Skip to main content

BCWWA – Designing Water Rates

Karyn Johnson, FCS Group presents “Design water rates
to reflect cost of service and water sustainability”

Cost of Service Rate Analysis
(COSA)

  • Revenue Requirements –
    Defining overall needs
    • Multi year financial
      plan
      • Cash Reserves
      • System Reinvestment
        Funding
      • O&M costs
      • Capital Regulated
        Costs
    • Used to allocate
      costs to users of the system
    • Forms the basis for
      rate design
    • Used to ensure 100%
      of the costs are allocated.
  • Cost of Service – Equity
    Evaluation
    • Pressure to ensure
      that rates are fair
    • Customers are becoming
      more sensitive as rates have increased
    • System Costs:
      • Regulatory
        requirements
      • Sustaining adequate
        supply
      • System replacement
        needs
      • Inflationary
        Pressures
    • Define Utility
      Functions – Service Components (Peak Day etc.)
      • Fire protection
      • Meters
      • Customer
      • Base demand
      • Peak demand
    • Define plant
      components/classify. Why is it needed? Why did we incur this expense? How
      did you determine the size? How is the asset used/operated? Allocate
      percentages of original cost to Average/Peak/Fire Protection and
      Customer.
      • Source of Supply /
        Supply treatment – Ration of Peak Day to Average Day Demand.
      • Transmission
        distribution – Portion of the mains are designed to fire protection;
        remainder to peak/average demand.
      • Storage –
        operational, equalization, emergency, fire suppression etc.
      • Hydrants – Fire
        Protection
      • General
      • Costs can be
        directly assigned if benefit is to only one customer or group of
        customers.
      • Not all customers
        use the system in the same way – system costs should not be recovered
        uniformly from all customers…
    • Define Customer
      Classes –
      • What makes customer
        classes distinct?
        • Distinct service
          requirements
        • Usage levels
        • Usage patterns
        • Seasonality of use
        • Strength of
          wastewater
        • Location
        • Type of user –
          land use
      • Common Customer
        Classes
        • Single Family –
          largest customer, low usage per dwelling unit, but high peaking, lowest
          fire flow requirements
        • Multifamily –
          lower usage than SFR (70%), relatively constant year-round, fire flow
          between SFR and Commercial.
        • Commercial –
          Varies depending on business, but relatively constant year-round,
          highest fire flow requirement.
        • Government
        • Industrial
        • Wholesale
        • Parks and
          Irrigation – no fire flow requirement, small customer class, peak usage
          in peak season.
    • Develop Unit Cost per
      Function
  • Rate Design – Collecting
    the Target Revenues
    • Target revenue levels
    • Cost-based
    • Need to reflect policy
      objectives such as conservation and revenue stability
    • Customer
      Impacts/affordability
    • Administrative
      Practicality

Mike Thomas

Mike Thomas P.Eng. ENV SP, is the author of UrbanWorkbench.com and Director of Engineering at the City of Revelstoke in the Interior of British Columbia, Canada. If I post something here that you find helpful as you navigate the world of engineering, planning and building communities, that’s wonderful. But when push comes to shove: This is my personal blog. The views expressed on these pages are mine alone and not those of my employer.