Desalination vs. Duct Tape: (Dis)Incentives to Securing Water Supplies

Abstract

Water providers must increasingly turn to reuse options, water harvesting, green infrastructure, desalination, aquifer storage and recovery, and risk mitigation strategies (such as dry-year options) as they face increasing demand and a reduction in traditional water supplies. State public utility commissions should give more deference to reasonable decisions of utilities when utilities turn to unorthodox supplies. Without clear authorization from PUCs, utilities have no incentive to undertake expensive, long-term programs for securing a reliable source of water. Second-guessing by PUCs, particularly years into a project, and reluctance to allow utilities to recoup sunk costs, creates disincentives for utilities to be imaginative and proactive with programs for using unorthodox supplies. The message sent by PUCs to utilities is, “Keep your costs down: if you have a problem, go to Home Depot and buy a few cases of duct tape.”

Keywords: utility, regulatory, ratemaking, rate-recovery, deference, water, environmental, desalination, water reuse, climate, public utility commissions