Commentary: The Death of CBFR

Proponents of the Water Initiative turned in signatures in January
Proponents of the Water Initiative turned in signatures in January

Many in and around the city believe that the vote for Measure P was a vote against CBFR. While I cannot rule that out, I think it has become an easy scapegoat. The truth will probably never be totally known, but it is likely far more complicated.

Remember, the surface water project only passed by a 54-46 margin, and while that was comfortable as these things go, 46 percent of the electorate against a project is not a good thing. Council and candidates will tell you stories about people’s anger, confusion and fear of CBFR and the dreaded look back.

But I know a lot of people who voted for Measure P simply because they believe the water project to be too costly, and a smaller subset because they were angry at the city for being less than honest about the state of things.

If reports we are getting are correct, CBFR will be completely off the table by the time the council votes on water rates on June 24. What will replace it will be one of seven potential water rate systems that have a traditional rate structure – a variable component and a fixed component. We have learned enough about the rate structures to know that, as the city shrinks the size of the fixed cost, it produces a much greater amount of equity between the low-end users and the higher-end users.

That’s really what CBFR was supposed to fix. It was an elegant and innovative way to deal with the fact that the Bartle Wells fixed rate, being as large as it was, produced a 50% discrepancy in per unit costs from the top to the low end. Fairness suggested that low-end users should not subsidize high-end users.

I do not buy into the notion that CBFR was that complicated. It simply added a third term to the equation. Instead of a variable charge and a flat-fixed charge, it added a supply charge based on actual previous year water usage.

I understand the criticisms of the rate structure. The first problem was finding a way to deal with people in rental units where there is constant turnover. I think that could have been resolved relatively easily. I’m not sure that the year to year usage in a rental unit is going to vary nearly as widely as some fear. With the biggest water usage being outdoor irrigation, in a rental unit it’s hard to imagine a water intensive garden being ripped out and replanted on a regular basis to create huge variance in water use.

The other problem was the dreaded look-back mechanism. This is actually a more serious concern, in my view, anyway. The problem is that there is a one-year gap in feedback from behavior to consequence. That means that a household that over-watered or used too much would have to suffer for a whole year before rectifying the situation would have any effect.

On the other hand, that was not an insurmountable obstacle, as the city could have had a year pilot where it operated CBFR in billing statements only so that a family would be able to adjust their usage before the real thing happened. Of course, that would have required the city to be nimble and implement the pilot quickly.

In our view, all of this was psychologically-based anxiety rather than a real problem with the model that would have fixed a lot of the inequity in the system.

But CBFR was not perfectly equitable and when Donna Lemongello and Matt Williams set out to fix the remaining inequity, they probably made the city realize that they could do the same thing with a much simpler and easier to understand formula. Now, whether the city is willing to go to a 13% fixed rate and 87% variable charge, remains to be seen.

Analysis: the passage of Measure P

We have not really analyzed the passage of Measure P. But I’m going to go out on a limb, since we do not have any data, and lay the blame with two events and strategies.

The first is the interplay between Bob Dunning and the Measure I campaign. Bob Dunning spent most of January and February of 2013 attacking not so much the surface water project but CBFR and the rate structure. There was the column he ran where he analyzed the water rates for five fictitious water users who happened to have the same names as the five members of the Davis City Council.

They each used the same amount of water, but did so at different times of the year and that produced widely variable charges.

On January 27, 2013, Bob Dunning proclaimed, “City water rates violate Prop. 218.”

“The easiest way for the city to comply with the requirements of Prop. 218 is to charge each customer a fixed rate per gallon and be done with it,” he wrote.  “For unexplained reasons, however, the city has come up with a three-headed monster known as the Consumption Based Fixed Rate (CBFR) that calculates the majority of your next year’s bill based strictly on the water you used the previous summer.”

Concluded Bob Dunning, “The fact their bills vary so wildly for the same amount of water is proof positive Prop. 218’s requirement of ‘proportionality’ is violated by the CBFR rate structure. Dramatically so, in fact.”

He added with a measure of certainty, “If this thing ends up in court, as it no doubt will, the city won’t have enough attorneys to explain how it costs $1,373.64 to deliver 180 ccf to Rochelle but only $596.04 to deliver the exact same amount of water to Joe. But good luck trying.”

As we all know, Judge Dan Maguire, in fact, argued that this scenario did not violate the constitution.

In his ruling he wrote, “In particular, the plaintiffs construct a hypothetical situation in which a resident uses one extra ccf in the summer, which then causes the resident’s supply charge to be increased in the next year, thereby increasing the resident’s bill even further.”

Wrote Judge Maguire: “This hypothetical underscores a distinctive feature of the CBFR, which is that the rate is quite sensitive to changes in summer water use. This sensitivity promotes conservation, as does any system in which the rates increase with the volume.”

The plaintiffs, Judge Maguire noted, “argue that the CBFR rates discriminate between users, by penalizing users who use more water in the summer.”  He disagreed, however, writing, “There is a good reason, supported by the Administrative Record, to charge more for summer water: the system must be built to handle peak capacity, and that capacity is determined by summer usage.”

What was interesting is that last year the Measure I campaign steadfastly wanted to avoid getting caught up in the mud. They chose to run a 30,000 foot campaign, arguing for the need for the surface water project and avoided attempting to debunk the arguments put forward by Bob Dunning.

That was largely left to the Vanguard, but the bigger issue was that, while the strategy worked in the sense of getting Measure I passed, it left the rate structure vulnerable to the Measure P campaign, where the whole premise was focused on the inequity of the rates, bolstered by the arguments made by Sue Greenwald in her op-ed in the Enterprise and backed up in the minds of voters by the unrebutted arguments by Bob Dunning.

The second problem was complacency. The opponents of Measure P never took the threat seriously. The Measure I campaign relied on a professional organization headed by Will Arnold as the campaign manager. It ran ads, identified voters, and ran an extensive get-out-the-vote campaign.

The Measure P opposition did little of that and was caught flat-footed as the landscape shifted.

The underlying belief, despite the overly dramatic warnings of the city, is that Measure P did not matter, and the city would simply adopt new rates.

The combination of this has doomed CBFR, but without CBFR, we would probably not be moving toward rates with far greater equity. The rate structure that Woodland passed is very similar to the Bartle Wells rate structure, which means low-end users will be paying far more per gallon than high-end users.

Regardless of what happens to CBFR, that will not be the case in Davis. CBFR helped us identify the inequities of traditional rate models and hopefully find ways to circumvent them.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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5 Comments

  1. Davis Progressive

    i think what gets lost on people complaining about cbfr is how inequitable the previous system was. it would be ironic if we went back to that unfair system out of some sense that cbfr is too confusing.

  2. Dave Hart

    I also fear we may end up with stupid rates to suit Bob Dunning. The best thing about CBFR was that it broke the rate down into parts that allowed the public to understand what and how much they were paying for the relative proportion of each component. That is the essence of ‘open government’ that people like Dunning say they want, but when they get it, it’s “too confusing”. I can’t help thinking that the process should shift from the URAC for a while in favor of educational polling, town hall meetings, etc., to engage residents (voters) to get some vision on what truly fair rates might look like. That seems the best way to build a strong 60% or 70% support for the next rate structure. In the absence of taking the time to do that work we could be back here again after the next election.

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