Memo - Conservation Water Utility RatesMemorandum
To: Honorable Mayor and Members of the City Council
CC: Rick Getschow, City Manager
From: John R. Bradford, City Engineer
Date: 10/23/2009
Re: Conservation Water Utility Rates
In 2008, section 103G.291 of the Minnesota Statutes was amended to include a
requirement for public water suppliers to adopt a water rate structure that encourages
conservation. This work session item addresses this requirement.
Background
There are several ways to structure water rates to encourage conservation. Among
these are:
Increasing Block Rates where higher use incurs a higher charge per 1,000 gallons
used. The recommended rate increases are 25% and 50% for usage above and
greatly above normal domestic use. In Hopkins, this structure could be implemented
as shown below:
Tier I 0 — 9,000 gallons = $1.90/1,000 gallons
Tier II 9,001 — 18,000 gallons = $2.38/1,000 gallons (25% over Tier I)
Tier III Over 18,000 gallons = $3.56/1,000 gallons (50% over Tier II)
This structure is being used in the cities of Edina, Richfield and St. Louis Park.
A challenge with this structure is the case where multi - family dwellings have only
one water meter for the entire building. The statute requires that each individual unit
be accounted for in the rate. This means that for a four -plex, the lowest water rate
October 23, 2009
would be in effect for 36,000 gallons. A 10 -plex would get a 90,000 gallon trigger.
The administrative time needed to set this up will be significant.
Irrigation Rates where a higher rate is charged per gallons for irrigation meters. The
public policy value of this methodology is that lawn irrigation should be tempered
and a higher rate provides an economic incentive to do so. Many of our customers
have irrigation meters.
Individualized Goal Rates are used for large industrial customers with process water
demands. Citrus Systems is an example of this. They use very large volumes of
water in their production of orange juice. This really isn't wasteful use, as most of
this water is later consumed by people. An individual tier structure would be set up
for these industrial customers.
Proposed Strategy
At this time, we are proposing to implement an Irrigation Rate increase for 2010 as a
first step to conservation rates. This first step would be followed up with an
Increasing Block Rate to be implemented in 2011 and 2012. During 2010, staff
would develop the database needed to properly bill multi - family dwellings and work
with our commercial customers who have process uses to set up Individualized Goal
Rates.
The net effect on revenue will be twofold. The base $1.90/1,000 gallons rate that is
currently in place will not have to be raised until 2016. This has the net effect of
lowering residential water bills from the plan that was adopted in 2008. Commercial
and other large users will see an increase in their water bills.
We look forward to presenting detailed information about this item at the work
session and answering any questions you may have.
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