sewer rate evaluation wareham, massachusetts january 14, 2014 michael j. schrader, p.e
DESCRIPTION
Ratemaking Goal No. 1 To ensure that the utility has revenue sufficient to -Operate the utility (pay the bills) -Maintain all facilities in working order (upkeep) -Replace/upgrade equipment as required (capital) -Repay debt (sustainability)TRANSCRIPT
Sewer Rate EvaluationWareham, Massachusetts
January 14, 2014
Michael J. Schrader, P.E.
Project Goals
Make an informed decision relative to:
1. What should the basis of the sewer rate be:
EDU’s or Gallons?
2. What should the rate itself be?
WE WANTFAIR
RATES
Ratemaking Goal No. 1
To ensure that the utility has revenue sufficient to
- Operate the utility (pay the bills)
- Maintain all facilities in working order (upkeep)
- Replace/upgrade equipment as required (capital)
- Repay debt (sustainability)
What do Rates Cover?
Expenses:
Direct & Indirect Payroll & BenefitsElectricityUtilitiesChemicals
CapitalDebt ServiceCapital Outlay
59%
41%
What do Rates Cover?
Fixed vs. Variable costs:
Fixed (independent of flow)Payroll & BenefitsCapitalDebt
Variable (Flow dependent)ChemicalsElectricitySludge
50%
50%
Ratemaking Goal No. 2
To allocate or distribute those costs back to users fairly and proportionally
What does fairly and proportionally mean?It means that bills reflect cost to treat
What does THAT mean?
Variables effecting cost
Flow: It costs more money to treat more gallons, but is each gallon equal?
No. High strength waste costs more to treat.
Why?
It’s all about the bugs
Wastewater is food for the bugs.
More food = more bugs More bugs = more air
more sludge more chemicals
more cost
Ratemaking Goal No. 3
To predict the need for future rate changes by planning ahead.
Costs will generally go up
Capital planning will impact debt and rates
The Importance of Capital Planning
Wastewater infrastructure is replaced due to:■ Service condition: Equipment is subject to harsh operating
conditions and 24/7 operation. A 20 year service life is generally assumed and often optimistic.
The Importance of Capital Planning
Wastewater infrastructure is replaced due to:
■ Obsolescence – equipment design changes over time.
■ New requirements – Increasingly stringent permit requirements can require new equipment.
■ Failure
The Importance of Capital Planning
■ Failure is always more expensive than planned replacement
The Importance of Capital Planning
The Town is planning to complete a Capital Improvement Program (CIP) to help identify future needs based upon
■ Likelihood of failure (Condition)
■ Consequence of failure
Projecting the Town’s capital needs over the next 20 years will bring an additional degree of predictability to rates and reduce chance of failure.
Ideal Rates
The idealized rate would incorporate volume and strength, but that is not realistic: Instead…
■ Town’s charge per gallon and set limits on wastewater strength (non residential users only)
– Some stuff costs more to treat so you pay more
– Some stuff is toxic and you just can’t discharge it
■ How does this compare to what we’re doing now?
Current Rate Structure
The EDU or “Equivalent Dwelling Unit” is commonly used to develop wastewater projectionsPro’s and Con’s of using EDU’s
Pro’s– Convenient
– Steady revenue
Con’s– May not be equitable
– Hard to defend
1 EDU
Flow based Rate Structure
Each user would be billed for sewage discharged using water use as a surrogate measurement.Pro’s and Con’s to using water usage for sewer
Pro’s– Accurate– Fair and equitable
Con’s– Increased complexity, added parties– High Strength waste is not addressed– Susceptible to loss of big users / weather/ usage
What do other Town’s do?
■ Rate Structure
56%32%
11%1%
Flat rate
Ascending Rate
Flat Fee
Other
Wareham, Progress to date
■ Step one – Data gathering
■ Wastewater Plant– Expenses: last three years, budget and Actual
– Debt schedule
– Operating costs
■ Water System(s)- Water usage
- Annual statistical reports
Who has what?
■ To evaluate going to water consumption based rates we need to understand how many customers have water and sewer.
■ To do this we compared lists… lots of lists■ And we made mapsThis is what we found:
Who has what?
59% of Town is sewered
6,150
(59%)
8,744
(42%)
Total Parcels: 14,894
3,400 (55%)
Onset Water2,215 (36%)
535 (9%)
Wareham FD
91% have both water and sewer, 9% are on wells
Who has what?
Trends
2006 2007 2008 2009 20100
50
100
150
200
250
300
350
400
450
500
f(x) = − 6.6 x + 435.8R² = 0.294722598105548
f(x) = 2.5 x + 37.1Con
sum
ptio
n (m
illio
n ga
llons
per
yea
r)Residential water use is decreasingCommercial / Industrial water use is increasing
Wareham Fire District
Trends
Residential water use is decreasingCommercial / Industrial water use is increasing
Onset Water District
2009 2010 2011 20120
20
40
60
80
100
120
140
160
f(x) = − 4.537 x + 142.29
f(x) = 0.889 x + 18.37
Distribution of Users
■ Wareham Fire District– 10% of usage comes from top 20 users (0.3% of total)– 50% of usage comes from top 1121 user (16% of total)
■ Onset Water District– 10% of usage comes from top 10 users– 50% of usage comes from top 563 users (9%)
10%
90%
0.28%
99.72%
Next Steps
Decide which option best suits Wareham:■ Keep EDU based system■ Adopt usage based system with
- one rate- one rate with a minimum charge- ascending rate- separate rate for residential and commercial