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Home My WebLink AboutWater Budget Study - Supplemental Communication - Study Sess 11/7/2011 WATER BUDGET STUDY City Council City of Huntington Beach November 7, 2011 (01 I FC FIIIN'IA, co�uLw,Ts.wc. RK M IOF Agenda • Water Enterprise Challenges • Water Rate Evolution • Benefits and Challenges of Water Budget Rate Structure • Preliminary Usage Analysis • Revenue Stability and Pricing • Rate Structure Comparison rev 7, ao�/ 11/7/2011 Water Enterprise - Current Challenges • New Regulatory Requirements SB x7-7:20%reduction by 2020 • Increased Volatility of Water Supply and Demand Weather Economy Regulatory MWD Allocation&Conservation Program • Funding of Urban Runoff/Stormwater Program and Future Master Plan Projects • Increased Pressure for Conservation Rate Structure Orange County Grand Jury Report California Urban Water Conservation Council tGw4Yiv+l1.K Water Management Challenges Given these challenges, how will your agency address these concerns? The key is o develop . Conservation Structure that 1. Ensures compliance with new regulatory requirements by aggressively promoting supplyconservation and efficient water use 2. Equitably allocates water objectives3. Enhances revenue stability 4. Meets the agency's goals, RK 2 11/7/2011 Conservation Rate Structure Which customer classes should have conservation rate structures? Important to Assign Value to End-uses of Water Sanitary/ Economic Recreational Outdoor Health& Safety Aesthetic Necessary Use Discretionary Use Least Water Most Water R� 3 11/7/2011 Proposed Guiding Principles for the Study if rec uctlons are needed, an emphasis will be to target inefficient use, focusing first on outdoor aesthetic water, then recreational usage. Only in severe circumstances should water be reduced for economic activities and sanitary / heath and safety. RVC l Which Customer Classes Should Have Conservation Rate Structure? Given the objectives and end-use valuation outlined, RFC recommends: This study focus on Dedicated Landscape, Single Family and Multi Family Business, Industrial and Institutional will be examined at Phase II RFC 4 11/7/2011 Water Rate Structure Evolution Flat Rate:$xx/month regardless of usage Pros: Revenue stability,easy to understand Cons: Inequitable, no conservation signal, not affordable for essential use M. Water Rate Structure Evolution City of Huntington Beach uniform Rate:$xx/hcf current water rates @ Pros:Revenue stability,administrative ease, 1.76 hcf easy to understand Cons:Weak conservation, not affordable for essential use RFC 5 u/7/zoii Ile, Water Rate Structure Evolution seenm.e Winter 01 . �� Behavior Seasonal Rate:$xxx/hcf in Summer, Change $ x/hcf in Winter Pros:Promote water conservation in the summer,easy to administer Cons:Revenue instability, not affordable for ss essential use IRS Water Rate Structure Evolution e SeasonalRate b to zo 30 ao so quantity Behavior Change Inclining Tiered Rate— Inclining Tiered Rate: Pros:Promote conservation,affordable for essential use,easy to administer,easy to understand Cons:Penalize large users IRM u/7/zo11 Water Rate Structure Evolution Seasonal Rate Behavior Change IncliningTiered Rate Water Budget Tiered Rate: Pros:Promote water efficiency,equitable, affordable for essential use,drought allocation tool,revenue stability Cons:High administrative cost,harder to OF, understand What Is a Water Budget? "Water budget rate is an increasing block rate structure in which the block definition is different for each customer based on an efficient level of water use by that customer." Source: American Water Works Association Journal,May 2008,Volume 100,Number 5 RM 7 11/7/2011 Conservation & Efficiency Water Water Conservation Efficiency • Reducing water usage • Reducing water waste • Rules and regulations • Target driven • Restricting water use • Appropriate water use Conservation Rate Structures INCLINING BLOCK WATER BUDGET Pros Pros +Provides water efficiency targets +Easy to administer Addresses equity concerns for +Sends clear conservation signal large families/lots +Addresses affordability for basic +Properly allocates drought needs penalty rates +Addresses affordability for basic Cons needs -Targets larger water users Cons • High use=wasteful use -Equity concerns -Higher administrative costs • How is efficiency defined? • Penalizes large families/lots • Billing system update required • Exacerbated during drought • Proactive Public outreach pricing • Increases staff for customer service 8 11/7/2011 Water Budget Allocation • Two components: 1. Indoor Budget, which is determined by household size and gallons per capita per day (gpcd) 4 persons per household * 55 gpcd * days of service Waiver allows for approved additional needs and/or additional occupancy 2. Outdoor Budget, which is determined by landscape area estimate and weather RK Preliminary Usage Analysis Summary Single Family 76% 24% -1,800 acre ft `13,900 acre ft Multi Family 64% 35% -1,500 acre ft -6,300 acre ft Irrigation 51% 49% -1,000 acre ft -2,800 acre ft Sri . ^18%of potential water usage RKreduction 9 ii/7/zoli Enhancing Revenue Stability and Affordability Collect the remaining fixed costs from usage in the lower tiers Customers who are above their allocation will be asked to reduce their consumption The rate structure is aligned with the goal of meeting SBx7-7 compliance Customers who are efficient will see a reduction in their bills RFC Cz Tiered Price Justification & Prop 218 Rationality is required on the differences in tiered prices Tiered prices are typically based on the following: Water supply cost Urban run off Conservation program Water Master Plan Study Peaking cost associated with capital could be allocated to the higher tiers RFC 10 11/7/2011 Tiered Rate Components Tier 1 Blended groundwater No delivery cost for Less revenue offset and imported water affordability Tier 2 Blended groundwater Delivery cost Peaking cost and imported water Tier 3 Blended groundwater Delivery cost Conservation and imported water Stormwater Peaking cost Tier Marginal cost of water No delivery cost to Conservation enhancerevenue Stormwater stability Peaking cost RX I Case Study: El Toro Water District (ETWD) FY r , Supply Tiers Rates Water Delie Conservation Offset Total Tier 1 $1.89 $1.86 ($0.06) $1.80 Tier $1.89 $1.86 $0.34 $2.20 Tier $1.89 $3.80 $0.34 $0.24 $4.38 Tier $1.89 $5.70 $0.24 $5.94 RX nv.s...mz.x 11 11/7/2011 Outcomes of Water Budget: ETWD %of Bilk CUSTOMER IMPACTS SFR+MFR♦IRR 70% I _60% 50% 40% 30% 20%10% 6% 4% 6% 4% S% 6% e" 0% v $6o $2 $5 $10 S15 $25 $50 >550 $change in Bills 62%of the customers will see a reduction in their bill 1 07„ Costs to Implement a Water Budget Rate Structure If the City adopts a Water Budget Rate Structure, the following costs will be incurred: Costs associated with a new billing system Costs associated with additional staff necessary for implementing and administering the program Water Budget rate structure that does not allow for appeal process on the allocation factors;or • Example:City of San Clemente Water Budget that allows for an appeal process on the allocation factors • Example: Irvine Ranch WD 12 11/7/2011 19, Rate Structure Comparison Promoting Efficiency Admin Cost/Implementation yyl 1 1 Cost Customer Understanding * ** Funding Mechanism for 1 1 Conservation<tormwate CIP Equity/Affordability * ** Drought Management Tool/ SB x7-7 MWDOC Agencies R .� Best= *" Next Steps • Step 1 Develop the associated tiered rates and determine the customer impacts Determine the cost associated with changing the Billing System and meeting staffing level requirements Conduct a City Council Workshop to evaluate different rate structures and present the costs associated with implementation • Step 2 Implement the new Billing System and then conduct Prop 218 notice • Step 3 Conduct Public Hearing meeting on adopting the Water Budget Rate Structure 13 ii/7/zoii City Council Direction • Should the City continue to evaluate Water Budget Rate Structure? Develop the associated tiered rates and determine the customer impacts Conduct a Billing System assessment Determine the staffing levels needed to support the Water Budget Rate Structure Discussion 10, r F 14