Reducing per capita water use in cities and suburbs is key for helping communities get through droughts. And together with strategies to improve water supplies, it can also help build long-term water resilience in the face of our changing climate. In recent decades, Californians have been making great strides in long-term water conservation, and this latest drought showed once again that communities will go the extra mile to save water during droughts if needed.
But while it’s often assumed that water conservation is inexpensive, it actually can be very costly. In response to 2018 legislation, the State Water Board is now considering new urban water use regulations whose statewide costs would far exceed their benefits. What’s more, these costs would significantly impact affordability, hitting inland, lower-income communities hardest. In this post, we explore some of the proposed regulations’ challenges and suggest some better approaches for implementing the law. An accompanying dataset provides further details.
A recap of recent urban conservation law
The 2018 legislation Making Conservation a California Way of Life called for the state to develop long-term water use standards for urban retail water suppliers—the roughly 400 utilities that serve more than 90% of California’s residents. The law focused on indoor and outdoor water use and water loss from leaky pipes within distribution systems. In 2022, the State Water Board adopted regulations on reducing water loss, and new legislation set uniform statewide targets for indoor residential use.
The State Water Board is now considering proposed standards for outdoor water use by homes and non-residential water users with large amounts of landscaping. Outdoor use averages close to half of urban use, but the share varies widely across communities. Board staff developed the proposal, and it includes substantially tighter requirements than those recommended by the Department of Water Resources (DWR) following a multi-year technical assessment with extensive stakeholder input.
Once the regulations are adopted, suppliers could be fined if they fail to meet both the water loss standards and the combined indoor and outdoor standards. The board could also mandate specific actions to reduce water use. Crucially, while utilities can directly control their performance on water loss, they will need to rely on their customers to achieve the required indoor and outdoor savings. Achieving long-term water savings generally requires spending both by customers (on landscaping, for instance) and by utilities, which must staff and fund rebates and other programs to help customers use less water.
Major challenges with the State Water Board proposal
Among the issues with the proposal now before the board, three stand out:
Very high cost for little benefit. Board staff analysis concludes that the regulations would save roughly half a million acre-feet of water annually and would generate a net benefit to California of $2.2 billion between now and 2040—or $1.24 for every dollar spent. But as one of us shows elsewhere, that analysis both overstates the benefits and vastly understates costs. In reality, the regulations are likely to cost utilities and their customers over $15 billion dollars to implement, while providing only $8 billion in benefits. This would result in a net cost to California of $7.4 billion to save less than 1.5% of annual water used by communities and farms statewide. In other words, California would see just $0.53 of benefit for every dollar spent.
Major affordability concerns. The staff analysis also asserts that most Californians would see their water bills go down. But given the regulations’ high net costs, the reverse is likely to be true. We estimate that at best, only a quarter of communities would save money or face no net costs—and the majority would see costs rise. And the regulations would hit the pocketbooks of inland, low-income, smaller communities hardest.
As the first map shows, the regulations would disproportionately impact smaller, low-income, inland communities, which would face the biggest mandated reductions, given their relatively high outdoor water use. Half of inland communities would need to cut water use by more than 30%, versus just 12% among coastal communities. Communities with the most low-income residents are twice as likely to face high cutbacks as communities with the fewest low-income residents (38% versus 19%). The smallest urban utilities are also twice as likely as the largest ones to face high cutbacks (36% versus 16%).
As the second map shows, inland, low-income, and smaller communities also will face the biggest net costs of implementing the regulations. This map plots our conservative estimates of annual net implementation costs per connection—the average cost households could face by 2035 when the regulations are in full swing. The statewide average is $101 per year, but the range is wide. On average, coastal communities would pay $54/year to implement the regulations, versus $194/year in inland areas. The communities with the most low-income residents would pay 2.5 times more than those with the fewest. And those served by smaller utilities would also face higher costs. This pattern reflects two things. First, achieving larger reductions is more costly. And second, inland areas such as the Central Valley tend to face relatively low costs for water compared to coastal areas, and thus lower benefits (or “avoided costs”) from using less of it.
Standards will be hard to meet. As many speakers at a recent board workshop pointed out, the strict standards for outdoor use not only will be costly, they will be hard for many communities to achieve without compromising the health of urban greenery, such as shade-providing trees, and banning residential lawns altogether, including in backyard play areas. Especially in the warmer inland parts of California, the standards could increase the risk of urban heat islands, erode quality of life, and undermine public confidence in government.
In response to concerns raised, the staff’s approach so far has been to offer “variances” such as special allowances for communities with a lot of horses, or small delays in implementation for communities that file special requests to protect their trees. Such approaches add to the administrative costs for utilities, and they will tend to amplify the already considerable inequities, because larger, better-resourced utilities will find it easier to avail themselves of these variances.
A better approach
We believe it’s possible for the board to meet both the letter and spirit of the Making Conservation a California Way of Life legislation, while limiting the harmful unintended consequences. The following options could be used individually—or ideally in combination:
- Revert to the outdoor water use standards proposed by DWR. Whereas the board staff opted to impose largely untested design standards for outdoor water use efficiency, DWR’s proposal includes some room for error, based on expert judgement of what’s feasible in large-scale implementation. Applying these standards would reduce average annual implementation costs by 40%—down to $60/connection—and lower the share of communities facing high reductions and high net costs.
- Cap required water use reductions. Past experience has shown that it’s both hard—and very costly—for communities to go beyond 20% savings. Capping the reductions at that level would bring average compliance costs down to $57/year, while reducing the gap in costs between inland and coastal regions and lessening the burden on lower-income communities. DWR also recommended including a cap for utilities facing very high reductions.
- Conduct benefit-cost assessments at the utility level. Even with these options, a majority of communities are likely to lose money implementing the new conservation law; nearly a quarter—including many lower-income communities—would still face annual net implementation costs of more than $100 per household. This is especially troubling given growing concerns about water affordability in the state. A reasonable—and feasible—approach would be to limit conservation requirements for each community to levels that can be justified by the data. It is relatively straightforward to obtain credible estimates of supplier-level benefits and costs using the data developed by DWR and board staff; we have done that for our estimates above. The board has already used such an approach to adjust utility water loss standards. To guard against very costly outcomes, something similar could be done to gauge the local cost-effectiveness of the indoor and outdoor urban water use targets.
The bottom line
The proposed regulations show that urban water conservation can indeed be very costly for California’s households, with very large expenses for very little payoff. Judicious modifications could meet the legislature’s goal of promoting continued progress in urban water use efficiency in ways that are both equitable and wallet-smart. If the regulations go forward as proposed, it will be tempting to look for taxpayer dollars to help keep conservation programs locally affordable. But that would be penny-wise and pound-foolish. In our warming, increasingly volatile climate, California has vast investment needs to safeguard our water supplies and protect people and property from growing flood, heat, and wildfire risks. It’s imperative that we spend our water dollars wisely.