To say Texas is large would be an understatement. It is, after all, nearly 800 miles wide and

home to four USDA climate zones with vast differences in rainfall, temperature, humidity and

elevation. The Gulf Coast experiences a coastal climate, whereas inland it’s more continental,

drier and more elevated in the west and and wetter along the eastern border with Louisiana.

Factors of geographic region, drought tendencies and water sources all have an influence on

water rates, according to the Federal Energy Management Program (FEMP). However, there are

also other variables to consider when looking at factors that determine water prices in cities

and towns throughout Texas.

 

Water escalation rates, according to an FEMP study, may be higher in cities in regions of

long-term drought compared to cities in water-rich environments. In an analysis conducted to

understand how water rates have increased in the past, the FEMP studied water rate data from

1993, 2001 and 2007 to estimate an annual escalation rate for selected cities in the United

States. This was done to better predict possible water rate increases in the future. While

escalation rates ranged between 4 and 8 percent nationally, commercial annual escalation rates

between 1993 and 2007 in Dallas and San Antonio were 4.5 percent and 9.2 percent

respectively. San Antonio was found to have the largest rate escalation among cities included in

the rate study, which may be attributed to the fact that droughts in Texas are most prevalent in

the Central Plains and Great Plains regions.

 

To test the FEMP’s theory for water rate trends, commercial and industrial water bills

can be compared with 2017 effective rates for 1 CCF (one hundred cubic feet, or roughly 748

gallons). If the theory holds true, rates in drought-ridden regions should exceed those in water

rich regions. In the most heavily drought-impacted Central Plains and Great Plains, Dallas, San

Antonio and Austin water rates for 1 CCF are priced at $2.94, $3.22, and $4.84 respectively. In

the lesser water-strained Mountains and Basins Region and Coastal Plains, 1 CCF in El Paso and

Houston are respectively priced at $4.95 and $7.73. The data suggests that geographic region,

drought tendencies and water source are not the only variables at play and cannot reliably

determine water price trends.

 

An important factor to note is that most water bills incorporate both variable and fixed

charges. Variable charges are tied to how much water flows through the tap. On the other

hand, fixed charges, usually based on the size of the meter leading into your home or building,

are paid every billing period regardless of water consumption volume. Fixed charges capture

the costs of aging infrastructure maintenance and repair, which are regularly stressed with

growing populations that need more water, stricter water standards which require system

upgrades and unpredictable weather, including floods or droughts. These fixed charges address

the “conservation conundrum,” where customers lower water consumption through

conservation efforts in hopes of attaining a cheaper water bill (i.e. use less = pay less). While

conservation and overall environmental stewardship are certainly encouraged and incentivized

in the form of variable costs in the utility water rates, the lower demand for the commodity at

hand (water) translates to decreased revenue for the utility provider. This loss in revenue

affects utilities, as the majority of expenses are operational and infrastructure costs to treat

and distribute water. Passing along these fixed charges keep steady rates for customers and

revenue for utilities.

 

Although geographic region, drought tendencies and water source are not reliable

indicators for water escalation trends, these factors can certainly foreshadow the stressors

utilities will face to balance operational upkeep and resource restraints. On a consumer level,

paying attention to these factors in addition to rainfall, temperature, humidity and

evapotranspiration levels can better guide irrigation needs across the state.

 

Tracking and monitoring water usage is a great first step to understanding budget risk

and overall irrigation needs. Contact a Banyan landscape expert today to identify where

conservation opportunities may exist in your portfolio.