Bureaucrats vs Markets
Submitted by Aguanomics Blog
This AWWA post on the failure of California’s Drought Water Bank. Why? High rice prices? Environmental problems? BurRec barriers? Nope.
But even as more supply has become available, there has been less demand than expected, as buyers from the water bank must pay the state’s administrative expenses and the cost of moving the water they purchase — on top of the $275 per acre-foot ($223/ML) base price.
Geimer says the Water Bank will probably move about 80,000 acre-feet (98,000 ML) this year. The original target was around 600,000 acre-feet (740,000 ML).
That leaves water suppliers farther South in the unhappy — if by now all-too-familiar — position of scrounging around for water and waiting for a resolution to Delta water issues.
The problem is this: DWR did not establish a real market (despite promising to!) where price would fluctuate above/below its arbitrary, bureaucratic level of $275/af.
Bottom Line: Don’t blame the farmers for a lack of supply or demand, blame DWR for preventing the market from operating.
