The Tale of Two Water Meters

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The Tale of Two Water Meters Customer Equity
and Water Budget RatesPresented byGreg
ClumpnerSenior Financial ManagerHDR
Engineering, Inc.
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Discussion Topics

• 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

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Water Rates in California

• 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

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Water Rates in California (cont.)

• 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

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Water Rates in California (cont.)

• 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

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Legal Framework of Water 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
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Legal Framework of Water 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 customers needs and
  property characteristics. (Chapter 3.4, Section
  372 (a) (2))

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Legal Framework of Water 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

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Water Consumption Patterns
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Water Consumption Patterns
Typical Consumption Patterns by Customer Classes
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Water Consumption Patterns (cont.)
Typical Peaking Patterns by Customer Classes
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Water Consumption Patterns (cont.)
Seasonal Averages Single-Family Customers
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Water Consumption Patterns (cont.)

• Expected Water Consumption by Lot Size

We would expect proportional increases in
consumption as lot sizes increase
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Water Consumption Patterns (cont.)

• Water Consumption by Lot Size (City of Modesto)

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Water Consumption Patterns (cont.)

• Number of Lots by Size (Modesto)

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Water Consumption Patterns (cont.)

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

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Empirical Data City of Fresno
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Empirical Data City of Fresno
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)
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Empirical Data City of Fresno (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 (gt 6,000 but 10,000 sf) 50
  would have higher and 50 would have lower bills
  (i.e., 14 and 14)
• Larger lots (gt 10,000 sf) 16 of 19 would have
  smaller bills

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Empirical Data City of Fresno (cont.)

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

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Empirical Data City of Fresno (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

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Empirical Data City of Fresno (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.

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The Tale of Two Water Meters
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The Tale of Two Water Meters

• Meter 1 Water Budget-Based Water Rate
  Structure
• Meter 2 Multi-Tiered Conservation-Based Water
  Rate Structure

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The Tale of Two Water Meters (cont.)

• 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 Auroras Consumption Data for Lots of
  5,000 to 9,000 sf

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The Tale of Two Water Meters (cont.)

• 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

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The Tale of Two Water Meters (cont.)
Results Water Bills for Water Budget Rates vs.
Multi-Tiered Rates
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The Tale of Two Water Meters (cont.)
Results - Water Bills (for the same amount of
water use)
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Conclusions

• 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

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Questions?