Cal-Am has lost roughly 70% of its rights to Carmel River water. We have a few more years to come up with alternatives to the water we have lost. If Cal-Am tries to build it independently, without low-interest municipal-bond funding, the costs (to say nothing of the public opposition) would be astronomical. Our water leadership studied the dam proposal in great detail, presented it to the people, and the people said no. The process worked. It’s time to look at other, more creative options.

There are plenty of ways to increase our supply of water and reduce demand: enough to meet the needs of the peninsula for decades to come. Among the supply options are desalination, reclamation, and drawing from the Seaside and Fort Ord aquifers. These measures, in total, come close to closing the gap opened by the loss of the Carmel River water. We can close the gap completely by implementing Fair Use-Management (FUM).

FUM is a fair and reasonable combination of voluntary incentives and mandatory activities (such as requirements for low-flow toilets) for water users to reduce demand. The centerpiece of Fair-Use Management is a voluntary market for water use-rights that would financially reward water-savers and raise the costs of new and large-scale water-users. Our current system of unlimited use-rights is no longer feasible. We propose instead to allocate to all water customers rights to use a sufficient (even generous) amount of water each month. Some of the allocation would be permanent and non-tradable, but a significant proportion would be tradable. You can sell your extra use-rights for a month, a few months, or permanently. Likewise, if you decide you need extra use-rights, you can buy them. The price of these rights will not be set but would be determined by supply and demand for water.

Here is how your monthly water bill would change. First, it would list what your total monthly allocation is. Then, it would list how much of your allocation you used, and bill you only for the amount you used. There might also be an "unused capacity" fee, lower than the use fee, that reflects the cost to Cal-Am of holding in reserve your unused water. If your actual use is less than your allocation, no more fees. If your actual use exceeds your use rights, an additional charge is added. Your statement also would provide information on how to buy and/or sell water use-rights, and easy ways to conserve water.

Cal-Am and/or the Water Management District would take on a critical new role as a clearinghouse for the trading of water use-rights. Buying and selling water would be as easy as buying or selling a stock or bond ˆ one phone call to the clearinghouse and you are matched with a buyer/seller at the going price. The Clearinghouse handles the details, and the billing/pay-out is reflected on your water bill. Done.

This plan would save water a number of ways. There would be a direct, show-me-the-money incentive to conserve water, since customers can sell what they conserve. Our water market, and not the Carmel River, would become the water source for an appropriate level of economic growth. Environmental interests could purchase and/or donate water use-rights for environmental purposes, for example, leaving more water in the river in spring and summer. Finally, use-rights would be allocated as a proportion of the total amount of water available: in wet years, use-rights would essentially be unlimited, but in dry years, when our reservoirs are low, use-rights would proportionately scale back. (Of course, essential uses would be protected.)

Customers would be protected. A proportion of everyone’s use-right is not tradable, so no one can accidentally trade away all their rights, which would result in an extremely expensive water bill!

The Clearinghouse would hold some water in reserve for customers who do exceed their use-right totals, so there will always be water in the tap. Plenty of customer-service representatives would be available to explain how the system works and to help customers save/make the maximum amount of money from the new system. The allocation system would adjust smoothly both when we enter and emerge from drought periods, so forced-rationing periods would become a thing of the past.

The environment would also be protected since annual or seasonal availability of water would take environmental needs into account. Total availability would be a function of rainfall to date, level of reserves, environmental requirements, customer willingness-to-pay, and cost of additional production from desalination and other new sources. An independent panel would evaluate the data and set the annual or seasonal total availability.

A Peninsula water-market, as one part of a multi-faceted plan to replace the water supplies we have lost, could help us control demand, provide for appropriate growth, and protect the environment, in a fair and efficient way. Similar markets ˆ designed to allocate scarce natural resource in a fair, efficient, and environmentally sensitive way now exist in many parts of the nation and world. The cost is likely to be a fraction of what the dam would cost. Please join us in calling on the water district for a full investigation of Fair Use-Management, and its recommendation of a water market.

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Original article co-authored with Dr. Brent Haddad, assistant professor of environmental studies at the University of California, Santa Cruz. He holds a bachelor of arts degree from Stanford University, a master of arts degree from Georgetown University, and both a master of business administration and a doctorate in Energy and Resources from the University of California, Berkeley. His doctoral dissertation is on the use of markets to reallocate water in California.