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.
- 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
- 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).
- 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
- 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