Los Angeles Somehow Paid More For Water During A Flood

The 2022 California floods were a partial blessing for a state that had previously seen at least three continuous years of drought. While the historic downpour that came between December of 2022 and January of 2023 as a result of atmospheric rivers did a lot of damage, it easily replenished the state’s aquifers and helped lower the risk of large wildfires, like the 2018 Camp Fire, that had been decimating the state.

Water is a precious commodity in the Golden state, and it leans heavily on conservation measures to preserve water for its residents, the large agricultural industry, and for firefighters.

The state is also one of a few that has a water commodity market to trade water rights. Industries requiring bulk water purchases—like agriculture or water utilities—can buy access to water by the acre-foot.

With the 2022 downpour, prices in the water markets that had been steadily rising year over year during droughts crashed. The Nasdaq Veles California Water Index—which tracks the spot price of water leases and transactions—would hit a peak of 1,282 in September of 2022 right before the rains started. It would then crash to 156 by July of 2023.

For the Los Angeles Department of Water and Power (LADWP)—the city’s water, sewer, and electricity utility—the rain meant they could cheaply source more water from upstate via the Los Angeles aqueduct rather than paying for water from private sources. During the drought in 2021, they bought over 103 billion gallons of water, but by 2024 they bought less than half that according to annual financial reports.

But while most of the state was benefitting from the cheap price of water, LADWP was somehow paying more since the flood. The average price paid per gallon went from .29 cents in 2022 to .44 in 2024.

Even if the price had simply stayed at the 2022 mark and not declined, the utility would have saved $100 million since the floods. Outside of maintenance and operations, water purchases are regularly the largest expenditure, accounting for over 16 percent of annual costs.

Rising Prices For L.A. Water

Independent of droughts or floods, the price of water service in Los Angeles city has only gotten more and more expensive year over year. Total revenue brought in by the water authority has consistently increased for every gallon of potable water it delivers.

Not only have water costs repeatedly increased, charges are set to continue increasing over the next four years, effectively doubling by 2028.

Mysteriously, Less and Less Water Needed

Besides the price paid for water, LADWP has seen sharp declines in the overall demand for water. Some of that is certainly due to the declining population of the Los Angeles area, with the county losing around 400,000 people since 2016.

But even with population decline, it doesn’t account for how the Los Angeles city water system now produces 50 billion fewer gallons of water a year than it did ten years earlier.

Even if that total population decline all came from Los Angeles city, that would mean each of those residents that left was using 125,000 gallons of water a year—or 342 gallons a day—on average.

Ongoing Criticism of LADWP

LADWP has been criticized for the lack of water in fire hydrants during the recent Los Angeles firestorm and is now the target of a lawsuit as a result. The utility has defended itself stating that the lack of water was purely from the heightened demand and not a lack of resources.

But the utility is also being criticized for paying their newest general manager, Janisse Quiñones, a full $750,000 a year, over twice what the previous manager was receiving.

Potentially another sign that the utility was flush with too much cash, the L.A. City Council recently voted to transfer $219 million from LADWP’s coffers to the city’s reserve fund to pay off various lawsuits and other budget necessities.