Any article that promises tips on how to trim a household budget gets my attention. Self-employed and 
married to someone who retired early, I’m highly motivated to keep our expenses low. But invariably I come away from those financial advice columns disappointed – whatever they suggest, I’ve already done. At this point, there’s very little to pare from our budget. OWASA board chair Gordon Merklein would understand.
During the debate at the April 25 Town Council meeting over whether to secure permanent access to 5 million gallons a day of Jordan Lake water, some council members argued that OWASA should implore the community to conserve water as supplies run low, rather than have OWASA tap another supply. Merklein pointed out that demand for water has been reduced so much after the drought in 2007 and 2008 that there is not much more we can do to conserve. “People forget how high we’ve raised the bar on conservation,” he said.
And is it OWASA’s responsibility to urge the community to conserve? As Ed Kerwin, OWASA’s executive director, told council: “The community determines its water needs. OWASA’s job is to meet that need.” And OWASA is bound to do so in a manner cost-effective for its customers. The law of supply and demand dictates that as demand for water increases and/or supply decreases, the cost will rise. Why not hedge against unsustainably high water bills, as council member Matt Czajkowski said, by having permanent access to a back-up option of water, albeit of what council member and former OWASA board member Penny Rich referred to as inferior quality from Jordan Lake?
Granted, Merklein, who became UNC’s executive director of real estate development after he was named to the OWASA board, certainly is cognizant of his employer’s water needs. UNC is OWASA’s biggest customer, even though the university has launched aggressive conservation measures in the past few years. But somebody on the OWASA board should be watching out for UNC’s interests, and Merklein is as good as any.
The issue isn’t over. Mayor Mark Kleinschmidt urged OWASA to keep talking and bring the matter back at a future meeting.
– Nancy Oates
James Barrett
/ May 7, 2011How exactly does the Law of Supply and Demand apply here? That “law” doesn’t often apply in monopoly situations. Especially here, where our price is determined by demand spread over large fixed costs. In fact, it is our low demand over the past several years that has directly led to large price increases. There is certainly effect in the other direction – higher prices will discourage use, but OWASA can not set prices based on free-market idea of supply and demand.
Terri Buckner
/ May 7, 2011This is a community in which there is high residential turnover so it’s not really accurate to assume there is no further conservation that can be achieved. Each new resident needs to learn how to reduce water usage in the same way those of us who have survived multiple droughts have learned. There is always more we can do with conservation and I find it extremely troublesome for the chair of the OWASA board to say that we’ve reached the limit.
I’m also troubled by the statement you quote from Ed Kerwin. It may be OWASA’s job to provide water, but since they own the supply and set the rates, they have a great deal of control over the variables impact demand. Ed knows (and believes) that so I assume there was more context to the quote.
As for the supply and demand issue, in a standard supply and demand graph there is an assumption that supply always varies with demand and that price is elastic between the two. In conservation pricing, the economic model adopted by many water and wastewater organizations, the supply is assumed to be relatively fixed so the elasticity is lost. Therefore, price is more tied to demand in an upside down curve from the standard model. The greater the demand, the greater the cost in order to protect supply.
One last point. The Jordan Lake allocation is not without (significant) cost. OWASA will have to invest in infrastructure in order to draw upon the allocation. And the cost of designing, building, and maintaining that infrastructure is the greatest portion of the OWASA budget other than staffing costs. So there should be no expectation that keeping the allocation will serve as a hedge against “unsustainably high” water bills.