Title
Briefing on Volume-Based Utility Rates Proposal to Base Single-Family Residential Wastewater Rates on Water Usage
Recommended Action
Committee Recommendation:
The Utility Advisory Committee (UAC) reviewed and supports the recommendations (see Attachment 1).
City Manager Recommendation:
Recommend forwarding volume-based rates proposal to the full City Council.
Report
Issue:
Volume-based wastewater rates were discussed by the City's UAC during recent wastewater planning processes. The emerging rate proposal would provide a percentage of single-family residential customers with a discount on their wastewater rate for drinking water usage substantially lower than the average. The Committee will consider whether or not volume-based wastewater rates should be implemented in 2016.
Staff Contact:
Diane Utter, Water Resources Engineer, 360.753.8562
Andy Haub, Water Resources Director, 360.753.8475
Presenter(s):
Diane Utter, Water Resources Engineer
Background and Analysis:
The 2013 Council-adopted Wastewater Management Plan includes goals for rates and fees that support financial equity and affordability, minimize rate increases and maintain consistent levels of service. The Plan supports evaluating the feasibility of volume-based wastewater utility rates for residential customers. Residential customers currently pay a flat wastewater rate regardless of how much drinking water they use and how much wastewater they generate.
The UAC initiated a discussion about volume-based residential wastewater rates as part of the 2013 Wastewater Management Plan. In May 2013, April and October 2014, and June 2015, City staff presented the UAC with options for both two- and three-tiered residential wastewater rates. The proposed rate structure would incentivize water conservation and provide rate discounts for customers that produce low volumes of wastewater. Since wastewater is not metered, drinking water is used to calculate how much wastewater is generated. Most drinking water is converted into wastewater through household use. The UAC discussion recognized that in order to maintain the Utility's total revenues, reducing rates for some customers would necessitate increasing rates for others.
UAC supports the concept of volume-based residential wastewater rates and asked staff to complete a financial analysis of a three-tiered rate structure. The proposed rate structure would apply to single-family residential customers only. Staff is introducing the rate structure changes to City Council as part of the 2016 utility rate/budget process. City Utility Billing confirms that proposed rate changes could be implemented without causing excessive workload.
· Standard Rate: The majority of customers (approximately 70% of single-family residential customers) would be in the top tier and pay a flat rate per month.
· Discount Rates: Customers billed for less than 350 cubic feet (cf) of drinking water per month (700 cf for a 2-month cycle) would qualify for a volume-based discount. The lowest discounted rate (Tier 1) would be for customers consuming 250 cf or less of drinking water per month (500 cf for a 2-month cycle). Approximately 18% of customers are expected to qualify for the maximum discount. Tier 2 rates would progressively increase to the standard rate (Tier 3) with increasing water use. About 12% of customers are expected to qualify for the Tier 2 partial discount.
See Attachment 2 that shows a sample wastewater rates/discounts based on the proposed structure.
Staff set the proposed volumetric rate thresholds and volume-based rates by analyzing the last five years of drinking water consumption data. The analysis verifies that wastewater utility revenue, under the new rate structure, will be equivalent to revenue collected under the existing rate structure.
Neighborhood/Community Interests (if known):
Wastewater rates are a key element of overall City Utility charges. The new rate structure better reflects the amount of wastewater generated. It will continue to encourage water conservation.
Options:
1. Recommend that staff present the volume-based rates proposal to the full City Council.
2. Recommend that staff investigates additional options for volume-based wastewater rates.
3. Recommend not pursuing volume-based rates at this time.
Financial Impact:
Staff anticipates that wastewater utility revenues will not be adversely affected by the proposed rate changes. Wastewater utility customers not affected by the discount will experience approximately a 5% rate increase to implement the new rate structure. This translates to $1.05 per equivalent residential unit per month. The number of customers in each rate group will vary with actual drinking water consumption. A 0.5% cushion was included in the revenue analysis to account for additional revenue volatility and potential incentivized water conservation.
Attachment(s):
Attachment 1 - UAC Letter
Attachment 2 - Sample Rate Table