“Achieving water conservation while maintaining sound financial performance”

Fernando Aranda

Conservation Measures:

Conservation & Finance THE ISSUES

• Drought • Scarce & Expensive Water Resources Environmental

• Revenue Losses • Aging Infrastructure • Population Growth • Water Storage & Water Rights

Economic

• Rate Increase Aversion • Short-term View • Affordability • Debt Finance

Political

You are not alone

The Cost of Water 20

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Water/Sewer Bill Inflation

Inflation CPI

Water Utilities Are Among the Most Capital Intensive in the World*

$0.11 $0.25 $0.26 $0.77

*based on most recent 12 months reported on SEC 10K report

$ invested in physical assets for every $1.00 in revenue

$5-$9 AVERAGE WATER UTILITY INVESTMENT IN ASSETS FOR EACH $1.00 IN REVENUE iS BETWEEN

City of Santa Fe, NM

Oldest Capital in the US

Population 79,627

CIP $113M Next 10Years

Water Production 10,406 AFY Accounts 33,440

Why? Is Santa Fe’s conservation story worth telling

Consumption per Capita Vs. Population

168

139

115 104 105

60

62

64

66

68

70

72

74

76

78

80

82

80

90

100

110

120

130

140

150

160

170

180

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Popu

latio

n (T

hous

ands

)

Cons

umpt

ion

(GPC

D)

Population GPCD

Since 1995 from 168 to 105 GPCD

Reduced GPCD Usage by 37%

The City Conservation Efforts

Does this Compare with Other Western Cities.

How?

GPCD Comparison Western Cities

86 105

111 121

139 145 146

152 160

165 170 173 177

185 204

222 242

0 50 100 150 200 250 300

San Francisco, CA Santa Fe, NM

Flagtaff, AZ Aurora, CO El Paso, TX

Los Angeles, CA San Antonio, TX

San Diego, CA Albuquerque, NM

Denver, CO Austin, TX

Colorado Springs, CO Tucson, AZ

Phoenix, AZ Reno, NV

Las Vegas, NV Salt Lake, UT

152 Gallons* Santa Fe is 30% lower than the US Average Usage

The Average per-capita usage in the US is:

*per United Nations Development Program – Human Development Report 2006

Was this conservation achieved. How?

Conservation Policies Financial Incentives System Improvements Multiple Strategies….

That’s How

Public Education

Water Restriction

Fixtures

Combination of Conservation Strategies

Water Losses

Renewable Water

Rebates

Rate Structure

Water Restriction Fee

Financial Stability

The City had to implement several rate adjustments to meet their revenue requirements

Which Hasn’t been easy

Conservation can not be achieved without

Financial History

•  Service charges are adjusted by 76% to restore bond covenant compliance

•  Recommended steps for further study •  Started work on first 10-year financial plan

2001 2000 •  Revenues fail to meet rate requirements

in bond covenants

2003 •  Revenues meet rate requirements and bond covenants

2007-09

•  Construction stars on Buckman Diversion project

•  City approves a 7-year 8.2% annual rate increases

Financial History

2010-12

• City Goes Back to the Bond Market • Fitch Rate the City’s Outstanding Debt at AAA • City Finished Construction of Buckman Diversion Project 01/2011 • City meets all bond and fund balance requirement

But… How can the City maintain financial stability and promote conservation?

Conservation Rate Structure

That’s how

Available Rate Structures

Simplicity

Conservation

Fixe

d Ch

arge

Fixe

d Vo

lum

e Ch

arge

Incl

inin

g Bl

ocks

Sea

sona

l

Wat

er B

udge

t Rat

es

Revenue Risk

The Unmentioned Side of Conservation

The Unmentioned Side of Conservation

The Unmentioned Side of Conservation

How can you design rates that will incentivize conservation and will maintain financial stability ….

It’s Not Rocket Science

Elasticity Measures the responsiveness of the demand to changes in prices

Allows you to anticipate the reduction in consumption for any increase in price

0.1 to 0.5 Increases in price produce lower decreases in usage

Water is Inelastic

What About Droughts A drought is the most stressful situation a utility can have.

Options During a Drought

•  Rate Stabilization Fund •  Rate Surcharges Design – Enhance Conservation – Maintain revenue stability

Questions

Public Education

Water Restriction

Fixtures

•  Conservation Website •  Landscaping Classes •  Radio Show •  Children conservation programs

•  Over 8,000 high flush toilets were replaced for Ultra-low flush toilets

•  Automated Meter Reading Program

•  May 1 – October 31 No outdoor irrigation from 10 am to 6 pm

Conservation Policies & Programs

System Improvements

Water Losses

Renewable Water

§  Distribution System Leak Repair & Detection

§  Buckman Diversion Project §  Storage of San Juan

Chama Water

• 1st Violation $20 • 2nd Violation $50 • 3rd Violation $100 • 4th and each additional Violation $200

• High-efficiency washing machine ($150 - $350)

• High-efficiency toilet ($125 - $500) • Water free urinals ($500) • Water Harvesting ($12 - $50)

•  Inclining block rate structure

Financial Incentives

Rebates

Water Restriction Fee

Rate Structure