Water is a fundamental human need. It is also critical to our economy. So, when utilities propose to increase water use fees, people take notice.
The rates will not go up uniformly, however. In some places the rate increase would be around 30%, while in other places it would exceed 50% (“New Berlin and Mequon, would get a 50.6% and a 58.9% rate increase, respectively”). Likely due to cost of delivery of product.
The Wisconsin Journal-Sentinel article reporting on the proposed hike in Milwaukee includes pushback from MillerCoors, certainly a huge employer and contributor to the local economy.
“That could potentially mean that production, and the associated jobs, could be transitioned to other breweries in our network,” [MillerCoors LLC] Vice President Andrew Moschea said. “Given the prolonged economic downturn, that is something that neither the brewery nor the state should allow to happen.”
Reports suggest that the cost of water at the MillerCoors facility would increase by approximately $600,000. Water, to MillerCoors, is a cost of business, and thus would seek to move production elsewhere if this cost increased locally. However, MillerCoors is not on the ropes. In fact, profits are reported to have increased 0.4 percent in the first quarter of 2010 compared to 2009 to $217.2 million – in just 4 months. Thus, the increasing cost of water really is a drop in the bucket for MillerCoors. Further, if the cost of water increases, should not the utility pass the cost along? That’s how it works. And, although $600,000 is nothing to sneeze at, the cost of moving production to another site would never recoup $600,000 per year in costs. HR costs in shifting the workforce would far exceed that figure alone, much less the facilities.
On another note, this same article mentions how the utility has a perverse financial incentive to not encourage/force water conservation, because it reduces cashflow (despite having wide-ranging social, environmental, and economic benefits).
“Nicolini and Lewis said a 12% decrease in water usage from 2006 through 2008 cut Water Works revenue by $4.3 million a year, partly because residents are trying to save water by watering their lawns less often and installing more efficient appliances.”
As an interesting side note, reading the public comments submitted to the Journal-Sentinel article are always entertaining, as well as head scratching and wondering how some folks… well, I won’t go there. But I will comment how it is interesting how some readers comments show how conserving water, water quality/quantity, restoring natural surface waters, and utility rates have become highly politicised topics. Certainly, there is no clear line drawn in the sand, but there is clear correlation between political orientation and stances on these issues.
Infrastructure costs are higher in the suburbs. Less people/businesses per acre means less people paying per unit of infrastructure, which means higher costs. Does your lawn help pay the taxes? Sure does consume resources. In addition, resource use is strongly inversely correlated to population density, displaying that low density suburbs consume more resources (water, electricity, fuel, etc), and have high per-person infrastructure costs, yet somehow residents/businesses located there want to yell about their rates going up faster. Look in the mirror and repeat: location, location, location. First law of real estate (and one of the few).
Update: (May 21, 2010) MillerCoors announced that increase in water rates will not drive them from Milwaukee.
Milwaukee Journal-Sentinel, May 13, 2010
Business Journal of Milwaukee, May 4, 2010