BCWWA - Are You Charging Enough For Water?

John Weninger from Urban Systems, Kamloops, BC presents a rationale for water rates.
Facts:

• By 2025, 2/3 of the world's population will suffer water shortages
• half of the world's hospital beds are occupied by water related disease patients.

Canadian Problems?

• 15% of communities reported shortages
• approaching capacity
• in Canada only 50% of actual costs are recovered through rates - need full cost pricing
• consumption of treated water impacts our environment - chemicals for treating - 80% of "used" water is discharged to sewer
• 85% of communities discharge sewerage effluent directly to fresh water

Rates send a value signal to the customer
Metering on average brings a 70% (?) reduction in water consumption.
Costs per month Canadian average - $50, BC $32.

Rate Setting Process

1. Revenue Requirements

• O&M - (Don't forget: A portion of senior staff costs, IT, interdepartmental expenses, general fleet/vehicle costs)
• Debt Servicing
• Rate Funded Capital
• Contribution to Reserves
• (Operating reserve 45 days of O&M costs)
• (Capital Reserve - Typical Year of Capital Projects - rate funded)
• (Emergency Reserve (optional) - Funds to replace largest piece of infrastructure in the case of emergency such as earthquake).

2. Allocation of Costs

• Some customers cost more than others to service.
• Generally accepted as “Fair and Equitable”
• Avoids Interclass subsidies”
• Rates equal cost of service provided
• Provides accurate “Price Signals”
• Legally Defendable

3. Rate Design

• Guiding Principles
• Stability – Build it into the design
• Predictability – How much money is the utility going to bring in for you
• Social Needs – Consider Fixed Income – Lifeline Rate
• Conservation – An opportunity to promote conservation of water as a resource
• Easy to Administer
• Typical Rate Structures
• Flat Rate (Extremely Common in Rural BC)
• Constant Unit Rate (Very Common in Canada)
• Decreasing Block Rate (about 15% of municipalities) (sends consumer a signal right from the first cubic meter)
• Increasing Block Rate (can be good for Fixed Income)
• Seasonal Rate (Summer/Winter)
• Implementing the New Rate
• Communication to Staff/Council and Public
• Timely
• Consistent
• Accessible