State Water Board Drought Year Water Actions
Conservation Water Pricing
Conservation pricing is an effective tool to prevent wasteful water use. As a result, it is an important part of the portfolio for local water agencies' efforts to conserve water in the short- and long-term.
Directive 8 of Governor Jerry Brown's April 1, 2015 Executive Order B-29-15 promotes water conservation pricing mechanisms. This webpage provides background on the directive and issues related to conservation pricing, including compliance with applicable laws. On July 8, 2015, the State Water Board conducted a workshop to receive stakeholder input on the implementation of Directive 8.
Water pricing can reduce demand by providing an economic incentive for consumers to conserve water. Many water suppliers have established rate structures to incentivize water conservation.
Pursuant to the Executive Order, the State Water Board is to direct urban water suppliers to develop rate structures and other pricing mechanisms to maximize water conservation consistent with statewide water use restrictions. The specific form of that direction is left to the discretion of the State Water Board.
The State Water Board is aware that rate-setting is a complex undertaking that involves numerous local determinations. There is no one-size-fits-all approach to rate-setting, let alone setting rates that promote conservation. Conservation water pricing must be carefully tailored to local circumstances to be effective. Further complicating rate-setting, local water agencies must carefully construct and document their rate structures to comply with constitutional limitations from Proposition 218.
Pursuant to Directive 8, the Water Board is currently engaging with state agencies, water suppliers, and other stakeholders to address the financial, technical, political, and legal challenges associated with changing rates, surcharges, and other fees. As one element of its implementation of Directive 8, the Board will provide information and resources to facilitate the development and enhancement of water rate structures that encourage efficient water use.
The following information and reports provide additional information about the use of water rate structures to promote water conservation and efficient water use.
Efficacy of Conservation Pricing
- Stephen St. Marie, Declining Water Deliveries - How Rates and Bills will be Impacted, Policy & Planning Division, California Public Utilities Commission (Sept. 2016)
- Sheila M. Olmstead and Robert N. Stavins, Comparing price and nonprice approaches to urban water conservation, 45 Water Resources Research W04301, (Apr. 2009)
- Pacific Institute, An Overview of the “New Normal” and Water Rate Basics (June 2013)
- Pacific Institute, Pricing Practices in the Electricity Sector to Promote Conservation and Efficiency: Lessons for the Water Sector (Sept. 2013)
- Raftelis Financial Consultants, Inc. and American Water Works Association, California-Nevada Section, 2013 Water Rate Survey.
- Manuel P. Teodoro, Measuring Fairness: Assessing the equity of municipal water rates, 97 Journal AWWA 111 (Apr. 2005)
- Kenneth A. Baerenklau, Kurt A. Schwabe, and Ariel Dinar, Do Increasing Block Rate Water Budgets Reduce Residential Water Demand? A Case Study in Southern California, Water Science and Policy Center University of California, Riverside Working Paper 01-0913, September 2013
Mechanics of Developing Conservation Pricing
- American Water Works Association (AWWA), Manual M1 Principles of Water Rates, Fees and Charges (2012)
- California Urban Water Conservation Council (CUWCC), Best Management Practices 1.4 (2015)
- California Urban Water Conservation Council (CUWCC), Water Shortage Pricing Primer (2015)
- Alliance for Water Efficiency, Financing Sustainable Water (2015)
- Irvine Ranch Water District, Residential Water Rates
- Irvine Ranch Water District, Irvine Ranch Water District Allocation-Based Conservation Rate Structure Background Paper (2014)
- City of Santa Cruz, Water Rate Redesign (2015)
- Moulton Niguel Water District, Water Budget Based Rate Structure (2018)
- Rancho California Water District 2017 Water, Recycled Water, and Wastewater Rate Study Report (June 2017)
Proposition 218 Compliance Information
- Association of California Water Agencies (ACWA), Proposition 218: Local Agency Guidelines for Compliance (2007)
- California Special Districts Association (CSDA), Proposition 218 Guide for Special Districts (2013)
- Also see "Best Practices/Examples" above.
- Notice of Public Workshop on Solicitation of Comments regarding Conservation Water Pricing and Implementation of Directive 8 of Executive Order B-29-15. The Public Workshop was scheduled for July 8, 2015.
Comment Deadline was July 1, 2015 by 12 noon.
- Workshop Agenda
- Workshop Presentations
- Public Comments
- State Water Board's request to the California Supreme Court to depublish the recent Capistrano Taxpayers Association v. City of San Juan Capistrano concerning the City of San Juan Capistrano's tiered rates.
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