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Water & Wastewater Systems Cost of Service Study and Proposed Rate Structure
At the October 14, 2019 Commission meeting, FCS Group consultants provided information on the District’s future rate strategy for its water and wastewater systems. Following is a brief overview, followed by a link to the presentation slides, proposed resolution and accompanying charts. The presentation was originally included in the board packet posted to the website on October 10, 2019. At the upcoming October 28, 2019 regular Commission meeting, the Commissioners will consider adopting a resolution establishing phased one-system rate structures for water and wastewater systems.
What are Postage Stamp Rates?
Postage stamping of rates refers to the practice of combining costs for all different systems or regions of a utility and setting rates at the same level for all customers, regardless of location.
What are the Benefits of Postage Stamp Rates?
Postage stamp rates are easier to administer and understand. Operational and administrative costs are reduced when water systems utilize shared resources. Accounting, legal and regulatory compliance expenses are lower when spread over a larger customer base. Postage stamp rates also help to insulate smaller systems from a large rate increase due to expensive capital improvements or repairs. Shared capital savings allows more capital improvements to be completed without the need for additional debt.
When have Postage Stamp Rates been Supported?
Since 2011, District Commissioners have approved plans to transition from separate system rates to postage stamp rates. The first Cost of Service Analysis (COSA) Report including a transition plan was published in 2011. The next COSA was completed in January 2017. This included a 10-year transition plan. The first 3 years of this plan were approved by the Board of Commissioners to begin in 2017.
Why Use Tier Blocks for Rates?
A Tier Block Rate Structure is designed to capture additional costs as a customer’s water use increases. As water consumption increases, there is a need for additional water rights, water storage, source and pumping capacity, and treatment and pipeline upgrades. Tier blocks promote conservation by charging less for basic water use and more for increased water usage. Conservation is efficient use of water and ensures that there is enough for everyone. Efficient use of water resources remains an important component of the PUD’s strategic plan and is required by State regulations.
Why Revise the Tier Blocks?
Revising the tier blocks will promote water conservation. This will allow the PUD to serve more customers with our existing infrastructure and water rights. With the revised tier blocks, the transition to postage stamp rates will take less time, and have lower average rate increases, than proposed in the 2017 COSA. The proposed blocks will realign the rate tiers with average indoor and outdoor water use. The revised rates for the lowest tier will be lower and for the purpose of basic indoor water use. Creating more meaningful tier blocks will help customers prioritize water usage and allows for a proportionally lower rate increase to conservation conscientious customers who have low to average water consumption.
The proposed water rate structure seeks to accomplish uniform rates by 2024 through rate adjustments and a revised tier block structure. The tier blocks are designed to encourage conservation, and responsible management of water resources. The rate structure will meet the current and future revenue requirements of the water systems, ratepayer equitability, and stable rates with minimal impact to the average customer.