PNW Water Institutional Development

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PNW Water Institutional Development

• Richard Slaughter, Ph.D.
• Don Reading, Ph.D.
• Climate Impacts Group
• University of Washington

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The Question

• Does it require crisis?

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Alternative Models

• Miles, et al.
• Dependent variable
• - Regime effectiveness
• - outcomes changes in human behavior
• Independent variables
• - problem structure (malign)
• - institutional (regime) setting
• - distribution of power
• -quality of leadership

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Alternative Models

• Miles, et al.
• Dependent variable
• - Regime effectiveness
• - outcomes changes in human behavior
• Independent variables
• - problem structure (malign)
• - institutional (regime) setting
• - distribution of power
• -quality of leadership
• Missing Linkage between policy and outcomes

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The Question

• How quickly and completely do existing
  institutions translate social costs into private
  costs?

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The Question

• How quickly and completely do existing
  institutions translate social costs to private
  costs?
• Hypothesis the more effective the linkages
  between social and private costs, the more
  efficient the institution

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The Question

• How quickly and completely do existing
  institutions translate social costs to private
  costs?
• Hypothesis the more effective the linkages
  between social and private costs, the more
  efficient the institution
• Linkage (transactions costs)
• 1. Specification of property rights
• 2. Information

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Alternative Models

• North
• Dependent variable
• - outcomes changes in human behavior
• Independent variables
• institutional structure
• transactions costs
• cost of acquiring knowledge, negotiating
  agreements
• cost of enforcing agreements

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Alternative Models

• North
• Assumption Market reflects all human
  economic interaction, will reflect existing
  marginal costs as constrained by transactions
  costs
• Corollary 1 If policy directs a particular
  outcome (indirectly changing cost relationships),
  the market will reflect the change, producing
  unintended and sometimes perverse side-effects.
• Corollary 2 The market will, at best,
  recognize only the discounted present value of
  future costs.

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Institutional Innovation
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When Do Innovations Occur?

• Increased demand/Resource constraint
• changes price relationships
• New technology
• allows use of a technology previously not
  feasible reduces costs
• Change in social priorities
• new public policy changes prices

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Case Studies

• Snake River
• 2000 - 2001 energy crisis
• Klamath Basin

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Klamath River Basin 2001
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Expected Findings (Klamath)

• Appropriation rights not defined in
  constitution or statues
• Tribal rights
• ESA and related statutes
• Irrigation rights assigned by Bureau -
  Administrative allocation
• Crisis continues

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Snake River 1850 - 2002
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Snake River Development History Upper Snake 345
diversions, 41 reaches, 700 water rights, 9
reservoirs
1
1.60
1.40
1.20
1.00
0.80
0.60
0
0.40
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Fish Flush
Irrigated Acres
Drought
Milner CFS
Brownlee CFS
Plus 1 SD
Minus 1 SD
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Snake River Development History Upper Snake 345
diversions, 41 reaches, 700 water rights, 9
reservoirs
1
1.60
Carey Act 1894
1.40
National
Reclamation Act
1.20
Milner/
Twin Falls Project
1.00
Jackson Lake
1911 - 16
0.80
American Falls
0.60
Committee
Ground Water
of Nine
Development/Desert
Land Act 1877
0
0.40
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Fish Flush
Irrigated Acres
Drought
Milner CFS
Brownlee CFS
Plus 1 SD
Minus 1 SD
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Snake River Development History Upper Snake 345
diversions, 41 reaches, 700 water rights, 9
reservoirs
1
1.60
Carey Act 1894
1.40
National
Reclamation Act
1.20
Milner/
Twin Falls Project
1.00
Jackson Lake
1911 - 16
0.80
American Falls
0.60
Committee
Ground Water
of Nine
Development/Desert
Land Act 1877
0
0.40
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Fish Flush
Irrigated Acres
Drought
Milner CFS
Brownlee CFS
Plus 1 SD
Minus 1 SD
20
Snake River Development History Upper Snake 345
diversions, 41 reaches, 700 water rights, 9
reservoirs
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California Electricity Market 1990 - 2010
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A CONTRIBUTION TO THE CRITIQUE OF POLITICAL
ECONOMY, Karl Marx, 1859
In the social production of their existence, men
inevitably enter into definite relations, which
are independent of their will, namely relations
of production appropriate to a given stage in the
development of their material forces of
production. The totality of these relations of
production constitutes the economic structure of
society, the real foundation, on which arises a
legal and political superstructure and to which
correspond definite forms of social
consciousness. The mode of production of material
life conditions the general process of social,
political and intellectual life.
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Fill-up 50,000
Fill-up 8,500
Fill-up 25
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FERC 888, 889 - 1996

• Open Access Transmission
• Separate Transmission/Generation
• Merchant Plants
• WHOLESALE DEREGULATION

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California Retail Deregulation

• Separate Generation and Distribution (Retail)
  Market, not Utility Commission, Determines Supply
• Freeze Retail Rates No Link Between Supply
  Demand
• Utilities Must Buy in Pool No Bilateral
  Contracts
• Uncertainty No Generation Built Despite Demand
  Increases

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Causes of Price Spikes

• Supply Demand Imbalance
• Drought Northwest/California Exchange
• Natural Gas Prices
• Market Manipulation

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Impacts

• Price Spikes
• Demand Side (Conservation)
• Purchase Demand
• Elasticity
• Supply Side
• Planned Generation (Natural Gas CCs, CTs)
• Dam Operations to Maximize Power Output Not for
  Fish
• Temporary Generation
• Contracts
• FERC Rules Change
• July 2001 Price Caps, Generation Sale Requirement
• California Eliminated Perverse Rules

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MARKET ADJUSTMENTS THROUGH PRICE AND
INSTITUTIONAL DECISIONS
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Fill-up 50,000
Fill-up 8,500
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