Discussion Topics Overview of Water Rates in California Legal Framework of Water Rates Water Consumption Patterns Empirical Data – City of Fresno The Tale of Two Water Meters Conclusions HDR - A Tale of Two Meters 2

Water Rates in California California is Facing Some Significant Challenges, such as: Prolonged Drought Water Supply Shortages Costly Water Quality & Supply Projects Current Economy Has Led to More Prop 218 Rejections of Rate Increases Greater Attention on Fairness and Equity in New Water Rates HDR - A Tale of Two Meters 3

Water Rates in California (cont.) Many Cities are Moving Towards More Conservation-Oriented Water Rates: Converting from Flat to Volumetric Rates Converting from Uniform Volumetric (Single-Tier) Rates to Multi-Tiered Rates Converting from Multi-Tiered Rates to Water Budget Based Rates HDR - A Tale of Two Meters 4

Water Rates in California (cont.) Water Budget-Based Rates Appear to be the Cutting Edge in Conservation: A Water Budget is Defined for Each Customer (Typically Just Residential) Budgets Reflect Lot Size, Irrigable Area, Household Size, etc. They Clearly Promote Conservation, but Raise Some Questions About Equity HDR - A Tale of Two Meters 5

Legal Framework of Water Rates Prop 218 * – The Right to Vote on New Taxes (1996) AB 3030 * – Inflation Adjustments and Wholesale Pass-throughs (2002) AB 2572 * – Requires Water Meters for Urban Water Suppliers (2004) AB 2882 * – Allocation-Based Conservation Water Pricing (2008) HDR - A Tale of Two Meters 6 * California law

AB 2882 – Allocation-Based Conservation Water Pricing Aimed at two major water priorities in Calif.: 1.Preventing unreasonable waste of water 2.Ensuring costs are proportionally spread among customers But the focus is on providing legal foundation for allocation-based conservation pricing: A basic use allocation is established for each customer account that provides a reasonable amount of water for the customers needs and property characteristics. (Chapter 3.4, Section 372 (a) (2)) HDR - Re-Structuring Water Rates 7 Legal Framework of Water Rates (cont.)

AB 2882 – Additional Requirements for Allocation-Based Pricing: Rates must be based on metered usage Must use increasing blocks (tiers) to encourage conservation Rates must be proportional to: HDR - Re-Structuring Water Rates 8 Customer classes Basic use allocations Meter size Water consumption Discretionary Allocation of incremental costs between tiers Legal Framework of Water Rates (cont.)

Water Consumption Patterns HDR - A Tale of Two Meters 9

Water Consumption Patterns HDR - A Tale of Two Meters 10 Typical Consumption Patterns by Customer Classes:

Water Consumption Patterns (cont.) HDR - A Tale of Two Meters 11 Typical Peaking Patterns by Customer Classes:

HDR - A Tale of Two Meters 12 Seasonal Averages – Single-Family Customers: Water Consumption Patterns (cont.)

Expected Water Consumption by Lot Size: HDR - A Tale of Two Meters 13 Water Consumption Patterns (cont.) We would expect proportional increases in consumption as lot sizes increase:

Water Consumption by Lot Size (City of Modesto) HDR - A Tale of Two Meters 14 Water Consumption Patterns (cont.)

Number of Lots by Size (Modesto) HDR - A Tale of Two Meters 15 Water Consumption Patterns (cont.)

Water Consumption (per 1,000 sf) by Lot Size (Modesto) HDR - A Tale of Two Meters 16 Water Consumption Patterns (cont.)

Empirical Data – City of Fresno HDR - A Tale of Two Meters 17

HDR - A Tale of Two Meters 18 Fresno Bee Article* (How Will Meters affect Fresno Water Bills?): Analysis based on 6 months of meter data from 70 homes showed: Highest consumption was 7x lowest 25% to 50% appeared to have plumbing or irrigation leaks Water use varied widely, even among homes with the same size lots Empirical Data – City of Fresno (*Fresno Bee, ):

HDR - A Tale of Two Meters 19 Fresno Bee Article (cont.): Current flat rates are based on lot size; impacts of new metered rates vary by lot size: Smaller lots ( 6,000 sf): 17 of 23 would see their bills increase Medium-size lots (> 6,000 but 10,000 sf): 50% would have higher and 50% would have lower bills (i.e., 14 and 14) Larger lots (> 10,000 sf): 16 of 19 would have smaller bills Empirical Data – City of Fresno (cont.)

City of Fresno – Changes in Water Bills from Current Flat Rates to New Metered Rates: HDR - A Tale of Two Meters 20 Empirical Data – City of Fresno (cont.)

City of Fresno – Changes in Water Bills from Current Flat Rates to New Metered Rates HDR - A Tale of Two Meters 21 Data from 23 homes on lots 6,000 sf 17 of 23 homes would pay more under metered rates Empirical Data – City of Fresno (cont.)

HDR - A Tale of Two Meters 22 Fresno Bee Article ( ): Analysis based on 6 months of meter data from 70 homes showed: Highest consumption was 7x lowest 25% to 50% appeared to have plumbing or irrigation leaks Water use varied widely, even among homes with the same size lots. Empirical Data – City of Fresno (cont.)

The Tale of Two Water Meters HDR - A Tale of Two Meters 23

The Tale of Two Water Meters: HDR - A Tale of Two Meters 24 Meter #1: Water Budget- Based Water Rate Structure Meter #2: Multi-Tiered Conservation-Based Water Rate Structure

HDR - A Tale of Two Meters 25 City of Aurora Metered Data (Summer Season) for 50,700 Residential Customers Was Used to Compared Monthly Bills Under These Two Rate Structures Water Budget-Based Rates from Boulder, CO, Were Applied to Auroras Consumption Data for Lots of 5,000 to 9,000 sf The Tale of Two Water Meters (cont.)

HDR - A Tale of Two Meters 26 Monthly Bills from Water Budget Rates Were Compared to Bills from More Typical Multi-Tiered Conservation Rates Results indicate that Most Customers had Different Bills for Exactly the Same Level of Consumption The Tale of Two Water Meters (cont.)

HDR - A Tale of Two Meters 27 Results: Water Bills for Water Budget Rates vs. Multi-Tiered Rates

HDR - A Tale of Two Meters 28 Results - Water Bills (for the same amount of water use): The Tale of Two Water Meters (cont.)

Conclusions : HDR - A Tale of Two Meters 29 Residential consumption is typically highly variable within lots of the same size Our analysis of water budget-based rate structures showed: Water-budget based rates will result in some customers with higher water use paying lower water bills (for very similar size lots) Rate Equity: will customers using less water but getting higher bills consider water budget-based rates to be equitable? Water Agencies should carefully evaluate consumption patterns and know the rate impacts before adopting water budget rates

Questions? HDR - A Tale of Two Meters 30