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Water and drought

North Carolina has experienced droughts on a regular basis since 2000. The 2007-08 drought was the most severe. In response, municipal water agencies restricted when and how people could use water, some considered pricing policy changes, and many raised prices after the drought because successful conservation efforts left them with less revenue. Private water suppliers also had little ability to temporarily raise prices even if they had wanted to, because they would have had to get permission from the state Utilities Commission, which has no easy or timely way to approve temporary price increases in response to low water levels.

Empirical research has shown that higher prices lead to similar levels of conservation but at much less enforcement cost to the water utility and less of a decline in revenue. Higher prices cause consumers to conserve voluntarily, and to conserve individually in the ways that are most practical for their individual needs.

Amid the 2007-08 drought, lawmakers acted not to make prices more flexible in response to droughts or rainy periods, but instead to pass another law (HB2499) that expanded state control over private wells, private water companies, and municipal water systems. The state is also suing to gain control of a dam and reservoir owned by Alcoa along the Yadkin River.

Key Facts

• Raleigh and Durham had among the lowest water prices in the Triangle area and were also among the hardest hit by the drought.
• Neither system had enough reservoir capacity, nor had they built adequate connections to systems drawing from Jordan Lake or alternate sources.
• Raleigh had stopped drawing from the Lake Benson and Lake Wheeler reservoirs in 1987 but could not start drawing from Lake Benson again until the Dempsey E. Benton water treatment plant was complete in 2010.
• Instead of raising rates, municipalities regulated how households could use water.
• Municipal water rates in the Triangle climbed faster before the drought began and after it ended than during the drought, when supplies were at their lowest levels.
• State regulation of municipal water systems and wells is unnecessarily onerous, potentially violates property rights, and will likely be ineffective against the next drought. The Division of Water Resources website does not include any information on local water rates.

Recommendations

1. Repeal SL 2008-143 and its command-and-control approach to water resource management. It is too invasive and based on flawed assumptions.
2. Reform water rate regulations to permit temporary price increases when supplies fall. Prices could also fall when reservoirs are too high for public access.
3. Facilitate innovations tried elsewhere to reclaim wastewater for use as drinking water, to treat and transport drinking water separately from other water, and to privatize the water infrastructure as a way to increase investment.