, so why not for water. (I know there’s a small price break for dyed fuel; that’s just a subsidy from normal people to special interests…)

    6) Your “simple” rubric above is full of subsidies, i.e.,

    “Fairness should be reflected in surface and groundwater being treated as one resource and subject to the same pricing structure.” … within the same watershed, since supply and demand will vary.

    “In addition, similar uses of water should be subject to similar pricing.”… all uses are the same uses (of water), within a watershed.

    “Equitable pricing should reflect differences in the value of water based on the type of right granted, intended use, location or scarcity of water.”… everyone should have the same, annual right within a watershed that reflects scarcity. Intended use does NOT matter.

    “Pricing of water should distribute the costs of water management across users so that the effect on licensees and citizens is reasonable and manageable and enables business competitiveness.” … this sounds like a subsidy for me. Businesses ALL need to pay the same price. Some businesses will NOT be competitive at these prices. The solution is NOT to sell them water more cheaply.

    “Impact on the water resource: Water pricing should reflect the impact of the intended purpose or activity on the resource. For example, water that is consumed and removed from the watershed or aquifer should be assessed differently than non-consumptive uses.”… is true, except where the use is actually consumptive, e.g., heated discharges from thermoelectric plants or delayed discharges from reservoirs. Those are consumptive from an environmental perspective.

    “Cost recovery: Water pricing should support sustainable water management and generate sufficient revenue to recover the costs of managing the water resource. This includes science, monitoring, planning and facilitating community involvement, regulation and enforcement.”…. this is excellent.

    “Costs to users should also reflect a fair return to the Crown for use of a public resource.”… I am not sure of what this means, but an auction will generate revenue that’s not fair as much as an accurate descriptor of water scarcity, and thus the value of the Crown’s water.

    “Water pricing should motivate users to demand only the amount of water that is required for the intended purpose. Pricing should incent the use of non-potable water, encourage freshwater conservation, promote innovation and also facilitate government’s efficient administration and management of the resource.”… is over-specified. Nobody needs to care about how water is used (is my shower too long? my crop over-irrigated?) as long as that water is priced correctly (retail, covering costs; bulk, reflecting scarcity).

    “Water pricing should recognize the essential contribution of water to food security. Food security is a prerequisite for healthy nutrition and foundational to human and community health.”… obviously, but that does NOT mean farmers should get a break on water. Most food security concerns are not about the price of water as much as storage and transportation of food into markets, which is facilitated by free trade. Poor people who are “food insecure” should get support from the government. Support to farmers does not help the poor, it takes public money away from the poor (and everyone else) and gives it to farmers who can lobby for aid.

    Thank you for the opportunity to comment. I am happy to talk to any staff who would like further clarification.

    David Zetland
    Visiting lecturer in resource economics at Simon Fraser University
    Blogging on the political economy of water at aguanomics
    Author of The End of Abundance: Economic Solutions to Water Scarcity (2011) and Living with Water Scarcity (Apr 2014)

  6. POLIS Water Sustainability Project

    The POLIS Water Sustainability Project, located at the University of Victoria’s Centre for Global Studies, commends the B.C. Government on its efforts to put forward new legislation and table Bill 18-2014 Water Sustainability Act (WSA).

    The new legislation holds significant potential for new and innovative directions for water management in B.C. However, achieving the outcomes indicated will require significant additional financial resources and capacity.

    The current Service Plan for the Ministry indicates there will be no additional funding for the next three years for environmental sustainability, including water sustainability. As well, the level of sustainability indicated in the WSA cannot occur with the resources currently available in the Ministry of Environment and the Ministry of Forests, Lands and Natural Resource Operations. A budget increase in the order of at least 10 per cent to 20 per cent over its 2014 base will be needed.

    As such, this current review of the provincial water pricing system—including this opportunity for public feedback—is urgently needed and will be critical to the ultimate goal of better management of B.C.’s water.

    We believe that this review is a once-in-a-decade opportunity for the ministry to not only emphasize new practices that promote conservation and innovation, but also to seek necessary additional resources through increases in water rentals (fees).

    The most critical objective must be ensuring that the updated pricing system appropriately reflects all values of water; this includes needs for ecosystem integrity, as well as the interests of future generations. Pricing can also be a valuable tool to promote efficiency and conservation while driving innovation (for a detailed discussion of this aspect, please see the 2010 POLIS handbook “Worth Every Penny: A Primer on Conservation-Oriented Water Pricing” at http://poliswaterproject.org/publication/344).

    Inevitably, an updated and more innovative pricing program will be vital for turning the positive aspects of the WSA into effective implementation on the ground. If the Province updates its water rentals to appropriately reflect social, economic, and ecological priorities, B.C. will have a real opportunity to entrench the government’s commitment to both water sustainability and financial stability in a manner that could be leading on a global scale.

    We will follow this post with another later this week focusing on which of the water pricing principles (as laid out by the Province) should be prioritized. We will also provide a link to our formal response to government, which we are in the process of finalizing.

    Thank you for this opportunity to comment.

    Sincerely,
    The POLIS Water Sustainability Team

  7. POLIS Water Sustainability Project

    Following up on yesterday’s post, this post focuses on the pricing principles we believe should be prioritized and includes a link to our formal response to government (at end).

    Water is highly valued and massively underpriced in B.C. This represents a major missed opportunity to properly resource better water management and governance. Current industrial/commercial water-use fees and the proposed groundwater fee (rental) are extremely low, set at 85 cents per 1,000 cubic metres of water. This is the equivalent of the water used by approximately 3,000 average Canadians in a day—valued at less than one dollar.

    Existing fee schedules are not sufficient to even cover basic administrative costs, let alone help support important and needed monitoring, flow assessments, and enforcement. A higher and more appropriate fee structure for both and surface and groundwater is needed.

    With a new groundwater licensing system imminent, groundwater users must be brought into a pricing structure that effectively signals the value of water, promotes conservation and innovation, and covers the full costs of administration. Linking usage more directly to an effective system of cost recovery may be more equitable and also more sustainable (from both a financial and ecological perspective).

    POLIS supports a principled approach to establishing a sophisticated and comprehensive pricing regime. Based on the seven principles outlined in the Pricing B.C.’s Water paper, we feel it is critical to emphasize attention to Impact on the Water Resources and Cost Recovery:

    1. Impact on the Water Resources—As stated in Pricing B.C.’s Water, “water pricing should reflect the impact of the intended purpose or activity on the resource.” This is a critical point. A principled approach to pricing water should account for adverse impacts on watersheds, especially in high-risk areas, and for uses which have a detrimental impact on the local watershed.

    2. Cost Recovery—As stated in Pricing B.C.’s Water, “water pricing should support sustainable water management and generate sufficient revenue to recover the costs of managing the water resources.” POLIS sees the ability to secure sufficient resources and capacity to actually implement key provisions as one of the most important aspects of any modern water legislation.

    Regarding cost recovery, attention to ensuring additional funds through water rentals and fees (including groundwater) will be critical. Appropriate full-cost pricing of water allocations through licensing must be set to ensure:
    • an effective provincial enforcement regime can be maintained (polluter pays);
    • comprehensive monitoring and reporting of water use and impacts on watersheds and aquifers (transparency);
    • detailed understanding of local environmental flow needs and aquifer health and dynamics to inform all allocation and water planning decisions;
    • financial resources and expertise for development of enforceable plans and application of area-based regulations in priority areas, including capacity to implement and ensure compliance (financial sustainability);
    • a conflict resolution processes that assures citizens the right and ability to participate in key aspects of the allocation decision process, including citizen access to appeal decisions (public participation);
    • independent oversight (accountability);
    • basic administrative support for designated authorities (watershed governance); and
    • increased efficiency and conservation (volume-based pricing).

    For a more detailed discussion, including specific considerations and recommendations, please download our full formal response to government at http://poliswaterproject.org/publication/623.

    Once again, thank you for this opportunity to comment.

    Sincerely,
    The POLIS Water Sustainability Project Team

  8. Bruce Voigt

    In regards to bill 18
    Controversy in this subject is so very important.
    We are in times of major global change that will drastically affect this bill. A better understanding of this and so called global warming, climate change phenomenon is needed. I have answers, all you have to do is ask.
    brucevoigtdiscoverer@shaw.ca

  9. BC Salmon Farmers Association

    We are fully supportive of the seven principles of water pricing, and there are three that we believe stand out as priority principles:
    Food Security and Health: with growing concerns about food security and global food supply, it is important to recognize that water is essential to food security.
    Impact on the water resource: recognizing aquaculture under the agriculture category, and we feel it is important to distinguish between consumptive and non-consumptive users.
    Efficiency: We agree that water pricing should incent technological innovation and conservation.

  10. Mike Moroni

    Sirs, I am a consultant for the placer mining industry here in the Cariboo, and I would like to speak to the issues of fairness. We all understand the importance of the protection of our water resource, but we need to make sure that the method of doing that is not creating a situation where legislation cripples or shuts down a resource industry. Most mining activity uses the water and then the water is returned to the water table through exfiltration into the ground. It is not removed from the ecosystem as one would with a bottling plant.
    One of my concerns in pricing, is how can you manage water volumes fairly when most of the time it is being recycled? Will you have someone with mining experience to help with the implemenation of this new pricing structure to make sure it is fair and equitable?
    I have submitted a fair number of water licence application, and it is good to have them, but if the resources are not there to process and issue the applications, they become an industry stumbling block. I have a permanent water licence application that is well over a year old and does not seem any closer to being issued. I also have concerns that, in the past, all the documentation of water rates is tied to volumes. Even your comparision rate web page compares volumes, but your water calculator is only based on extraction Rates. I applied for a short term licence for a client, for 30 days of 4 hours use with a four inch pump, only proposing to use 25,000m3, and was told that he would have to pay for 950,000m3. It is clear to me that a more reasonable way to calcuate rates should be investigated and made clear on the web site. We also need to understand that 24/7/365 does not really work for the placer miner who, at best, works 6 months of the year. I believe most miners are willing to pay a fair rate for any water used, but if a reasonable rate and application is not forthcoming, it may be a very critical blow to a historic and viable industry here in BC.

  11. Ian Stephen

    Looking for help composing input on pricing water use in BC?
    Community reVISION.org and the WaterWealth Project have put together a handy resource with background info and a template letter to start from!
    http://community-revision.org/water/letter

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