The Alameda County Water District (ACWD), located in the San Francisco, California Bay Area, recently announced another round of rate hikes. The base “commodity rate” on water bills for the typical customer will increase by 6.0%. Service charges will increase by a whopping 19.0%. ACWD reassures its customers that their rates remain in the bottom 10 the Bay Area’s 30 water agencies (the city of Burlingame is at the top with rates that appear about double those of the ACWD).
ACWD provides a wide range of explanations for the price increases including “the cost of rising prices for purchased water and other operating expenses.” These costs make up 25% and 26% of the rate hike respectively. Water from the Hetch Hetchy system is increasing 38.4% this year to pay for seismic upgrades. The ACWD is reducing the impact of the increase by switching to more local supplies of water. I suspect that other water districts reliant on the Hetch Hetchy are implementing similar measures. The next biggest expense is maintenance costs with constitute another 16% of the rate hike.
Note that while some of these cost increases seem temporary in nature, the ACWD is NOT communicating that any part of its rate hike is temporary.
James Hamilton posted a quick study of the impact of oil prices on car sales in “Oil prices and the U.S. economy” in EconBrowser. Hamilton demonstrates from recent history that once the economy has made an adjustment to high oil prices, a subsequent price run will not impact the economy until it reaches new highs. In other words, oil prices must force the economy (consumers and businesses) to make new adjustments before a significantly negative impact occurs. Auto sales already greatly favor more fuel efficient vehicles, thus blunting the traditional drag on the auto sector as consumers shun bigger, gas guzzlers.
Oil’s relative share of consumer expenditures is another factor to consider. Amazingly, energy’s overall share of consumption has declined as gas prices have soared in recent months.
For more detail and data see “Oil prices and the U.S. economy“