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Rates, Conservation, Opting Out, Metering, Loss Prevention, Data Collection & Benchmarks

Rates, Conservation, Opting Out, Metering, Loss Prevention, Data Collection & Benchmarks. David A. Sheard, P.E. Public Service Commission of Wisconsin 608-266-9640 david.sheard@psc.state.wi.us. State Utility Commission’s Jurisdiction. IOU plus cities or districts (14)

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Rates, Conservation, Opting Out, Metering, Loss Prevention, Data Collection & Benchmarks

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  1. Rates, Conservation, Opting Out, Metering, Loss Prevention, Data Collection & Benchmarks David A. Sheard, P.E. Public Service Commission of Wisconsin 608-266-9640 david.sheard@psc.state.wi.us

  2. State Utility Commission’s Jurisdiction IOU plus cities or districts (14) IOUs only (31) No jurisdiction (5)

  3. Water Rate Comparison18,750 Gallons per Quarter

  4. Utility Frequency Distribution

  5. Ave. Cost: 18,750 gals. & ¾ in. Meter • Class AB ………………… $ 56.25 • Class C …………………. $ 63.10 • Class D …………………. $ 69.66 • Average All Classes …….. $ 66.22 -Rates as of February 8, 2006

  6. Water: A Rising Cost IndustryThe Drivers • Increasing water quality standards under the Safe Drinking Water Act • Infrastructure replacement, especially water mains • Increasing cost and complexity of siting additional supply facilities • Growth in both numbers of customers and consumption per capita

  7. Ave. Charge for 18,750 Gallons per Quarter: Wisconsin utilities

  8. Overview of the Ratemaking Process Rate Design Revenue Requirement Cost of Service

  9. Public Water UtilityOne “Pipe” – Many Customer Uses Public Authority PFP Commercial Industrial Residential

  10. General Rate Classes • Residential • Commercial • Industrial • Public Authority • Public Fire Protection

  11. Cost of Service Methods • American Water Works Association’s Base Capacity - Extra Demand

  12. Steps in the Cost of Service Study • Allocate costs to functional components • Assign functional costs to customer classes

  13. Typical Assignment of Functional Cost to Classes Max. Day Max. Hour Base Customer Residential Commercial Industrial Public & Other Fire Service

  14. The Role of Price in Utility Services

  15. Basic Rate Design Forms Uniform Rate $/Unit Seasonal Rate $/Unit Inclining Block $/Unit Declining Block $/Unit

  16. Conservation Conundrum • Disincentive to promote conservation because revenues diminish as customers conserve • Energy sector experienced decoupling of sales volumes and revenues since the early 1980’s • Growing conservation ethic requires this “decoupling”

  17. Current Conservation Practice • Historical consolidation and flattening of rate blocks • To date no utilities are applying water conservation rate structures or using conservation incentive programs • Almost all water sold by utilities is on a metered basis • Some utilities have school programs and radio and newspaper ads to educate residents on water conservation including summer sprinkling needs • Many municipalities enact sprinkling restrictions • There is some industrial recycling

  18. Opt out issue • What does it mean to “opt out” of the water system? • Who can do it? • Why is it an issue? • What effect could it have on a conservation based rate structure? • Does Wis. Stats. 281.45 impact this issue? • What are the policy implications of changing the “opt out” alternative?

  19. Real Life Example • Facts • City water utility serving about 4,000 customers • One industrial customer who represented 50% of total volume sales; 25% of all revenues • Industry “opted out” & installed own surface water supply because of concern over a large water rate increase • Result: The remaining utility customer base had to absorb an immediate 25% increase in water rates.

  20. Metering “… if you can’t measure it, you can’t manage it…” • Cutler-Hammer…& others

  21. Water Meter Standards • Basis for billing & measuring the efficiency of the distribution system • Periodic testing to maintain accuracy • Customer meters (PSC 185.65 Wis. Admin. Code) • Station meters (PSC 185.83 Wis. Admin. Code)

  22. Water Loss Program • Annual query of the annual report database for water loss • Utilities outside the standards are contacted and asked to take action • Follow up to provide accountability and offer assistance to utilities trying to improve

  23. Water Loss Standards PSC 185.85 • Class AB utilities – 15% water loss • Class C & D utilities – 25% water loss

  24. Class AB Utility Average

  25. Class C Utility Average

  26. Class D Utility Average

  27. Utility Water Pumped in Wisconsin

  28. Utility Unaccounted Water in Wisconsin

  29. Percent Unaccounted Water in Wisconsin

  30. Financial Viability Program • Annually select 6 to 12 utilities to work with to improve their financials • Generally includes a rate increase

  31. Financial Viability Work Plan • Ongoing work plan started in late 1997 • Identify a group of systems each year that may need financial help. Sort systems based on: • Net Operating Loss • Date since last rate increase • Current ROR • Debt/Equity ratio • Percent Water loss

  32. Data Collection • Annual financial reports of nearly 600 water utilities • Operating statistics including water pumpage and volume sales • Tariffs – the rates and rules • Benchmarks – financial and operational in the aggregate and individual systems

  33. PSC Web Site • http://psc.wi.gov/ • FAQ’s • Tariffs • Rate Comparison • Annual Reports • Benchmarks • Wisconsin Administrative Codes • Water Conservation Webpage

  34. Any Questions?

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