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Home My WebLink AboutA004 - Presentation on Seasonal Water Rate Structures AMES Seasonal Water IOWA Rate Structures Ames City Council Meeting March 4, 2008 Purpose • Use our water rate structure to encourage conservation during our peak consumption season • Shift the cost for the construction of additional treatment capacity to those uses of water that are driving the cost 2 Average Monthly Demand •e • 3 Growth in Peak Demand • Single-Day Peak — 2005: 9.26 MGD (4% Increase) — 2006: 9.84 MGD (6% Increase) — 2nn7• 1n.22 RAID (6% Increase) Expansion planning is • Peak 3-Day Average triggered at — 200b: u.uy muD (4% Increase) 85%capacity. — 2006: 9 Fn hA(;D (7% Increase) We're now at 82%. — 2007- 9.81 MGD (3% Increase) • Peak Monthly Average — 2005: 7.36 MGD(4% Increase) — 2006: 8.45 MGD (15% Increase) — 2007: 8.74 MGD (4% Increase) August 21 , 2007 Workshop • Identified two rate structures as being "Conservation-oriented" — Seasonal Rates 0 N -�- - Inclining Block 4 Rates F . .� x- What is a 11CCV9. "ccf" is a short-handAll abbreviation for "Hundred Cubic Feet' , (Equals 748 Gallons) Seasonal Rate Structures "The objectives of seasonal rates are to — Better match price and cost recovery to demand patterns and — Provide a price incentive for customers to reduce their consumption during peak- use periods." Seasonal Rate $/CCF Off- Peak Off- peak Season peak Pro Con • Encourages seasonal • Customers see large conservation seasonal swing in bill • Familiar—common among • Risk of revenue electric and gas utilities instability due to • Can reduce cost to all customers weather 8 Inclining Block Rate Structure "Inclining block rates should be considered when the utility • Is able to distinguish separate customer classes for billing; • Has the analytical ability to design block rate structures, including the ability to define the �— amount of water sold by block; _ • Is confronting system capacity constraints or potential system expansion; and • Would like to send a strong price signal." 9 AM Inclining Block Rate $/C C F Usage Pro Con • Encourages conservation — • Potential revenue volatility Very strong price signal • Can discourage new water- • Flexibility in rate design intensive businesses • Strongest demand-side • Complicated structures can be management rate structure confusing to customers 10 Recommended Approach A blend of seasonal rates and inclining block rates • Seasonal Inclining • Seasonal Flat Blocks for Rates for "Residential" and Commercial and "Irrigation" Industrial Customer Customer Classes Classes 11 First Question: How Much $? Existing Water Plant: 12 MGD • Proposed Plant: 15 MGD • "New" Capacity: 3 MGD • Estimated annual debt service on = $2,845,000 $29.25M @ -6% for 15 years • Annual debt service per MGD = $ 189,667 • Debt service due to "new" capacity = $ 569,000 (=20% of anticipated project) 12 Existing Rate Classes • Residential (RS) i • Small Commercial (SC) '. • Large Commercial (LC) i' ' • Industrial (IN) �+ • Irrigation & Yard Water Services (IR) 13 Seasonal Demand Patterns (in cf/month) IN LC SC RS IR Winter 370,142 5,048,363 3,939,845 7,448,786 15,479 '06& `07 Summer`07 468,456 5,848,368 5,146,077 8,372,323 2,419,792 Seasonal 98,314 800,005 1,203,232 923,537 2,404,313 5,429,401 Difference %of Seasonal 1.8% 14.7% 22.2% 17.0% 44.3% 100% Difference Debt Service $10,200 $83,600 $126,300 $96,800 $252,100 Allocation 14 Residential Block Sizes • During the winter months, 90% of all residential accounts use 9.1 ccf or less. • During the summer months, 90% of all residential accounts use 11 .3 ccf or less (after removing all Yard Water Accounts). • 1 st Block Size: 0 to 10 ccf • 2nd Block Size: 10 to 25 ccf • 3rd Block Size: > 25 ccf 15 Residential Block ' • 151 Block Size: 0 to 10 ccf Debt Service A!Incated to • 2nd Block Size: 10 to 25 ccf RE: $96,800 • 3rd Block Size: > 25 ccf Used Summer'07 Demand Patterns Used Multiples of Base Rate ($1.39/ccf) • 0 to 10 ccf $1.39/ccf (Base Rate) • 10 to 25 ccf $2.78/ccf (2x Base Rate) • > 25 ccf $4.17/ccf (3x Base Rate) Revenue Recovere $95,900 16 Residential Block Sizes • Recommendation for Refinement — Break Residential into 2 classes • "Small Residential" that would include single- family dwellings • "Large Residential" that would include some apartments, multi-plexes, etc. — Height of blocks ($'s) kept the same — Width of blocks (ccf's) varied 17 Irrigation Block Sizes • Avg. residential lot in Ames: approximately 10,000 sq ft • Assume 20% impervious; 8,000 sq ft in landscape • Irrigation needs: 1 inch per week 4 inches per month • Typical July Rainfall: 4.4 inches per month •Even in a severe drought (25% of"normal" rainfall), lawns only need 3" per month (0.25 ft)from irrigation - 18 Irrigation Block Sizes (cant.) • 8,000 sq ft x 0.25 ft/mo = 2,000 cubic ft/mo = 20 ccf/mo • Debt Service Allocated to IR: $252,100 • 1st Block: 0—20 ccf $2.09/ccf (1.5x Base Rate) • 2nd Block: 20-50 ccf $4.17/ccf (3x Base Rate) • 3,d Block: >50 ccf $6.95/ccf (5x Base Rate) Revenue Recovered $248,200 19 Customer Impact Total Number of Ac` unts Number of Accounts Block 2 Block 3 Residential 13,881 1,828 112(13%) (1%) Irrigation 1,833 303 53 (17%) (3%) Based on. umption 20 Non-Residential Rates • Non-discretionary water use varies widely • Development of block sizes more arbitrary • Possible Solution: Flat Summer Rate 21 _,. . Non-Residential Rates - IN LC SC Summer 468,456 5,848,368 5,146,077 Demand cf/month cf/month cf/month Debt Service $10,200 $83,600 $126,300 Allocation i Debt Service ] — Summer x 4 = Seasonal Peak Allocated to Classj Demand months] Surcharge, $/ccf., Seasonal Peak $0.54/ccf $0.36/ccf $9.61/ccf Surcharge, $/ccf Summer Rate (Base+Seasonal $1.93/ccf $1.75/ccf $2.00/ccf Surcharge) 22 Conceptual Seasonal Rate Structure Small Residential Small Commercial 0-10 ccf $1.39/ccf Seasonal Flat Rate 10-25 ccf $2.78/ccf $2.00/ccf > 25 ccf $4.17/ccf Large Residential Large Commercial Block 1 $1.39/ccf Seasonal Flat Rate Block 2 $2.78/ccf $1.75/ccf Block 3 $4.17/ccf Irrigation Industrial 0-20 ccf $2.09/ccf Seasonal Flat Rate 20-50 ccf $4.17/ccf $1.93/ccf > 50 ccf $6.95/ccf 23 Relationship to Rationing Ordinance Residential Current Flat Rate: Block 1: $1 .39 $1.39/CCF Block 2: $2.78 (� 5 gallons for 1¢) Block 3: $4.17 Small Commercial Stage 2 Rationing: $7.50/CCF over 150% Flat $2.00 (-1¢ per gallon) Large Commercial Flat $1.75 Stage 3 Rationing: Industrial $22.50/CCF over 110% Flat $1.93 (-3 ¢ per gallon) 4 Calculating a Bill Residential Customer 5/8" Meter using 850 cf/month Existing Rate Structure Minimum Bill $ 7.30 Consumption $11.82 Total "Water" Bill $19.12 Conceptual Rate Structure Minimum Bill $ 7.30 Block 1 Consumption(8.5 ccf @ $1.39) $11.82 Block 2 Consumption ( 0 ccf @ $2.78) $ 0.00 Block 3 Consumption ( 0 ccf $4.17) $ 0.00 Total"Water" Bill $19.12 25 Calculating a Bill Residential Customer 5/8" Meter using 3,000 cf Existing Rate Structure Minimum Bill $ 7.30 Consumption $41.70 Total"Water" Bill $49.00 Conceptual Rate Structure Minimum Bill $ 7.30 Block 1 Consumption (10 ccf @ $1.39) $13.90 Block 2 Consumption (15 ccf @$2.78) $41.70 Block 3 Consumption ( 5 ccf $4.17) $20.85 Total "Water'Bill $86.75 26 Calculating a Bill Large Commercial Customer using1-112" Meter 20,000cf/month Existing Rate Structure Minimum Bill $ 41 Consumption $2 : 11 Total • '1 Conceptual Minimum Bill $ : '1 Consumption ($1.75/ccf Summer Rate) $31 1/ Total '1: '1 27 July 2007 Existing Rate Proposed Rate Consumption,cf Structure,$ Structure,$ Barilla 445,200 6,305.08 8,709.16 (IN) Swift Stop Store 4,070 63.87 88.70(SC) Car Wash 17,860 277.43 386.40(SC) Irrigation 5,000 98.70 196.10 (IR) Target Store 20,750 346.83 421.53(I-C) Irrigation 11,300 215.47 663.15 (IR) Earl May Store 580 22.66 26.20(SC) Yard Water 5,160 86.32 178.02 (IR) Hickory Park Restaurant 55,290 826.93 1,025.98(I-C) Irrigation 5,510 183.89 202.35 (IR) 14 Comparison to Other Iowa Water Rates 600 1.000 10,000 100,000 cf cf cf cf Ames—Existing 15.64 18.42 168.20 1,623.60 Ames—Proposed 15.64 18.42 229.20 1,983.60 RS RS SC LC Median* 15.64 0: .0 Iowa City 21.36 33.32 245.47 2,216.12 West Des Moines 17.63 27.38 247.05 2,449.50 Newton 13.34 19.06 117.94 1,079.41 Burlington 12.31 18.23 152.30 960.68 Altoona 25.48 39.13 346.25 3,417.50 -Median of all Iowa cities>10,000 population with lime softening 29 Next Steps - '" • Define Customer Classes • Revise Block Sizes based on new Customer Class Definitions • Draft Ordinance — March 25 Council Meeting nThird Reading — May 13 — Effective June 1 • Public Education would begin March 25. 3� Related Issues • Revise Rationing Ordinance to be consistent with new definitions • Limit Sewer Exemption {Ames Municipal Code 28.304(9)} • Implement "even/odd" day watering (voluntary/mandatory?) 31 AM-,'E-4 Seasonal Water Rate Structures Are we on the right path ?