Water Budget Alternatives: How Do We Define Efficiency?
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WATER BUDGET ALTERNATIVES: HOW DO WE DEFINE EFFICIENCY? ACWA Spring 2011 May 12, 2011
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Water Budget Alternatives: How Do We Define Efficiency?. ACWA Spring 2011 May 12, 2011. Agenda. Why Have Water Rate Structures Changed? What is a Water Budget Rate Structure? Benefits and Challenges of Water Budgets Revenue Stability Example Outcomes of Water Budgets Wrap Up. - PowerPoint PPT Presentation
Transcript of Water Budget Alternatives: How Do We Define Efficiency?
WATER BUDGET ALTERNATIVES:HOW DO WE DEFINE EFFICIENCY?
ACWASpring 2011
May 12, 2011
AgendaWhy Have Water Rate Structures Changed?What is a Water Budget Rate Structure?Benefits and Challenges of Water BudgetsRevenue StabilityExample Outcomes of Water BudgetsWrap Up
May 12, 2011 2ACWA Spring 2011
Water Rate Structure Evolution
Flat Rate: $xx / month regardless of usagePros: Revenue stability, easy to understandCons: Inequitable, no conservation signal, not affordable for essential use
Revenue Mechanism
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Water Rate Structure Evolution
Revenue Mechanism
Price Information
Uniform Rate: $xx / hcf Pros: Revenue stability, administrative ease, easy to understandCons: Weak conservation, not affordable for essential use
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Water Rate Structure Evolution
Revenue Mechanism
Price Information
Behavior Change
Seasonal Rate: $ xxx / hcf in Summer, $ x/hcf in WinterPros: Promoting water conservation in the summer, easy administer Cons: Revenue instability, not affordable for essential use
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Inclining Tiered Rate: Pros: Promoting conservation, affordable for essential use, easy to administer, easy to understandCons: Penalizing large users
Water Rate Structure Evolution
Revenue Mechanism
Price Information
Behavior Change
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Water Budget Tiered Rate: Pros: Promoting water efficiency, equitable, affordable for essential useCons: High administrative cost, harder to understand
Water Rate Structure Evolution
Revenue Mechanism
Price Information
Behavior Change
Water Resource Management
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What Is Water Budget?
“Water budget rate is an increasing block rate structure in which the block definition is different for each customer based on an efficient level of water use by that customer.”
Source: American Water Works Association Journal, May 2008, Volume 100, Number 5May 12, 2011 8ACWA Spring 2011
Conservation Vs. EfficiencyWater Efficiency
Reducing water waste
No change in lifestyle
Appropriate water use
Water Conservation
Reducing water usage
Lifestyle adjustments Restricting water use
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Conservation Rate StructuresInclining Block
Pros+Easy to administer+Sends clear conservation signal+Addresses affordability for basic
needs
Cons- Targets larger water users and
doesn’t focus on efficient use of water High water use = wasteful
water use- Equity concerns
Penalizes large families / lots Exacerbated during drought
pricing
Water BudgetPros+ Provides water efficiency
targets Addresses equity concerns for
large families / lots+ Properly allocates drought
penalty rates+ Addresses affordability for
basic needs
Cons- Higher administrative costs
How is efficiency defined? Billing system requirements Proactive Public outreach Increases staff for customer
service (implementation phase)
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Indoor Water Budget Two options in defining indoor
allocation1. Household size – Assume a certain
household size * gallons per capita per day (gpcd)
4 persons per household * 60 gpcd * days of service
2. Average winter use – Suitable for cold winter climates
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Defining Indoor Water BudgetGPCD: 50 – 75 gallons of water per person per dayGPCD = 60 from Residential Water Use Summary in the
Study completed by Aquacraft, Inc. and AWWA Research Foundation
SBX 7-7 indicates 55 gpcd
Default household sizeCensus or State annual demographic dataBalance between variance program and equitable
allocation
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Defining Outdoor Water Budget
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Estimated Landscape Area Options
Customer Class?Meter Size?Parcel Size?% of Parcel?Lot Size -
Footprint?GIS?
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Incorporating Seasonality and Weather Impacts on Blocks Widths
Average Yearly Weather – Block widths are stationary year-round
Historical Season – Block widths change based on local historical seasonal conditions
Typically four seasons Historical Weather – Block widths change based
on historical weather conditions Historical average weather data of a CIMIS station
Actual Weather – Real time weather conditions Tied to daily weather data from a CIMIS station
May 12, 2011
Water Budget Tiered Rate
Outdoor Water Budget
Tier 2 Tier 3
P1
P2
P3
QuantityTier 1
Indoor Water
Budget
Excessive Use
(Percentage of total water
budget)
Rates
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Who Should Cut Back?
Total Water Budget is based on 4 per household, 60 gpcd, & 30% of lot size
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Revenue StabilityRevenue stability is achieved by collecting
the agency’s unrecovered “fixed” cost in the lower tiersConsumption in the lower tiers is considered
reliableRevenue is typically generated in the higher
tiers, which is being reduced from the conservation programAchieves the goal of the program without
sacrificing the financial stability of the District
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Case Study: El Toro Water District (ETWD)
Tiers FY 2010 Rates
Current Rates
Water Supply Delivery Conservation Offset Total
Indoor Use $1.89 $1.86 ($0.06) $1.80
Outdoor Use $1.89 $1.86 $0.34 $2.20
Inefficient Use(50% of total
budget)$1.89 $3.80 $0.34 $0.24 $4.38
Excessive Use $1.89 $5.70 $0.24 $5.94
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Outcomes of Water Budget: ETWD
62% of the customers will see a reduction in their bill, if we did not have to increase revenue requirements.
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SUMMARY OF OUTCOMES
Single Family Residential Water Budget Rate Structure ComparisonsEMWD RCWD
(Rancho / Santa Rosa) EVMWD
Indoor Water Budget GPCD = 60Size SFR = 3
GPCD = 60Size SFR = 4
GPCD = 60Size SFR = 4
Outdoor Water Budget
ETAF = 80%Landscape Area = 65% (Lot Size – Foot Print)LA Cap = 6,000 sq ftReal Time ET
ETAF = 85%Landscape Area = GISLA Cap varies with Lot SizeReal Time ET
ETAF = 60%LA= 60% of Lot SizeSummer / Winter Average ET
Tier DefinitionsTier 1 – IndoorTier 2 – OutdoorTier 3 – 50% TWBTier 4 – above Tier 3
Tier 1 – EssentialTier 2 – EfficientTier 3 – 50% TWBTier 4 – above Tier 3
Tier 1 – IndoorTier 2 – OutdoorTier 3 – 100% of Tier 2Tier 4 – 100% of Tier 2Tier 5 - above Tier 4
Tier RatesTier 1 – $1.483Tier 2 – $2.714Tier 3 – $4.864Tier 4 – $8.898
Tier 1 – $0.40 / $0.88Tier 2 – $1.42 / $1.87Tier 3 – $2.31 / $2.31Tier 4 – $5.22 / $5.22
Tier 1 – $1.92Tier 2 – $2.56Tier 3 – $5.12Tier 4 – $7.68Tier 5 - $10.24
Other Factors Rolling Budgets
Cost of Implementing a Water Budget Rate Structure
EMWD RCWD EVMWD
Number of Accts 131,392 ~38,000 ~39,000
WB Implementation Date April 10, 2009 July 1, 2009 July 1, 2009
Cost of Implementation $1,500,000 $767,942 $245,000
Cost per Acct ~$12 ~$20 ~$6
Total Variances 68,909 16,800 5,586
% of Variance from Total Accts 52% 44% 14%
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Factors that Drive Implementation CostBilling System Upgrade / Replace
Can the current system be upgraded or is a new system required? EVMWD just needed an upgrade, which was a minor cost, EMWD needed a new CIS, which was a significant cost driver
Default Values Tighter default values will increase the cost of the variance
program EMWD used a default household size of 3 for SF and 62% of the
variance was for family size adjustment EVMWD used a default value of 60% of lot size and had minor
adjustmentsDiversity of lot sizes
46% of RCWD costs was associated with estimating landscape size
Economy of Scale Larger agencies will benefit from the economy of scale
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What Does a Water Budget Rate Structure Accomplish?
Revenue Stability
Water Demand
Promotes Water
Efficiency
Water SupplyAllocates water during
drought conditions
Establishes a water efficiency benchmark for each account based on indoor and outdoor
requirementsRevenue stability is accomplished by allocating the utilities fixed cost on the
reliable water sales
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Contact InfoSanjay GaurManager Raftelis Financial
Consultants201 S Lake Av. Ste 301Pasadena, CA 91101
Cell: 213 327 4405Fax: 626 583 1411Email: [email protected]
Sanjay GaurManager Raftelis Financial
Consultants201 S Lake Av. Ste 301Pasadena, CA 91101
Cell: 213 327 4405Fax: 626 583 1411Email: [email protected]
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