Why Canada's water systems are failing us

Subsidies aren't enough to cover costs of fixing decrepit services Philip Lee The Ottawa Citizen

The one constant theme in the Canadian water story is subsidies.

Canadians don't pay enough for water to cover the cost of municipal water and wastewater services, according to a July report by Environment Canada.

The report, based on national municipal water use and rate surveys done in 1991, 1994, 1996 and 1999, concludes that Canada is paying a heavy price for its water subsidies.

Municipalities desperately need to repair and upgrade their water and wastewater systems and, even with subsidies, governments are covering only half of the multibillion-dollar price tag.

Meanwhile, Canadian per-capita water use continues to rise as we recklessly consume, and waste, subsidized water.

The Environment Canada surveys, sent to municipalities with populations of more than 1,000 people, had a response rate of 87 per cent and reflect the water use of 25 million Canadians.

The Environment Canada report concludes there is a relationship between price and water demand; incentives matter.

There are two basic ways to charge for water: flat rates and volume-based pricing.

Under a flat-rate system, consumers pay their water bill and have unlimited access to water.

"The principle disadvantage of flat-rate pricing, from an environmental perspective, is that it results in higher water use than volume-based pricing, because once the monthly payment is made, customers may take as much water as they choose at no additional cost," write Environment Canada economists David Burke, Luis Leigh and Valerie Sexton.

"This leads to wasteful water use practices such as lawn watering during rainstorms, failure to replace dripping faucets, or using treated, potable water to clean a driveway. Under this pricing structure, customers have neither the incentive nor the information required for developing awareness of water usage."

Volume-based rates charge the consumer per unit of water used. The most effective volume-based systems increase the price as more water is consumed above a basic amount for each household.

According to the report, 55 per cent of Canadians who receive water from municipalities are paying rates that discourage conservation. Some municipalities with volume-based rates aren't encouraging conservation because they apply a minimum charge that includes a volume of water greater than normal residential use.

In 1999, 44 per cent of Canadian homes served by municipal water supplies had no water meters, the prerequisite for volume-based rates. The report estimates that 3.48 million water meters would have to be installed to allow volume pricing throughout Canada.

Water use is 70 per cent higher in homes that don't have volume-based rates. Flat-rate customers in Canada use 457 litres of water per day; volume-based consumers use 269 litres per day.

Personal water use by people living in Canadian municipalities is on the rise, from an average of 327 litres per person per day in 1996 to 343 litres per person per day in 1999 (not including industrial and agricultural use). In Germany, daily per capita water use is 128 litres, in the United Kingdom, 149 litres.

Flat rates for water are most common in Newfoundland, Prince Edward Island, New Brunswick, Quebec and British Columbia. In Newfoundland and P.E.I., almost all water users pay a flat rate. In Quebec, 79 per cent pay a flat rate, in British Columbia, 76.7 per cent. In New Brunswick, about half of all water consumers pay a flat rate, while in Ontario, just 15.3 per cent pay a flat rate.

The Prairie provinces, where water is often in short supply, now have less than three per cent of water users on a flat-rate system, although Alberta still has 26 per cent of municipal users without meters.

The majority of Canadians who paid a flat rate for water in 1999 (6.4 million people) paid an average of $22.40 a month, although the price of water fluctuates wildly across the country. The average monthly rate in Canada, combining flat-rate and volume users, was $28.56 a month. The cheapest water in Canada is in Quebec, the Atlantic provinces and British Columbia; the highest rates are in the Prairie provinces and territories.

All water users in Ottawa have water meters. In Toronto, about 90 per cent of users have water meters, although a significant part of the original downtown core of the city still receives water without meters.

The report found that only half the cost of maintaining and operating water and sewage infrastructure was being recovered from the users of the systems.

"The combination of low levels of residential water metering, conservation-discouraging pricing structures and lack of real price increases in key rates has led to substantially increased residential water use levels in 1999 and will continue to erode municipalities' ability to finance needed infrastructure," the report concludes.

According to the National Round Table on the Environment and Economy, water and wastewater infrastructure in Canada requires an investment of almost $50 billion, and subsidies are only covering half of this cost. During the next 20 years, water and sewer infrastructure in Canada will need an investment of as much as $90 billion.

Elizabeth Brubaker, director of the conservation group Environment Probe, argues that all direct and indirect water subsidies in Canada should be removed. She made a case for the elimination of subsidies when she appeared last month before the inquiry investigating the tragedy in Walkerton, Ont., where seven people died last year after the municipal water supply was contaminated with deadly E. coli.

Conservation, and the maintenance and protection of municipal water supplies, will only begin when we give water a proper price, Ms. Brubaker says.

"We get water for free, and water treatment and distribution for a discount. We have some of the cheapest water in the world, and we have some of the highest use-rate in the world as a result. We have to internalize the costs of all of our behaviours. And water pricing is one of the ways of doing that."

Ms. Brubaker says Canadians need only look at the billions of dollars that need to be spent on water services to see how much they have underpaid for water.

"You have to meter. If you don't charge people according to their use, they don't have any incentive to conserve water. That's simple enough. When we got a water meter I cut down on our garden watering. I just figured it's not really worth a lot of money to stand out there with a hose every afternoon."

Water-related incentives can also have an impact on where people choose to live, Ms. Brubaker says. "It's obviously cheaper to pump water into downtown Toronto than it is

to pump it up to the outlying northern suburbs of Toronto. And not having to account for those costs is one of the factors that has contributed to our urban sprawl."

The way things work now, "people make their settlement decisions without thinking about the implications. They aren't paying for their roads, they're not paying for their water."

No one in Canada should go without water, Ms. Brubaker says. However, she adds, low-income families should be subsidized with cash, rather than with cheap water.

The elimination of subsidies would also encourage the privatization of water and sewer systems. Ms. Brubaker argues that privatization of water and sewage delivery will force governments to enforce pollution laws.

"The government just will not enforce the law," she says. "The government knows that if it enforces the law, given the extent of its subsidies, it's going to have to foot the bill. If it got tough, if it required those improvements, it would have to fund them. So it's in a direct conflict of interest because it has a strong reason not to enforce the law."

Private firms have an incentive to provide good service: they want more contracts. "Nobody is going to hire a firm that provides unsafe drinking water," she says.

"When you give someone a contract to operate a water system, you're not giving them ownership of the water. We're not talking about privatizing the water resource itself, we're talking about privatizing the water utility.

"In some cases municipalities may want to sell their utilities, in some cases they'll want to retain ownership of their utilities and contract out operations. We're talking about giving a company a contract to do something very specific, which is to operate a water treatment plant and sewage treatment plant."

Ms. Brubaker points to the experience of Moncton, N.B., which now has good quality drinking water for the first time in its history, after having hired a private firm to build and run a new treatment system for millions of dollars less than it would have cost had the city left the system in public hands.

"There is no downside," she says. "The community has clean and safe drinking water. What could be more important?"

The subsidization of water is an international problem, according to economist Andre de Moore and journalist Peter Calamai, who document the international water subsidy story in an Earth Council report called Subsidizing Unsustainable Development.

They point out that in OECD countries, subsidies for capital costs of public water supplies are common, and irrigation projects are even more heavily subsidized, by as much as $500 per irrigated acre in the U.S.

In developing countries, they found that subsidies for drinking water and irrigation amount to $45 billion per year.

They argue that water should be treated as an economic good, without forgetting that water is a basic human need and must remain affordable for the poor.

"First, recognize that water has an economic value in all its competing uses, whether those devised by nature or by humanity," they write. "It follows that a greater use of economic instruments in water policies is desirable; sound water pricing in general, and subsidy removal in particular, will achieve more sustainable patterns of water use. Water process should at least cover operating, maintenance and capital costs of systems, earning an appropriate rate of return.

"Moving toward sound water pricing also will generate the new resources necessary to expand water services, giving access to the poor and other marginal groups. Eventually, social and environmental costs should be incorporated as well."

T. Duncan Ellison, executive director of the Canadian Water and Wastewater Association, says one of the legacies of the Walkerton tragedy is that Canadians will start paying more for water.

He says that when engineers now appear before municipal politicians and say they need to spend money on water treatment systems and that consumers must pay the cost, local politicians will no longer take the politically easy route and say no. He says municipalities have turned away from volume-based, full-cost pricing for water in the past simply because flat-rate billing is easier to administer and more politically palatable.

"In principle, full-cost pricing is important for everything," Mr. Ellison says. "You should not be subsidizing anything unless you are meeting a certain social objective."

How do you convince people in Toronto there's a water shortage when they look out every day over Lake Ontario, one of the largest sources of freshwater on the planet, Mr. Ellison asks.

You put a proper price on water, he replies. Even in water-abundant Toronto, water still has to be pumped uphill, and treated when it flows into the community, and again when it flows out.

Then, Mr. Ellison says, you could ask realistic questions: "If a green lawn costs you $200 a year for irrigation water, do you still want it?"

Replenishing the Well

It's a full-blown crisis in some of the world's most arid regions, but the planet's shrinking supply of clean water has also become a critical issue in Canada -- forcing us to rethink the price we pay at the tap, the way we irrigate our farm fields, even the way we flush our toilets. Over the next week, Citizen writer Philip Lee examines the waste and exploitation of water and some of the solutions being proposed to save this precious resource.

http://www.ottawacitizen.com/national/

-- Martin Thompson (mthom1927@aol.com), August 12, 2001