Market-Based Operation to Improve the Efficiency of Water Supplies from the Colorado River Basin

Abstract

Disposition of water supplies in the Colorado River Basin was simulated under several different allocation systems and two levels of demand. Under the current system of compacts and reservoir operation rules no significant shortfalls were observed at the current demand level. At future demand levels, shortages reached disruptive levels. These shortfalls principally affected the Metropolitan Water District, and their magnitude depended on assumptions regarding surplus release policies at Lake Mead. Under a system of allocation based on economic values, shortages to high-valued M&I users could be dramatically reduced at the expense of modest increases in shortfalls to lower-valued uses (primarily agriculture), but occasional severe shortages to municipal users in both basins persisted. Shortages to municipal users could be eliminated by instituting a reserve policy in mainstem reservoirs, with water purchased from low-valued uses and maintained in storage for use by high-valued uses during drought periods. This paper reports the quantification of expected relative benefits of alternative management schemes involving transfers of water within the Colorado River Basin. It builds on the results of a study of the disposition of incremental streamflow from forestry practices in the Basin (Brown, et al, in press). The paper first describes the physical and institutional setting of the Colorado River Basin. It then briefly describes the model used to analyze alternative management schemes. Then the estimated effect of management changes is described.