HomeMy WebLinkAboutWater & Sewer Rate Structure and Rate Adoption - 01-09-2018 Council Agenda Report Water and Wastewater Rate StructureMeeting Date: 1/9/2018
FROM: Carrie Mattingly, Utilities Director
Prepared By:Jennifer Metz, Utilities Projects Manager
SUBJECT:WATER AND WASTEWATER RATE STRUCTURE REVIEW
RECOMMENDATION
Direct staff to incorporate the updated water and wastewater rate structures into the Water and
Wastewater Rate Study and fund analyses.
DISCUSSION
Background
The City’s Rate Structure Review began in July 2017 and critically examines Council goals in
support of the provision of water and wastewater services now and into the future. Guided by
HDR Engineering, Inc. (HDR), two study sessions in July and August 2017 provided the Council
and community an introduction to rate concepts and terminology and reviewing rate structure
goals (Attachments A and B). Based on the guidance received during the first two sessions, this
report now presents the recommended water and wastewater rate structures for use in the
upcoming water and wastewater rate study and fund analysis for the 2018-19 Budget
Supplement.
Actual rates are included in the recommended rate structures to review customer impacts;
however, staff is not proposing actual water and wastewater rates at this time. A recommendation
on water and wastewater rates will be included in the April 2018 Proposition 218 notice, and
presented to the Council as part of the 2018-19 Financial Plan supplement process in June 2018.
Current Rate Structure
The City’s current water rate structure does not differentiate between customer classes, meaning
there is no difference in the fixed and consumption charges to a residential customer, a
commercial business or office, or a multi-family apartment complex.
The City’s current residential wastewater rate
structure includes a monthly fixed charge per
account and a volumetric charge based on
average winter water consumption. The non-
residential rate structure also includes the
monthly fixed charge, plus a consumption
charge on all water consumption.
During the August 15, 2017, study session, the
City Council prioritized its rate structure goals,
as shown in Table 1. To identify the rate
structure that best reflect these goals, various
Table 1: City Council Rate Structure Goal
Prioritization
Rate Structure Goal Prioritization
1 Revenue Stability and Predictability
2 Discourage Wasteful Use
3 Stability and Predictability of the Rates
4
Fair Allocation of Total Cost of Service Among
Customer Classes
5 Reflect all Present and Future Costs
Source: August 15, 2017 City Council Water and
Wastewater Rate Structure Study Session.
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conceptual water and wastewater rate structures were reviewed and tested.
Recommended Rate Structures
To achieve revenue and rate stability and predictability, the Council’s #1 and #3 goals, the
recommended rate structure proposes to increase the percentage of monthly fixed charges from
existing levels. According to HDR, this movement towards a greater percentage of fixed charges
is seen throughout the water and wastewater industry and across the United States. This is due to
the impacts that climate conditions and regulatory factors have on utility revenues. The City’s
commitment to discourage wasteful use (goal #2) is maintained in the recommended tiered
residential rate structure and for all other customers by setting the variable charges at greater
than 70 percent.
To identify the appropriate level of fixed charges and ensure fair allocation of the cost of service
among customer classes (goal #4), HDR analyzed the City’s customer classes (shown in Table
2), water meter sizes, and consumption data. The average water customer uses six units of water
per month, with the average residential water bill at approximately $56. The average residential
wastewater bill, based on an average winter water use of four units, is $46.
Table 2: Water and Wastewater Accounts by Customer Class
Customer Class
Number of
Accounts
of Total
Accounts
Residential
Includes: individually metered residences, including
condominiums, and secondary dwelling units
11,203 73
Multi-Family Residential
Includes: apartments, duplexes, and mobile home parks
1,877 12
Non-Residential
Includes: all commercial, churches, city and government
facilities, schools, hotels/motels, manufacturing, etc.
1,675 11
Irrigation Only
Includes: parks, schools, and other separately metered
landscape irrigation (both potable and recycled water)
575* 4
TOTAL: 15,330 100%
NOTE: Irrigation only accounts do not generate wastewater, reducing the total wastewater
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accounts to approximately 14,800.
SOURCE: City of San Luis Obispo, Utility Billing System, 2017.
To establish greater equity for cost of service between the
customer classes, the recommended rate structure uses the
customer meter size to establish the monthly account charge
for the multi-family, non-residential, and irrigation classes.
The proposed structures, shown in Table 3 (water) and Table
4 (wastewater), reflect the recommended structure. Important
to note here is that the data shown is revenue “neutral”
meaning they represent current revenue levels. Bill
comparisons are provided at right and in Attachment C as to
how the proposed structure would affect the average
residential customer’s bill and other customer classes.
Residential Rate Structure.The recommended residential
water rate structure, applicable to individually metered
residences, proposes an increased monthly fixed charge from
12.33 to $16.40 and a new three-block increasing
consumption charge to replace the existing two blocks. The
three-block structure is based on average winter use (up to
five units/month), average peak summer use (six to 12
units/month), and greater than peak summer use (greater than
12 units/month). Consumption over the five units is charged
at a higher rate to account for the increased costs associated
with providing the additional capacity needed for higher water
consumption. Although this higher rate tier is specifically
based off the cost of providing the additional service as
required by Prop. 218, the rate will have the effect of
incentivizing conservation (goal #2). The recommended
residential wastewater rate structure also proposes an
increased monthly fixed charge per account from $8.57 to
13.80. The volumetric charge will maintain the City’s
current average winter water use approach.
Multi-Family, Non-Residential, and Irrigation Rate
Structures.The recommended rate structure for multi-family
and non-residential customers includes an increased monthly
fixed charge varying by meter size, and a uniform
consumption charge for all units of water consumed. The
recommended rate structure for irrigation customers also
includes a monthly fixed charge by meter size and a uniform
consumption charge. The average use of most irrigation
customers is in the upper block of the current rate structure.
The recommended multi-family residential wastewater rate
structure maintains the current winter water structure for those
Recommended Rate Structure
Customer Impacts
Average Residential water bill
monthly base charge + 6 units)
Current Rate Structure: $55.95 monthly
Recommended Rate Structure:
56.35 Monthly
Average Residential wastewater bill
monthly base charge + 4 units)
Current Rate Structure:
45.25 monthly
Recommended Rate Structure:
45.60 monthly
II
Multi-Family Residential customer bill
Example: # unit Apartment building
1” meter using 20 units/month
Current Water Rate Structure:
170.38 / month
Recommended Rate Structure:
186.40 monthly
Current Wastewater Rate Structure:
121.85 monthly
Recommended Rate Structure:
181.05 monthly
I
Non-Residential Customer Bill
Example: Motel with 2” water meter
using 200 units/month
Current Water Rate Structure:
1,813.85 monthly
Recommended Rate Structure:
1,637.40 monthly
Current Wastewater Rate Structure:
1,842.57 monthly
Recommended Rate Structure:
1,703.55 monthly
I
Irrigation-Only Customer Bill
Example: Park with a 2” meter
using 200 units/month
Current Water Rate Structure:
1,813.85 monthly
Recommended Rate Structure:
1,787.40 monthly
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customers with a separate irrigation meter. However, similar to the recommended water rate
structure, the monthly fixed charge is proposed to vary by meter size. The non-residential rate
alternative maintains the current rate structure based on all water consumption and adds a
monthly fixed charge that would vary by meter size.
Table 3: Current and Proposed Water Rate Structure Comparison
Existing Rate
Structure
All Customers)
Recommended Rate Structure, by “Customer Class”
Residential Multi-Family
Non-
Residential
Irrigation
Monthly Account
Charge (or Base Fee) $
12.33 $16.40 N/A N/A N/A
Monthly Account Charge (by Meter Size):
3/4” & Less N/A N/A $16.40 $16.40 $16.40
1” N/A N/A $27.40 $27.40 $27.40
1-1/2” N/A N/A $54.60 $54.60 $54.60
2” N/A N/A $87.40 $87.40 $87.40
3” N/A N/A $164.00 $164.00 $164.00
4” N/A N/A $273.40 $273.40 $273.40
6” N/A N/A $546.60 $546.60 $546.60
8” N/A N/A $874.60 $874.60 $874.60
Consumption Charge:
Block 1 (First 8 units) $7.27 N/A N/A N/A N/A
Block 2 (> 8 units) $9.08 N/A N/A N/A N/A
Block 1 (First 5 units) N/A $6.50 N/A N/A N/A
Block 2 (6 – 12 units) N/A $7.45 N/A N/A N/A
Block 3 (>12 units) N/A $8.60 N/A N/A N/A
All Consumption N/A N/A $7.75 $7.90 $8.50
NOTE: 1 unit of water equals 748 gallons
Table 4: Current and Proposed Wastewater Rate Structure Comparison
Existing Rate
Structure
All Customers)
Recommended Rate Structure by “Customer Class”
Residential Multi-Family Non-Residential
Monthly Account Charge
or Base Fee) $
8.57 $13.80 N/A N/A
Monthly Meter Charge
3/4” & Less N/A N/A $13.80 $13.80
1” N/A N/A $23.05 $23.05
1-1/2” N/A N/A $45.95 $45.95
2” N/A N/A $73.55 $73.55
3” N/A N/A $138.00 $138.00
4” N/A N/A $230.05 $230.05
6” N/A N/A $459.95 $459.95
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8” N/A N/A $735.95 $735.95
Volumetric Charge
All Consumption* $9.17 $7.90 $7.90 $8.15
Residential customers, and multi-family customers without a separate irrigation meter, are billed the volumetric
charge on average winter water use.
Water and Wastewater Drought Rate Structure
As experienced during the recent drought conditions, climatic changes have an immediate effect
on water consumption and influence wastewater production in turn. The recommended rate
structures were selected to add revenue stability; however, 77 to 78 percent of the City’s water
and wastewater revenue would still come from volumetric charges. Establishing a drought rate
structure outside of a declared drought emergency would add another component to provide
revenue stability during future drought. Once the final rate structure is determined, the City will
develop a drought rate to align with the recommended rate structures and the five water shortage
response stages beyond the Monitor stage (identified as the Watch, Warning, Severe, Extreme,
and Critical stages) in the City’s 2015 Urban Water Management Plan, Water Shortage
Contingency Plan. The drought rate structure would vary by stage to reflect the severity of the
event and would be enacted by the Council. The drought rates would be eliminated, or reduced,
as the event changes to reflect the impacts to revenues.
Public Outreach
The City is committed to helping the public understand the
recommended water and wastewater rate structures. The
Utilities Department included a feature article on the water
and wastewater rate structure changes in the most recent
Resource publication and information on the Utilities web
page. Targeted Facebook messaging directed people to the
web page for information on the recommended rate
structure changes. Outreach efforts will continue until
final consideration of the rate structure and rate study in
June.
FISCAL IMPACT
The recommended changes to the water and wastewater
rate structures were designed to be revenue neutral. If
nothing but the rate structures were to change in the
future, customers would see changes in their bill depending on their water consumption, sewer
cap, and water meter size as shown in the examples provided. Utility billing staff has confirmed
that the recommended water and wastewater rate structures presented in this report can be
accommodated by the City’s utility billing software and incorporated into the billing system.
The City has begun a comprehensive Rate Study where actual rates will be developed around
each customer class, water consumption patterns, and cost of service. The Rate Study is
anticipated to be discussed at a study session with the City Council on February 6, 2018.
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CONCURRENCES
Concurrence was provided by other affect reviewing City departments.
ENVIRONMENTAL REVIEW
Modification of rates and charges by public agencies is statutorily exempt from the California
Environmental Quality Act (CEQA) under Section 15273 of the Public Resources Code because
the change in fees is not intended to fund expansion of capital projects not otherwise evaluated
under CEQA. Therefore, no environmental review is required for this item.
Attachments:
a - Rate Structure CAR 7-18-2017
b - Rate Structure CAR 8-15-2017
c - Rate Structure Customer Impacts
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3: Structure Customer
Structure - Bill
Present Structure:
Fixed Acct.
Per Account $12.33
Unit
0 – 8 Units $7.27
8 + Units 9.08
Present Proposed
CCF)
0 $12.33 $16.40 $4.07 33.0%
1 19.60 22.95 3.35 17.1%
2 26.87 29.50 2.63 9.8%
3 34.14 36.05 1.91 5.6%
4 41.41 42.60 1.19 2.9%
5 48.68 49.15 0.47 1.0%
6 55.95 55.70 (0.25) -0.4%
7 63.22 62.25 (0.97) -1.5%
8 70.49 68.80 (1.69) -2.4%
9 79.57 76.98 (2.59) -3.3%
10 88.65 85.16 (3.49) -3.9%
Di
Proposed Structure:
Fixed Acct.
Per Account $16.40
Unit
0 – 5 Units $6.50
5 – 25Units7.45
25 + Units 8.60
In Units
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3: Rate Structure Customer Impacts
Water Rate Structure - Family Bill Comparison
Present Rates:
Base Fee $ / Acct.
Per Account $12.33
Volume Charge $ / Unit
0 – 8 Units $7.27
8 + Units 9.08
Present Proposed
CCF) Rates Rates $ %
3/4" & Less Customer
5 $48.68 $54.65 $5.97 12.3%
10 88.65 98.64 9.99 11.3%
15 134.05 142.63 8.57 6.4%
20 179.45 186.61 7.16 4.0%
25 224.85 230.60 5.75 2.6%
30 270.25 274.59 4.34 1.6%
35 315.65 318.58 2.92 0.9%
1" Customer
25 $224.85 $230.60 $5.75 2.6%
50 451.85 450.54 (1.31) -0.3%
75 678.85 670.48 (8.38) -1.2%
100 905.85 890.41 (15.44) -1.7%
125 1,132.85 1,110.35 (22.50) -2.0%
150 1,359.85 1,330.29 (29.56) -2.2%
Di
Proposed Rates:
Base Fee $ / Acct.
Less $16.40
1-Inch 27.40
Volume Charge $ / Unit
All 7.75
In Units
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3: Rate Structure Customer Impacts
Water Rate Structure - Non-Bill Comparison
Present Rates:
Base Fee $ / Acct.
Per Account $12.33
Volume Charge $ / Unit
0 – 8 Units $7.27
8 + Units 9.08
Present Proposed
CCF) Rates Rates $ %
3/4" & Less Customer
5 $48.68 $55.90 $7.22 14.8%
10 88.65 95.40 6.75 7.6%
15 134.05 134.90 0.85 0.6%
20 179.45 174.40 (5.05) -2.8%
25 224.85 213.90 (10.95) -4.9%
30 270.25 253.40 (16.85) -6.2%
35 315.65 292.90 (22.75) -7.2%
1" Customer
25 $224.85 $213.90 ($10.95) -4.9%
50 451.85 411.40 (40.45) -9.0%
75 678.85 608.90 (69.95) -10.3%
100 905.85 806.40 (99.45) -11.0%
125 1,132.85 1,003.90 (128.95) -11.4%
150 1,359.85 1,201.40 (158.45) -11.7%
175 1,586.85 1,398.90 (187.95) -11.8%
2" Customer
50 $451.85 $411.40 ($40.45) -9.0%
100 905.85 806.40 (99.45) -11.0%
150 1,359.85 1,201.40 (158.45) -11.7%
200 1,813.85 1,596.40 (217.45) -12.0%
250 2,267.85 1,991.40 (276.45) -12.2%
300 2,721.85 2,386.40 (335.45) -12.3%
350 3,175.85 2,781.40 (394.45) -12.4%
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Proposed Rates:
Base Fee $ / Acct.
Less $16.40
1-Inch 27.40
2-Inch 87.40
Volume Charge $ / Unit
All 8.20
In Units
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3: Rate Structure Customer Impacts
Water Rate Structure - Bill CŽmparisŽn
Present Rates:
Base Fee $ / Acct.
Per Account $12.33
sŽlume Charge $ / Unit
0 – 8 Units $7.27
8 + Units 9.08
CCF) Rates Rates $ %
0 $12.33 $16.40 $4.07 33.0%
2 26.87 33.40 6.53 24.3%
4 41.41 50.40 8.99 21.7%
6 55.95 67.40 11.45 20.5%
8 70.49 84.40 13.91 19.7%
10 88.65 101.40 12.75 14.4%
12 106.81 118.40 11.59 10.9%
14 124.97 135.40 10.43 8.3%
16 143.13 152.40 9.27 6.5%
18 161.29 169.40 8.11 5.0%
20 179.45 186.40 6.95 3.9%
25 224.85 228.90 4.05 1.8%
30 270.25 271.40 1.15 0.4%
40 361.05 356.40 (4.65) -1.3%
50 451.85 441.40 (10.45) -2.3%
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PrŽpŽsed Rates:
Base Fee $ / Acct.
Less $16.40
sŽlume Charge $ / Unit
All 8.50
In Units
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3: Rate Structure Customer Impacts
Wastewater Rate Structure - Bill Comparison
Present Rates:
Base Fee $ / Acct.
Per Account $8.57
Volume Charge $ / Unit
All Use $9.44
Present Proposed
CCF) Rates Rates $%
All Customers - AWWU 3
0 $8.57 $13.80 $5.23 61.0%
1 17.74 21.75 4.01 22.6%
2 26.91 29.70 2.79 10.4%
3 36.08 37.65 1.57 4.4%
4 36.08 37.65 1.57 4.4%
5 36.08 37.65 1.57 4.4%
6 36.08 37.65 1.57 4.4%
All Customers - AWWU 4
0 $8.57 $13.80 $5.23 61.0%
1 17.74 21.75 4.01 22.6%
2 26.91 29.70 2.79 10.4%
3 36.08 37.65 1.57 4.4%
4 45.25 45.60 0.35 0.8%
5 45.25 45.60 0.35 0.8%
6 45.25 45.60 0.35 0.8%
All Customers - AWWU 5
0 $8.57 $13.80 $5.23 61.0%
1 17.74 21.75 4.01 22.6%
2 26.91 29.70 2.79 10.4%
3 36.08 37.65 1.57 4.4%
4 45.25 45.60 0.35 0.8%
5 54.42 53.55 (0.87) -1.6%
6 54.42 53.55 (0.87) -1.6%
Di
Proposed Rates:
Base Fee $ / Acct.
Per Account $13.80
Volume Charge $ / Unit
All Use $7.95
In Units
NOTE: AWWU = Average Winter Water Use
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3: Rate Structure Customer Impacts
Wastewater Rate Structure - Family Bill Comparison
Present Rate Structure:
Base Fee $ / Acct.
Per Account $8.47
Volume Charge $ / CCF
All Use $9.17
Present Proposed
CCF) Rates Rates $%
3/4" & Less Customer - AWWU 5
0 $8.57 $13.80 $5.23 61.0%
1 17.74 21.75 4.01 22.6%
2 26.91 29.70 2.79 10.4%
3 36.08 37.65 1.57 4.4%
4 45.25 45.60 0.35 0.8%
5 54.42 53.55 (0.87) -1.6%
6 54.42 53.55 (0.87) -1.6%
1" Customer - AWWU 7
0 $8.57 $23.05 $14.48 169.0%
2 26.91 38.95 12.04 44.7%
4 45.25 54.85 9.60 21.2%
6 63.59 70.75 7.16 11.3%
8 72.76 78.70 ` 5.94 8.2%
10 72.76 78.70 5.94 8.2%
12 72.76 78.70 5.94 8.2%
1 1/2" Customer - AWWU 9
0 $8.57 $45.95 $37.38 436.2%
3 36.08 69.80 33.72 93.5%
6 63.59 93.65 30.06 47.3%
9 91.10 117.50 26.40 29.0%
12 91.10 117.50 26.40 29.0%
15 91.10 117.50 26.40 29.0%
18 91.10 117.50 26.40 29.0%
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Proposed Rate Structure:
Base Fee $ / Acct.
Less $13.80
1-Inch 23.05
1-1/2-Inch 45.95
Volume Charge $ / Unit
All Use $7.95
In Units
NOTE: AWWU = Average Winter Water Use
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3: Rate Structure Customer Impacts
Wastewater Rate Structure - Non-Bill Comparison
Present Rate Structure:
Base Fee $ / Acct.
Per Account $8.57
Volume Charge $ / Unit
All Use $9.17
Present Proposed
CCF) Rates Rates $%
3/4" & Less Customer
0 $8.57 $13.80 $5.23 61.0%
2 26.91 30.10 3.19 11.9%
4 45.25 46.40 1.15 2.5%
6 63.59 62.70 (0.89) -1.4%
8 81.93 79.00 (2.93) -3.6%
10 100.27 95.30 (4.97) -5.0%
12 118.61 111.60 (7.01) -5.9%
1" Customer
5 $54.42 $63.80 $9.38 17.2%
10 100.27 104.55 4.28 4.3%
15 146.12 145.30 (0.82) -0.6%
20 191.97 186.05 (5.92) -3.1%
25 237.82 226.80 (11.02) -4.6%
30 283.67 267.55 (16.12) -5.7%
35 329.52 308.30 (21.22) -6.4%
2" Customer
10 $100.27 $155.05 $54.78 54.6%
20 191.97 236.55 44.58 23.2%
30 283.67 318.05 34.38 12.1%
40 375.37 399.55 24.18 6.4%
50 467.07 481.05 13.98 3.0%
60 558.77 562.55 3.78 0.7%
70 650.47 644.05 (6.42) -1.0%
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Proposed Rate Structure:
Base Fee $ / Acct.
Less $13.80
1-Inch 23.05
2-Inch 73.55
Volume Charge $ / Unit
All Use $8.15
In Units
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