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).
  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

Published by 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.