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

  • Revenue Requirements –
    Defining overall needs
    • Multi year financial
      • Cash Reserves
      • System Reinvestment
      • O&M costs
      • Capital Regulated
    • 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
    • Pressure to ensure
      that rates are fair
    • Customers are becoming
      more sensitive as rates have increased
    • System Costs:
      • Regulatory
      • Sustaining adequate
      • System replacement
      • Inflationary
    • 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
      • 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
      • General
      • Costs can be
        directly assigned if benefit is to only one customer or group of
      • 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
        • Usage levels
        • Usage patterns
        • Seasonality of use
        • Strength of
        • Location
        • Type of user –
          land use
      • Common Customer
        • 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
  • Rate Design – Collecting
    the Target Revenues
    • Target revenue levels
    • Cost-based
    • Need to reflect policy
      objectives such as conservation and revenue stability
    • Customer
    • Administrative

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.