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.