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Home My WebLink About12-04-2012 ac munds & malico at b2• RECEIVE D DEC 0 3 201 2 council memoRanOuffici n CLER K December 3, 201 2 TO : City Counci l VIA: Katie Lichtig, City Manager 1 FROM : Carrie Mattingly, Utilities Directo r PREPARED BY : Ron Munds, Utilities Conservation Manage r Debbie Malicoat, Utilities Business Manager SUBJECT : Proposed Water Rate Structure and Low Income Customer s After several water rate structure study sessions, Council is considering adopting a water rat e structure that would implement a minimum fixed fee per month ; a concept that would increas e the monthly bill for "lower water use" customers and decrease the monthly bill for "higher wate r use" customers . The staff recommendation includes adopting a fixed fee of $5 per month an d creation of a two-tiered consumption structure for residential customers . The consumption tier s would provide lower per-unit rates for the first 8 units of water . The second tier for use of 9 o r more units would be charged at a higher rate . In response to concerns about how the proposed water rate structure would impact low incom e customers, staff has done additional analysis to assist in understanding the scope and breadth o f this impact. Staff reviewed the billings for August, September and October 2012 for the cur rent group o f customers that participate in the City's low income assistance program . While usage an d program participation varies from month to month, there are approximately 415 account s participating in the program (approximately 2% of total accounts). The median usage for thi s group is 6 units per month . For purposes of this analysis, staff has considered those using 6 o r fewer units of water per month as "lower use" accounts and those using 7 or more units a s "higher use" accounts . As shown in the table below, approximately 60% of low income customers fall into the "lower use" category and 40% use 7 or more units of water each month . AGENDA CORRE SPONDENC EDate]L1tem#R • • • Proposed Water Rate Structure and Low Income Customers Page 2 !Summary Summary August September October 3 mont h averag e Number of Low income accounts using 6 units or less :237 197 293 242 Number of Low income accounts using 7-25 units :172 213 122 169 Number of Low income accounts using 25+units :1 7 1 3 Low income accounts using 6 units or less (as % of total 58%47%70%58 .5% Low income accounts using 7 - 25 units :42%51%29%40.8% Low income accounts using 25+ units :0%2%0%0.7 % Average # of units for accounts using 6 or less :3 4 3 3 Average # of units for accounts using 7 -25 :11 12 9 1 1 Average #of units for accounts using 25+:27 33 28 2 9 'Median '61 71 51 61 Based on the recommended water rate structure, those customers using 8 units of water or mor e would see a decrease in their water bill ; those using less than this amount would see an increase . This `break point,' where the recommended and alternative rate structures positively o r negatively impacts the customer, changes for each of the alternatives based on the amount of th e fixed charge . For example, if the fixed charge were $7 per month, the `break point' would b e around 6 units of water . In addition, Utilities staff received a list of properties from the City's Housing Program s Manager that are considered affordable housing units for very low, low, and moderate incom e earners . Analysis of this group indicates that a significant portion of the affordable housing unit s are not single-metered units ; rather, they are apartment complexes or other master-metere d properties . Of the 46 single-metered units on the list, the average consumption is 6 .1 units of water . This data indicates that a large number of low income customers either use more than 6 units of water or live in housing that does not directly receive a water bill, but would b e considered "higher use" customers . While these master-metered customers will benefit from a minimum fixed charge rate structure, how that benefit would be passed along to the renters of the individual units is not within the control of the City . In summary, after analysis of this data, there does not appear to be a direct correlation betwee n income level and the amount of water used . In fact, about 40% of the low income account s would be considered "higher use ." There is anecdotal evidence that these higher use customer s tend to be families or houses inhabited by multiple people . Preliminary analysis of residentia l customer use patterns indicates that there seems to be a correlation between the size of th e household and the amount of water use, however the size of the household is not an indicator o f income level . In addition, low water use does not necessarily indicate low income levels . Having said that, staff is very sensitive to the impacts of the rate structure changes on all utilit y customers and will be prepared to discuss alternatives with the Council at the meeting o n December 4, 2012 . • • • Proposed Water Rate Structure and Low Income Customers Page 3 Alternative Rate Structure s Based on Council's discussion, the City's consultant has provided additional compariso n information as requested . These are based on "Alternative 2," a concept which reflects two tier s and a minimum charge, the only difference between the attached examples is the amount of th e minimum charge . Attached to this memo are comparisons with a minimum charge of $6 .00 , $7 .00 or $7 .25 . Staffs recommended rate proposal with a minimum of $5 .00 per month, is also attached . G :\Council Communications\Council Memos\Water Rate Structure low income.docx • • • Staff Recommendatio n Residential Proposed Rate Structure - Adjusted 2-Blocks With Fixe d Monthly Charg e CONSUMPT PRESENT PROPOSED $DIFF %DIF F 0 $0 .00 $5.00 $5 .00 0 .0 % 1 6 .25 11 .10 4 .85 77 .6 % 2 12 .50 17 .20 4 .70 37 .6 % 3 18 .75 23 .30 4 .55 24 .3% 4 25 .00 29 .40 4 .40 17 .6% 5 31 .25 35 .50 4 .25 13 .6% 6 39 .07 41 .60 2 .53 6 .5% 7 46 .89 47 .70 0 .81 1 .7 % 10 70 .35 69 .06 (1 .29)-1 .8 % 12 85 .99 84 .32 (1 .67)-1 .9 % 14 101 .63 99 .58 (2 .05)-2 .0 % 16 117 .27 114 .84 (2 .43)-2 .1 % 18 132 .91 130 .10 (2 .81)-2 .1 % 20 148 .55 145 .36 (3 .19)-2 .1 % 25 187.65 183 .51 (4 .14)-2 .2 % PRESENT PROPOSE D Monthly Fixed Charge Monthly Fixed Charg e per customer $0 .00 per customer $5.00 Consumption Charges Consumption Charges 0 -5 ccf $6 .25 0 - 8 ccf $6 .1 0 5 -25 ccf 7 .82 9+ ccf 7 .6 3 26+ ccf 9 .80 •11/28/2012 Copy of SLO Water RPR 2012-$5_final rate designs11 .28.12 .xlsm Alternative 2 with $xed fe e Residential Alternative 2 Bill Compariso n CONSUMPT PRESENT PROPOSE D 0 $0 .00 $6 .00 $6 .00 0 .0 % 1 625 6 .00 (0 .25)-4 .0 % 2 12 .50 12 .45 (0 .05)-0 .4 % 3 18.75 18 .90 0 .15 0 .8 % 4 25 .00 25 .35 0 .35 1 .4 % 5 3125 31 .80 0 .55 1 .8 % 6 39 .07 38 .25 (0 .82)-2 .1 % 7 46 .89 44 .70 (2 .19)-4 .7 % 10 70 .35 67 .27 (3 .08)-4 .4 % 12 85 .99 83 .39 (2 .60)-3 .0 % 14 101 .63 99 .51 (2 .12)-2 .1 % 16 117 .27 115 .63 (1 .64)-1 .4 % 18 132 .91 131 .75 (1 .16)-0 .9 % 20 148 .55 147 .87 (0 .68)-0.5 % 25 187 .65 188 .17 0 .52 0 .3 % Monthly Fixed Charg e per customer $0 .0 0 Consumption Charge s 0 - 5 ccf $6 .2 5 5 - 25 ccf 7 .8 2 26+ccf 9 .80 Monthly Fixed Charg e per customer $6 .0 0 Consumption Charge s 0 - 1 ccf $0 .00 2 - 8 ccf 6 .45 9+ ccf 8 .06 Alternative 2 with $7 fixed fe e • Proposed Rate Design - Option 3 - Adjusted 2-Blocks With Minimum Charg e CONSUMPT PRESENT PROPOSED $DIFF %DIF F 0 $0 .00 $7.00 $7 .00 0 .0 % 1 6 .25 7 .00 0 .75 12 .0 % 2 12 .50 13 .38 0 .88 7 .0 % 3 18 .75 19.76 1 .01 5 .4 % 4 25 .00 26.14 1 .14 4 .6 % 5 31 .25 32 .52 1 .27 4 .1 % 6 39.07 38 .90 (0 .17)-0 .4 % 7 46 .89 45 .28 (1 .61)-3 .4 % 10 70 .35 67 .62 (2 .73)-3 .9 % 12 85 .99 83 .58 (2 .41)-2 .8 % 14 101 .63 99 .54 (2 .09)-2 .1 % 16 117 .27 115 .50 (1 .77)-1 .5 % 18 132.91 131 .46 (1 .45)-1 .1 % 20 148 .55 147 .42 (1 .13)-0 .8 % 25 187 .65 187 .32 (0 .33)-0 .2 % PRESENT PROPOSE D Monthly Fixed Charge Monthly Fixed Charg e per customer $0 .00 per customer $7 .0 0 Consumption Charges Consumption Charges 0 - 5 ccf $6 .25 0 -1 ccf $0 .00 5 - 25 ccf 7 .82 2 - 8 ccf 6 .38 26+ ccf 9 .80 9+ ccf 7 .98 •11/28/2012 Copy of SLO Water RPR 201245_final rate designsl1 .28 .12 .xlsm Alternative 2 with $7 .2 5 fixed fe e Proposed Rate Design - Option 3 - Adjusted 2-Blocks With MinimumCharge CONSUMPT PRESENT PROPOSED $DIFF %DIF F 0 $0 .00 1 6 .2 5 2 12 .5 0 3 18 .7 5 4 25 .0 0 5 .31 .2 5 6 39 .0 7 7 46 .8 9 10 70 .3 5 12 85 .99 14 101 .6 3 16 117 .2 7 18 132 .9 1 20 148 .5 5 25 187 .65 $7 .2 5 7 .2 5 13 .60 19 .95 26 .30 32 .65 39 .00 45 .35 67 .60 83 .50 99 .40 115 .3 0 131 .2 0 147 .1 0 186 .85 $7 .25 0 .0 % 1 .00 16 .0% 1 .10 8 .8 % 1 .20 6 .4 % 1 .30 5 .2 % 1 .40 4 .5 % (0 .07)-0 .2 % (1 .54)-3 .3 % (2 .75)-3 .9 % (2 .49)-2 .9 % (2.23)-2 .2 % (1 .97)-1 .7 % (1 .71)-1 .3 % (1 .45)-1 .0% (0 .80)-0 .4% PRESENT Monthly Fixed Charg e per customer $0 .0 0 Consumption Charge s 0 - 5 ccf $6 .25 5 - 25 ccf 7 .8 2 26+ ccf 9 .80 PROPOSE D Monthly Fixed Charg e per customer $7 .2 5 Consumption Charge s 0 -1 ccf $0 .0 0 2-8ccf 6 .3 5 9+ ccf 7 .95 •11/28/2012 Copy of SLO Water RPR 2012-$5_final rate designs .xlsm