How much does water cost and what is its actual value? What are the economic and political factors that go into how water is priced? That’s the California drought question our audience most wanted answered, after we put three reader-submitted questions to a vote. Here is what we found. You can see more answers to readers’ drought questions here. Thanks to Josh Boissevain for submitting the original question.
Reveal’s readers ask: What does water cost?
The short answer: not much.
In the United States, provided you have a hookup to a municipal water system, you’re paying around a penny per gallon for clean, safe drinking water, according to an oft-cited statistic from the American Water Works Association.
But the price is steadily climbing. Among the nation’s biggest cities, the price of water has increased 41 percent since 2010, according to an annual survey published by Circle of Blue, a science news service.
Much of the price hike is due to the cost of replacing aging water delivery infrastructure, writes reporter Brett Walton. Some cities also are investing in improved water-treatment equipment to meet federal clean water guidelines, he reports.
Oddly, the price increases are occurring at a time when water consumption in the U.S. is plummeting, the result of drought and water conservation campaigns.
Some water districts use higher rates to encourage conservation, Walton writes. But water suppliers also jack up rates in response to a decline in consumption: The cost of treating and delivering drinking water is relatively fixed, no matter how much or how little is being delivered. At any rate, “water scarcity and successful conservation programs” are helping drive the rise in water prices, according to this analysis.
For its surveys, Circle of Blue computes how much a family of four would have to pay to buy 400 gallons of water per day.
The 2014 survey showed that the most expensive drinking water in the U.S. was in Santa Fe, New Mexico. There, a family would get a monthly water bill of $153.78. Water also was pricey in Seattle ($98.77) and Atlanta ($91.92).
Still, water isn’t very expensive. Here are water prices for selected cities from the Circle of Blue data, but with the rate computed in terms of pennies – actually, fractions of a penny – per gallon:
Santa Fe’s rates are high because the city is paying for a multimillion–dollar pipeline to bring water from the Rio Grande, according to the analysis.
Seattle and Atlanta have high rates because those cities are building new sewage treatment plants to comply with federal anti-pollution rules, while San Francisco is paying for seismic retrofits for its system of aqueducts.
Cities with low rates often have water infrastructure that was largely built and paid for by the federal government. That’s the case in Fresno (the Central Valley Project) and Phoenix (the Central Arizona Project).
For 2015, Circle of Blue’s survey combined sewer service and stormwater runoff fees with water fees. As a result, the total rates are higher.
Data about international water rates aren’t readily found.
A United Nations report from 2001 showed significant variation in water prices among Western industrialized nations.
The highest water prices in the U.N. survey were in Germany – more than triple the price in the U.S. and more than quadruple the price in Canada, which had the West’s lowest water prices.
Still, water in Germany was selling at less than a penny per gallon.
Here, from the U.N. report, are selected international water prices, with the rates expressed in cents per gallon. (The original report expressed rates in cubic meters.)
The U.N. report is too old to reflect the recent surge in water rates in the U.S. But it makes an enduring – and distressing – point about water prices in the developing world.
There, poor people who don’t have a home water hookup often must buy their water from street vendors, according to the report. Frequently, the street vendors charge exorbitant prices that the poor can ill afford. In Vientiane, the capital of Laos, water from the street vendors cost 100 times more than water from the tap, according to the report.
“When the supply systems are deficient, the poor are the first to suffer,” the U.N. report says.
That’s water’s cost. But Reveal’s readers also asked: What’s its actual value?
Many people who try to answer this question wind up wrestling with what is known as the “diamond-water paradox.”
It was posed in the 1700s by the famed Scottish economist Adam Smith, author of “The Wealth of Nations.”
“Nothing is more useful than water,” Smith wrote, “but it will purchase scarce anything; scarce anything can be had in exchange for it.
“A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.”
Economist Timothy Taylor, managing editor of the Journal of Economic Perspectives, writes that Smith’s paradox illustrates “the importance of scarcity and marginal analysis” in determining price.
“Diamonds are high-priced because the demand is high relative to the limited quantity available,” he writes.
“Water is inexpensive because it is typically fairly abundant, but if one is dying of thirst, then it would have a much higher value-in-exchange – conceivably even greater than diamonds.”