The Tale of Two Water Meters – Customer Equity and Water Budget Rates
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The Tale of Two Water Meters – Customer Equity and Water Budget Rates Presented by: Greg Clumpner Senior Financial Manager HDR Engineering, Inc. Discussion Topics. Overview of Water Rates in California Legal Framework of Water Rates Water Consumption Patterns

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The Tale of Two Water Meters – Customer Equity and Water Budget RatesPresented by:Greg ClumpnerSenior Financial ManagerHDR Engineering, Inc.


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Discussion Topics Budget Rates

  • Overview of Water Rates in California

  • Legal Framework of Water Rates

  • Water Consumption Patterns

  • Empirical Data – City of Fresno

  • The Tale of Two Water Meters

  • Conclusions

HDR - A Tale of Two Meters


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Water Rates in California Budget Rates

  • California is Facing Some Significant Challenges, such as:

    • Prolonged Drought

    • Water Supply Shortages

    • Costly Water Quality & Supply Projects

  • Current Economy Has Led to More Prop 218 Rejections of Rate Increases

  • Greater Attention on “Fairness and Equity” in New Water Rates

HDR - A Tale of Two Meters


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Water Rates in California (cont.) Budget Rates

  • Many Cities are Moving Towards More Conservation-Oriented Water Rates:

    • Converting from Flat to Volumetric Rates

    • Converting from Uniform Volumetric (Single-Tier) Rates to Multi-Tiered Rates

    • Converting from Multi-Tiered Rates to Water Budget Based Rates

HDR - A Tale of Two Meters


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Water Rates in California (cont.) Budget Rates

  • Water Budget-Based Rates Appear to be the “Cutting Edge” in Conservation:

    • A Water Budget is Defined for Each Customer (Typically Just Residential)

    • Budgets Reflect Lot Size, Irrigable Area, Household Size, etc.

    • They Clearly Promote Conservation, but Raise Some Questions About Equity

HDR - A Tale of Two Meters


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Legal Framework of Water Rates Budget Rates

  • Prop 218* – The “Right to Vote on New Taxes” (1996)

  • AB 3030* – Inflation Adjustments and Wholesale Pass-throughs (2002)

  • AB 2572*– Requires Water Meters for Urban Water Suppliers (2004)

  • AB 2882*– Allocation-Based Conservation Water Pricing (2008)

*California law

HDR - A Tale of Two Meters


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Legal Framework of Water Rates Budget Rates(cont.)

  • AB 2882 – “Allocation-Based Conservation Water Pricing”

    • Aimed at two major water priorities in Calif.:

      • Preventing unreasonable waste of water

      • Ensuring costs are proportionally spread among customers

    • But the focus is on providing legal foundation for allocation-based conservation pricing:

      “A basic use allocation is established for each customer account that provides a reasonable amount of water for the customer’s needs and property characteristics.” (Chapter 3.4, Section 372 (a) (2))

HDR - Re-Structuring Water Rates


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Legal Framework of Water Rates Budget Rates(cont.)

  • AB 2882 – Additional Requirements for Allocation-Based Pricing:

    • Rates must be based on metered usage

    • Must use increasing blocks (tiers) to encourage conservation

    • Rates must be proportional to:

  • Water consumption

  • “Discretionary Allocation of incremental costs between tiers”

  • Customer classes

  • Basic use allocations

  • Meter size

HDR - Re-Structuring Water Rates


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Water Consumption Budget Rates Patterns

HDR - A Tale of Two Meters


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Water Consumption Patterns Budget Rates

Typical Consumption Patterns by Customer Classes:

HDR - A Tale of Two Meters


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Water Consumption Patterns Budget Rates(cont.)

Typical Peaking Patterns by Customer Classes:

HDR - A Tale of Two Meters


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Water Consumption Patterns Budget Rates(cont.)

Seasonal Averages – Single-Family Customers:

HDR - A Tale of Two Meters


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Water Consumption Patterns Budget Rates(cont.)

“Expected” Water Consumption by Lot Size:

We would expect proportional increases in consumption as lot sizes increase:

HDR - A Tale of Two Meters


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Water Consumption Patterns Budget Rates(cont.)

Water Consumption by Lot Size (City of Modesto)

HDR - A Tale of Two Meters


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Water Consumption Patterns Budget Rates(cont.)

Number of Lots by Size (Modesto)

HDR - A Tale of Two Meters


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Water Consumption Patterns Budget Rates(cont.)

Water Consumption (per 1,000 sf) by Lot Size (Modesto)

HDR - A Tale of Two Meters


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Empirical Data – Budget RatesCity of Fresno

HDR - A Tale of Two Meters


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Empirical Data – City of Fresno Budget Rates

Fresno Bee Article* (“How Will Meters affect Fresno Water Bills?”):

  • Analysis based on 6 months of meter data from 70 homes showed:

    • Highest consumption was 7x lowest

    • 25% to 50% appeared to have plumbing or irrigation leaks

    • Water use varied widely, even among homes with the same size lots

(*Fresno Bee, 8-30-09):

HDR - A Tale of Two Meters


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Empirical Data – City of Fresno Budget Rates(cont.)

Fresno Bee Article (cont.):

  • Current flat rates are based on lot size; impacts of new metered rates vary by lot size:

    • Smaller lots (≤ 6,000 sf): 17 of 23 would see their bills increase

    • Medium-size lots (> 6,000 but ≤ 10,000 sf): 50% would have higher and 50% would have lower bills (i.e., 14 and 14)

    • Larger lots (> 10,000 sf): 16 of 19 would have smaller bills

HDR - A Tale of Two Meters


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Empirical Data – City of Fresno Budget Rates(cont.)

City of Fresno – Changes in Water Bills from Current Flat Rates to New Metered Rates:

HDR - A Tale of Two Meters


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Empirical Data – City of Fresno Budget Rates(cont.)

City of Fresno – Changes in Water Bills from Current Flat Rates to New Metered Rates

  • Data from 23 homes on lots ≤ 6,000 sf

  • 17 of 23 homes would pay more under metered rates

HDR - A Tale of Two Meters


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Empirical Data – City of Fresno Budget Rates(cont.)

Fresno Bee Article (8-30-09):

  • Analysis based on 6 months of meter data from 70 homes showed:

    • Highest consumption was 7x lowest

    • 25% to 50% appeared to have plumbing or irrigation leaks

    • Water use varied widely, even among homes with the same size lots.

HDR - A Tale of Two Meters


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The Tale of Two Budget RatesWater Meters

HDR - A Tale of Two Meters


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The Tale of Two Water Meters: Budget Rates

  • Meter #1: Water Budget-Based Water Rate Structure

  • Meter #2: Multi-Tiered Conservation-Based Water Rate Structure

HDR - A Tale of Two Meters


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The Tale of Two Water Meters (cont.) Budget Rates

  • City of Aurora Metered Data (Summer Season) for 50,700 Residential Customers Was Used to Compared Monthly Bills Under These Two Rate Structures

  • Water Budget-Based Rates from Boulder, CO, Were Applied to Aurora’s Consumption Data for Lots of 5,000 to 9,000 sf

HDR - A Tale of Two Meters


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The Tale of Two Water Meters (cont.) Budget Rates

  • Monthly Bills from Water Budget Rates Were Compared to Bills from More Typical Multi-Tiered Conservation Rates

  • Results indicate that Most Customers had Different Bills for Exactly the Same Level of Consumption

HDR - A Tale of Two Meters


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The Tale of Two Water Meters (cont.) Budget Rates

Results: Water Bills for Water Budget Rates vs. Multi-Tiered Rates

HDR - A Tale of Two Meters


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The Tale of Two Water Meters (cont.) Budget Rates

Results - Water Bills (for the same amount of water use):

HDR - A Tale of Two Meters


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Conclusions Budget Rates:

  • Residential consumption is typically highly variable within lots of the same size

  • Our analysis of water budget-based rate structures showed:

    • Water-budget based rates will result in some customers with higher water use paying lower water bills (for very similar size lots)

    • Rate Equity: will customers using less water but getting higher bills consider water budget-based rates to be equitable?

    • Water Agencies should carefully evaluate consumption patterns and know the rate impacts before adopting water budget rates

HDR - A Tale of Two Meters


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Questions? Budget Rates

HDR - A Tale of Two Meters


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