The Tale of Two Water Meters – Customer Equity and Water Budget Rates Presented by: Greg Clumpner Senior Financial Manag

The Tale of Two Water Meters – Customer Equity and Water Budget RatesPresented by:Greg ClumpnerSenior Financial ManagerHDR Engineering, Inc.

Discussion Topics • Overview of Water Rates in California • Legal Framework of Water Rates • Water Consumption Patterns • Empirical Data – City of Fresno • The Tale of Two Water Meters • Conclusions HDR - A Tale of Two Meters

Water Rates in California • California is Facing Some Significant Challenges, such as: • Prolonged Drought • Water Supply Shortages • Costly Water Quality & Supply Projects • Current Economy Has Led to More Prop 218 Rejections of Rate Increases • Greater Attention on “Fairness and Equity” in New Water Rates HDR - A Tale of Two Meters

Water Rates in California (cont.) • Many Cities are Moving Towards More Conservation-Oriented Water Rates: • Converting from Flat to Volumetric Rates • Converting from Uniform Volumetric (Single-Tier) Rates to Multi-Tiered Rates • Converting from Multi-Tiered Rates to Water Budget Based Rates HDR - A Tale of Two Meters

Water Rates in California (cont.) • Water Budget-Based Rates Appear to be the “Cutting Edge” in Conservation: • A Water Budget is Defined for Each Customer (Typically Just Residential) • Budgets Reflect Lot Size, Irrigable Area, Household Size, etc. • They Clearly Promote Conservation, but Raise Some Questions About Equity HDR - A Tale of Two Meters

Legal Framework of Water Rates • Prop 218* – The “Right to Vote on New Taxes” (1996) • AB 3030* – Inflation Adjustments and Wholesale Pass-throughs (2002) • AB 2572*– Requires Water Meters for Urban Water Suppliers (2004) • AB 2882*– Allocation-Based Conservation Water Pricing (2008) *California law HDR - A Tale of Two Meters

Legal Framework of Water Rates (cont.) • AB 2882 – “Allocation-Based Conservation Water Pricing” • Aimed at two major water priorities in Calif.: • Preventing unreasonable waste of water • Ensuring costs are proportionally spread among customers • But the focus is on providing legal foundation for allocation-based conservation pricing: “A basic use allocation is established for each customer account that provides a reasonable amount of water for the customer’s needs and property characteristics.” (Chapter 3.4, Section 372 (a) (2)) HDR - Re-Structuring Water Rates

Legal Framework of Water Rates (cont.) • AB 2882 – Additional Requirements for Allocation-Based Pricing: • Rates must be based on metered usage • Must use increasing blocks (tiers) to encourage conservation • Rates must be proportional to: • Water consumption • “Discretionary Allocation of incremental costs between tiers” • Customer classes • Basic use allocations • Meter size HDR - Re-Structuring Water Rates

Water Consumption Patterns HDR - A Tale of Two Meters

Water Consumption Patterns Typical Consumption Patterns by Customer Classes: HDR - A Tale of Two Meters

Water Consumption Patterns (cont.) Typical Peaking Patterns by Customer Classes: HDR - A Tale of Two Meters

Water Consumption Patterns (cont.) Seasonal Averages – Single-Family Customers: HDR - A Tale of Two Meters

Water Consumption Patterns (cont.) “Expected” Water Consumption by Lot Size: We would expect proportional increases in consumption as lot sizes increase: HDR - A Tale of Two Meters

Water Consumption Patterns (cont.) Water Consumption by Lot Size (City of Modesto) HDR - A Tale of Two Meters

Water Consumption Patterns (cont.) Number of Lots by Size (Modesto) HDR - A Tale of Two Meters

Water Consumption Patterns (cont.) Water Consumption (per 1,000 sf) by Lot Size (Modesto) HDR - A Tale of Two Meters

Empirical Data –City of Fresno HDR - A Tale of Two Meters

Empirical Data – City of Fresno Fresno Bee Article* (“How Will Meters affect Fresno Water Bills?”): • Analysis based on 6 months of meter data from 70 homes showed: • Highest consumption was 7x lowest • 25% to 50% appeared to have plumbing or irrigation leaks • Water use varied widely, even among homes with the same size lots (*Fresno Bee, 8-30-09): HDR - A Tale of Two Meters

Empirical Data – City of Fresno (cont.) Fresno Bee Article (cont.): • Current flat rates are based on lot size; impacts of new metered rates vary by lot size: • Smaller lots (≤ 6,000 sf): 17 of 23 would see their bills increase • Medium-size lots (> 6,000 but ≤ 10,000 sf): 50% would have higher and 50% would have lower bills (i.e., 14 and 14) • Larger lots (> 10,000 sf): 16 of 19 would have smaller bills HDR - A Tale of Two Meters

Empirical Data – City of Fresno (cont.) City of Fresno – Changes in Water Bills from Current Flat Rates to New Metered Rates: HDR - A Tale of Two Meters

Empirical Data – City of Fresno (cont.) City of Fresno – Changes in Water Bills from Current Flat Rates to New Metered Rates • Data from 23 homes on lots ≤ 6,000 sf • 17 of 23 homes would pay more under metered rates HDR - A Tale of Two Meters

Empirical Data – City of Fresno (cont.) Fresno Bee Article (8-30-09): • Analysis based on 6 months of meter data from 70 homes showed: • Highest consumption was 7x lowest • 25% to 50% appeared to have plumbing or irrigation leaks • Water use varied widely, even among homes with the same size lots. HDR - A Tale of Two Meters

The Tale of Two Water Meters HDR - A Tale of Two Meters

The Tale of Two Water Meters: • Meter #1: Water Budget-Based Water Rate Structure • Meter #2: Multi-Tiered Conservation-Based Water Rate Structure HDR - A Tale of Two Meters

The Tale of Two Water Meters (cont.) • City of Aurora Metered Data (Summer Season) for 50,700 Residential Customers Was Used to Compared Monthly Bills Under These Two Rate Structures • Water Budget-Based Rates from Boulder, CO, Were Applied to Aurora’s Consumption Data for Lots of 5,000 to 9,000 sf HDR - A Tale of Two Meters

The Tale of Two Water Meters (cont.) • Monthly Bills from Water Budget Rates Were Compared to Bills from More Typical Multi-Tiered Conservation Rates • Results indicate that Most Customers had Different Bills for Exactly the Same Level of Consumption HDR - A Tale of Two Meters

The Tale of Two Water Meters (cont.) Results: Water Bills for Water Budget Rates vs. Multi-Tiered Rates HDR - A Tale of Two Meters

The Tale of Two Water Meters (cont.) Results - Water Bills (for the same amount of water use): HDR - A Tale of Two Meters

Conclusions: • Residential consumption is typically highly variable within lots of the same size • Our analysis of water budget-based rate structures showed: • Water-budget based rates will result in some customers with higher water use paying lower water bills (for very similar size lots) • Rate Equity: will customers using less water but getting higher bills consider water budget-based rates to be equitable? • Water Agencies should carefully evaluate consumption patterns and know the rate impacts before adopting water budget rates HDR - A Tale of Two Meters

Questions? HDR - A Tale of Two Meters

The Tale of Two Water Meters – Customer Equity and Water Budget Rates Presented by: Greg Clumpner Senior Financial Manag