alt Hacker NewsPart of the issue is not systematically using a pricing structure that charges disproportionately more for usage above high thresholds.
The 101-level "solution" is to just raise the price to account for demand. The problem with that is that it treats all usage the same, whether it's a residence's first gallon or an alfalfa field's last gallon. But the former is something we need to protect.
It makes sense to price water, and electricity, in a fashion where the first X costs a certain amount, and the next X has a higher rate, and above some percentile of usage it has a much higher rate, and at some percentile of usage, customers should be very nearly paying for new required utility infrastructure themselves. That allows using pricing to solve supply problems, without penalizing normal levels of usage.
Some utilities already do this. But if there are actual issues with having enough supply for both datacenters/farms/smelters/etc and residential usage, then they're not doing this well enough, or don't have the pricing correct.
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I disagree. A large part of the cost of a utility is fixed per customer. Or any product really. That's how bulk purchasing makes sense. I can get 4x the product at a bulk store for 2x the price. Instead of being prejudicial about the use case, let's just charge what the utility actually costs. Include capital, operation, and decommissioning costs. That way, if you get a sudden spike in demand, you have the cash flow to issue a bond a scale up.
> Part of the issue is not systematically using a pricing structure that charges disproportionately more for usage above high thresholds.
We don't do this for gasoline (in most countries), even though it is also vital for life. And yet people can still drive, afford to eat food grown with fertilizers, use plastic, and so on.
Turns out markets are pretty good when you leave them alone. But when they're not left alone (as is the case with water today!!) you get some weird shit.
I think it makes sense to have a continuum of:
1. You're thirsty and need a sip of water? That should be free
2. You're an household and use water? That should cost progressively more the more you use if you use more than typically needed
3. Your business model requires you to evaporate every last drop of water in a desert region? That should be so prohibitively expensive that your business model does not work
This is basically just a low amount threshold and a exponential function. You just need to select the exponent.
This causes major market distortions and worse outcomes than the econ 101 solution.
The problem is that water isn't traded on a normal market at all. Lots of people have historical water rights and pay nearly nothing for their water use. There's byzantine regulation and many have the right to use for some purpose on their land but not to resell, so the market cannot allocate to more efficient use.
If you just let the 101 level solution actually work, water prices will rise until inefficient uses like water-intensive agriculture (not even all crops!) are pushed out. Urban users easily outbid almost all agricultural use, even at what any person would consider dirt cheap prices. For example, desalinated water, which is considered expensive for agriculture, can be 40 cents per cubic meter of water. That's a lot of water! Usually the last mile of urban water delivery costs more than that.
The amount required to satisfy all urban use, including water hungry lawns etc, and datacenters, corresponds to a very minor reduction in agriculture. Perhaps even just changing which crop is grown or switching irrigation techniques.
Charging more to higher users, price discrimination, causes several problems. First, it creates an incentive to cheat. I'm not using all this water myself, its for this whole group of people who "live" here. Don't allow this kind of spreading (somehow...)? Now you actually screw any business or institution that serves a lot of people. A farm produces food for thousands- do they count as one user? A park uses much more water than a garden but serves many more people. Whatever framework you create will require another bureaucracy to run. Lobbyists will find or insert loopholes for their friends.
The heavy users actually improve the system robustness, in both electricity and water. Their higher demand pays for more supply infrastructure, which itself often benefits from economies of scale, and in a shortage they may even be more responsive to price increases due to their high use.