Clean Water: The New Hot Commodity

When you think about hot commodities right now, you probably don’t think of water. Yet the price of water in some parts of the world is rising… sometimes very quickly. Take California, for example.

Mark Swatek is CEO of Southwest Water Co., a water utility that serves California and the Southwestern U.S. You may accuse him of talking his book when he says: “One of the fastest growing commodity prices is the price of metropolitan water [in Southern California].”

It may be an exaggeration, but not by much. Since 2007, the Metropolitan Water District of Southern California has increased its water rates from $574 an acre-foot to $781 an acre-foot — a 36% increase. (An acre-foot is the amount of water needed to flood a plain of one acre to a depth of one foot — or about 326,000 gallons.)

More increases are on the way. The MWD has approved an increase to $811 an acre-foot by January 2010 and another increase to $985 by 2011. That would mean a 71% increase in five years. Despite these increases, water is still too cheap in Southern California.

California is a good case study where the water crisis is in bloom. Cadiz CEO Keith Brackpool pointed out a number of challenges California faces, including supply limitations, drought and aging infrastructure. To combat these problems, the state has done a number of things, including those price increases I mentioned above. Yet because water is still so cheap, the increased water rates have not had much of an effect on water use so far. There is also an $11.1 billion water bond that will provide funds for storing water. And there is a search for new supplies of water. But as Brackpool says, “We’ve picked all the low-hanging fruit. The next frontier requires a large extension ladder.”