BCWWA – Are You Charging Enough For Water?

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

  • 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).
  1. 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
  1. 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

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