Editorial

When supply and demand breaks down

Wednesday, August 22, 2007

There's something wrong about this picture.

It's been rainier than usual this year, so people have had to water their lawns less than usual.

That means they'll have to pay more for the water they do buy from the city.

Utility Director Jesse Dutcher told the city council as much Monday night, saying that instead of the 4.25 percent increase originally anticipated for October, water users can expect to pay 10 percent.

Since that water has to go somewhere, they'll also be paying 8 percent more for sewer service, instead of the expected 7.5 percent.

Price gouging by the city fathers?

Certainly not.

The city's water and sewer systems are operated as "enterprise funds," separate from the rest of the city budget. That means the money needed to keep the systems in operation comes from the customers.

According to freshman economics, decreased demand -- like we are having this summer -- should result in lower prices, right?

Wrong.

That's because the city has some heavy overhead, including a $14 million water treatment plant, and the $1 million a year it takes to operate it. Although less consumption means less water to be treated, the treatment costs don't amount to that much when compared to the expense of having the system in place.

Fewer gallons sold means each gallon has to cost more in order to bring in enough money to pay those fixed costs.

The same situation exists in electricity, which in Nebraska is owned entirely by the people, through entities like NPPD, MPPD and many other power districts.

And on one hand, while the electric utilities encourage conservation in times of high demand, on the other hand, they hope demand stays high so they can bring in the money needed to keep the generators churning.

What's the answer? We don't know.

But somehow, conservation should be encouraged.

We would like to see a grass system similar to the Tree City rebate program in place in McCook, where the city encourages planting of trees through reimbursement.

Conservation could also take the form of "xeriscaping" our yards with landscaping that requires little water, planting native varieties of grass, or installing florescent lighting that can save dozens of dollars over the life of the bulb.

Like city water bills, such measures might not pay off immediately, but they will in the long run, in reduced need for expensive expansion of the capacity of our utilities.

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