rate study community advisory group study area overview · department of environmental services...
TRANSCRIPT
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Rate Structure Alternatives and Financial Overview
Study Area OverviewStaff Name, Department (DEPT ACRONYM)
Water and Wastewater UtilityRate Study Community Advisory Group
Meeting #2: November 14, 2019
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Agenda
• Welcome and Opening Remarks• Core Values and Rate Structure
Alternatives• Utilities Financial Overview• Wrap-up and Next Steps
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Welcome and Opening Remarks
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Core Values and Rate Structure Alternatives
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Rate Setting Process
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Step 1: Identify Core Values
• First step in the rate setting process
• Guides study and rate design
• Some core values conflict with one another
Equity Across Customer Categories
Rate Stability & Minimize Impacts
Simple to Understand &
Implement
Affordability
Conservation
Economic Development
Revenue Stability
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Step 1: Identify Core Values
Core Values for Rate Setting DescriptionThe rate structure should…
Affordability
…be designed such that essential usage is available to residential customers at an affordable price. Customer Assistance Programs (CAP), often funded through partnerships and charitable contributions, may be considered if they adhere to state legal requirements.
Conservation… incentivize water conservation. Conservation-oriented rates reward customers who save water through changes in appliances and/or behavior.
Rate Stability & Minimization of Customer Impacts
…be strategically implemented to reduce dramatic rate increases over time or across among customer categories. Structures that promote rate stability rely on smaller programmatic increases, where possible.
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Step 1: Identify Core ValuesCore Values for Rate Setting Description
The rate structure should…
Revenue Stability …provides more steady and predictable revenues due to a higher reliance on fixed charges.
Simple to Understand and Implement
…be easy for customers to understand. In addition, the rate structure should be able to be implemented without significant costs to the utility.
Equity Across Customer Categories
…each category of customers pays their fair share of the cost of service.
Economic Development …promote economic development.
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Rate Setting Process
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Fixed vs. Variable Charges
Primary Charge TypesFixed Charges
• Don’t change with customer usage
• Customer related costs• May include portion of capital
costs
TypesBase Charge (by Meter),
Minimum Charge, Other Fixed Charges (e.g. Repair and
Replacement, Environmental)
Variable Charges• Vary with amount of water
used• Utility costs that vary with
customer usage patterns• All other fixed costs
TypesUniform
Tiered (Inclining or Declining)Seasonal
Water Budget (Individualized)
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Fixed Charges vs. Variable Charges (continued)
Advantages vs. Disadvantages
Fixed Charges• Advantages
• Contributes to revenue stability
• May reflect customer related and other fixed costs (e.g. debt service)
• Disadvantages• Limits customer control of
bill / conservation incentives
Variable Charges• Advantages
• Recover volume-related costs based on usage
• Address policy objectives including conservation and affordability
• Disadvantages• Administrative costs
associated with metering consumption / advance rate designs
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Fixed Charges
• Fixed charges above customer costs are prevalent.• Revenue stability and recovery often cited as basis for
“high” fixed charges.
Water Sewer
Median Fixed Charge $ 12.19 $ 12.25
% of Total Bill 33% 26%
Source: 2019 AWWA/Raftelis National Water & Wastewater Rate Survey (Based on 1,000 Cf Bill)
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One Size Does Not Fit All
• Rate designs vary by utility and by region
• Rate levels vary by utility• Generally a function of the utility’s
costs and the customers demands
• Rates reflect diverse and competing objectives
Evaluating Alternative Rate Structures
Source: 2019 AWWA/Raftelis National Water & Wastewater Rate Survey
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Variable Charge Alternatives
Conservation
• Increasing Block• Seasonal• Individualized
Traditional
• Declining• Uniform
MORE LESSC O N S E R V A T I O N - E F F I C I E N C Y
BUDGET/INDIVIDUALIZED
INCLINING BLOCK SEASONAL UNIFORM
DECLINING BLOCK
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Alternative Rate Designs (continued)
Example: Usage: All units of consumptionRate: $2.74 per 1,000 gallons
Uniform Rate
Rate per 1,000 gallons
Definition: Single rate for all units of consumption, for all customers and customer classes; each unit of product is valued and priced the same.
$3.00
$2.74
$2.50
$2.00
10 100 1,000 10,000 Usage (in 1,000 gallons)
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Alternative Rate Designs (continued)
Uniform RatesMajor Advantages
• Are generally easy to implement, administer, and update
• Are understandable and accepted by most customers
Major Disadvantages
• Does not fully allocate system costs associated with peak/seasonal demand to usage which creates the peaks.
• May only marginally achieve conservation objectives
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Alternative Rate Designs (continued)
Example: Usage Rate (per 1,000 gallons)First 10,000 gallons $2.60Next 15,000 gallons $2.85Over 25,000 gallons $3.50
Uniform Rate
Rate per 1,000 gallons
10 100 1,000 10,000
$3.00
$2.74
$2.50
$2.25
$3.25
$3.50
Block 1(Essential Use)
Block 2
Block 3
Inclining Block Rate
Usage (in 1,000
gallons)
EXAMPLE ONLY
Definition: Unit rate increases with consumption.
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Alternative Rate Designs (continued)
Inclining Block RatesMajor Advantages
• Can be highly conservation oriented
• Are generally understandable by customers
Major Disadvantages• May result in revenue
instability• Pose challenges in
developing appropriate block cutoffs and unit rates
• May have substantial impact on high volume customers
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Alternative Rate Designs (continued)
Seasonal Rate
Definition: Higher unit rate(s) for consumption during a peak period than at other times during the year.
Rate per 1,000 gallons
Non-seasonal Rate
10 100 1,000 10,000
$3.00
$2.75
$2.50
$2.25
$3.25
$3.50
Usage (in 1,000 gallons)
EXAMPLE ONLY
Example:
Specific Rate Approach Non-Seasonal SeasonalAll units of consumption $2.40 $2.90
Usage Rate (per 1,000 gallons)
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Alternative Rate Designs (continued)Seasonal Rates
Major Advantages• Are based upon cost of
service allocation concepts• Are generally
understandable and accepted by customers
Major Disadvantages• May have substantial impact
on high volume customers• May have less predictable
impact on demand, and therefore revenue
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• Hybrid Approach– Rate structure varies by customer class– Any combination of rate structures may be
used– Addresses implementation issues for each
customer class
Alternative Rate Designs (continued)
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Sending an Affordability Message
• Rate structures can be a useful tool in addressing affordability– Can enhance or undermine affordability message.
• Encouraging customers to conserve is the best way to lower their bill
• Affordability-friendly:– Variable charges – Lifeline rates
• Less friendly:– Minimum charges – High fixed charges
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Other Programs & Initiatives
• Rate/Bill Assistance Programs*– Bill discounts– Rate discounts– Crisis assistance
• Water Efficiency Options– Conservation assistance (water audits)– Leak detection / repair– Education
• Other Measures– Financial counseling– Disconnection moratoria
*State-specific legal considerations are highly important.
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Other Considerations (continued)
Residential Sewer Billing Options• 100% water consumption
– Or less than 100% (return factor)
• Average winter consumption (AWC)
• Usage with a cap
Other Considerations• Irrigation meters and separate
rates
Source: 2019 AWWA/Raftelis National Water & Wastewater Rate Survey
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Utilities Financial Overview
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Utilities Fund
Utilities Fund• Enterprise fund = Self-supporting
fund• Fiscal Policy: 3 month reserve
• Water and Wastewater Rate funds all operating & capital needs
• Water purchase & distribution• Wastewater collection & treatment• Customer service & billing
Department of Environmental Services Utilities Fund
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Fund Overview
FY 2020 Key Initiatives• Utility Billing System Replacement
• Current system dates to 1990s• Billing for 38,000 accounts with
175,000 annual bills• “Go live” November 2019
• Water & Sewer Cost of Service and Rate Study
• Financial analysis and forecast• Rate structure and components• Key public engagement initiative
• Customer Service Enhancements• Water Meter replacement planning
• Next generation of technology• Solids Master Plan, Phase 1 projects
underway
New Customer Portal
Current Billing System
Customer Services Office
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Operating Budget
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Utilities Capital Improvement Plan (CIP)
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$499M over 10 years
Utilities Capital Improvement Plan FY 2019 – FY 2028
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FY 2019 (Effective 7/1/2018) FY 2020 (Effective 7/1/2019)Water $4.53/ TG Water $4.70/ TGWastewater $9.09/ TG Wastewater $9.10/ TGCombined $13.62/ TG Combined $13.80/ TG
Average Annual Household Impact (60 TG)
$817 per year
Average Annual Household Impact (60 TG)
$828 per year
TG = Thousand Gallons
Existing Rates
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Water - Provider Frequency Billing UnitConsumption
Charge
Base Rate or Billing
Fee
Capital Infrastructure
Fee Utility Tax
Water - Tiered Usage
Water- Peak User Fee
Sewer- Winter/
Seasonal Rate
Arlington County Arlington County Quarterly TG City of Alexandria
Water: Virginia America Water; Sewer: AlexRenew
Monthly TG
(sewer) Falls Church
Water = Fairfax Water; Sewer = Falls Church (billed by Fairfax Water)
Quarterly TG
(sewer) District of Columbia DC Water Monthly ccf Prince William County
Prince William County Service Authority
Monthly TG Prince Georges and Montgomery Counties (MD)
Washington Suburban Sanitary Commission (WSSC)
Quarterly TG Fairfax County
Water: Fairfax Water; Sewer: Fairfax County
Quarterly TG Fairfax City (Residential)
Water: Fairfax Water; Sewer: Fairfax City (billed by Fairfax Water)
Quarterly TG
(sewer)
(sewer) Loudoun County Loudoun Water Quarterly TG
Residential Bill Rate Structure
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Monthly Water Usage per Residential Account
Consumption Patterns
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Number of Accounts
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Customer Profile - Water
Source: Draper Aden Survey Compilation
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Customer Profile - Wastewater
Source: Draper Aden Survey Compilation
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Q & Awater.arlingtonva.us/water-and-wastewater-utility-rate-study/
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RSCAG Meeting Topics and ScheduleMeetings Topics Meeting Dates
Study Introduction and Overview
• RSCAG Charge and Objectives• Arlington’s Water Systems• Rate Study Overview and Goals • Public Engagement Overview and Goals
October 21, 2019
Rate-Setting Process • Core Values and Rate Structure Alternatives• Utilities Financial Overview November 14, 2019
Plant Tour • Wastewater System Overview and Treatment Plant Tour December 7, 2019
Core Values
• Identify and prioritize core values to inform rate structure design
• Additional topics TBD January 14, 2019
Alternative Rate and Fee Structure Proposals
• Alternative Water and Sewer Rate and Fee (e.g., Infrastructure Availability, Miscellaneous) Structures TBD
Recommendation Development and Reporting
• Recommended Rate and Fee Structures• Summary of RSCAG and broader Arlington Community
FeedbackTBD
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Thank you!water.arlingtonva.us/water-and-wastewater-utility-rate-study/
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Is My Rate Structure Affordability-Friendly?
Less Friendly
High Minimum Charges
High Fixed Charges
Declining Block Rates
Inclining Block Rates
Uniform Volumetric
Rates
Water Budget Rates
Lifeline Rates
More Friendly