Water Budgets and Rate Structures - Innovative Management Tools William B. DeOreo, P.E., M.S. Aquacraft, Inc. Boulder, Colorado

Project Sponsors and Participants AwwaRF (tailored collaboration grant) EPA California Urban Water Conservation Council City of San Diego Water Dept. EBMUD Pinellas County Utilities, FL Scottsdale Water Res. Dept, AZ San Juan Capistrano, CA Jordan Valley WCD Irvine Ranch WD Otay WD LADWP Las Vegas Valley WD Portland, OR Scottsdale, AZ City of West Jordan, UT Town of Cary, NC Boulder, CO Centennial Valley WSD, CO Marco Island, FL City of Santa Barbara

Project Team Aquacraft, Inc. Peter Mayer, Bill DeOreo, Leslie Martien A&N Technical Services, Inc. Tom Chesnutt, David Pekelney Lyle Summers

Goals and Objectives Everything you always wanted to know about water budgets, but were afraid to ask.  What are water budgets  How do they work  What are their advantages and disadvantages  How they have been implemented  Improved program designs that could be implemented in the future  What information and billing technologies are required  How they can be used to improve utility resource management  How they can be used to help manage demand within a drought crisis

Prevalence of rate structures in United States Adapted from Raftelis, 2002

What are Individualized Rates? AKA water budget-based, goal-based, and customer-specific rates A type of block rate where the block definition uses one or more customer characteristics: Number of persons per household Lot size, Evapotranspiration needs of landscape A lower/higher rate is set for levels of water use less/more than the block definition

What are Individualized Rates? Rate/unit Units Higher Rate Lower Rate Water Budget

Why use Individualized Rates? They have been implemented in communities facing limited supplies/shortages Seen as an equitable way to share limited supply while preserving choice “Fairness” cited as its greatest advantage When the basis for the individualized rate is communicated well, they are seen as intrinsically more equitable than rates that ignore customer characteristics

Why use individualized rates? For the customer Improved linkage between who causes costs and who pays for them (Cost of Service) Better information to make consumptive decisions For the utility Practical method to handle supply limitations Dedicated funding for cost-effective conservation Decreased demands can lower future costs Lower costs reduce revenue requirements Improved cash flow stability

Implemented Water Budget Programs

Summary of Implemented Water Budget Rate Structures Type of Water Budget ProgramNumber of Utilities Implementing Complete (all/most customer accounts)3 SF Residential and Irrigation Accounts7 SF Residential Accounts3 Irrigation Accounts5 Golf Courses2 Informational5 In process/pending2

Is Water Consumption Affected? Irrigation Rate (inches/acre) PeriodOtayIrvine Capistrano Valley pre ‘88-’90 Average post ’90 Average Difference Percent Change - 20%-37%-35% Landscape Water Budget-base rates: pre-post consumption

Is Water Consumption Affected? Irvine Ranch Water District – staff concluded water budgets increased outdoor efficiency by 60% – 52.8 inches of water applied across 3,600 irrigable acres in service area. (Turf grass requirement = 48 inches) – 20.4 inches of water applied across 11,768 irrigable acres in service area. 61% reduction.

Is Water Consumption Affected? Centennial Water and Sanitation District in Colorado documented an average 25% reduction in demand after implementing a water budget program. Even though Centennial continues to add customers, its demand has decreased 18 – 31% starting in 2003 when the water budget-based rate structure was implemented.

Are individualized rates perfect? Imperfect from a conservation/efficiency perspective By “grandfathering” existing landscape choices, water budgets can give insufficient incentives to change those choices over the long-term This imperfection increases the political implementation feasibility

Designing Water Budgets Water budgets are useful in their own right for conservation program targeting Who are the inefficient users? Utilities that can identify customers most in need of assistance (targeting) will improve the cost-effectiveness of customer outreach See “Improved Program Targeting,” Socioeconomic Impacts of Conservation Programs, AwwaRF 2001, Beecher et al., page 115.

Water Budgets and Drought Response Water budgets and water budget rate structures offer water utilities powerful new tools for reducing demand during drought and for monitoring customer compliance with drought restrictions.

Case Study: San Juan Capistrano TierCost per CCF of water Tier I: Use up to 100% of the allocation $2.27 per ccf Tier II: Use up to 200% of the allocation $2.91 per ccf Tier III: Use greater than 200% of allocation $4.85 per ccf Lots under 7,000 sf given same allotment based on 3,636 sf irrigable area. Lots greater than 7,000 sf given individualized water budget based landscape area. Single-family indoor allotment = 9 ccf (6.7 kgal) per month Multi-family indoor budget is 6 ccf (4.5 kgal) per month.

Case Study: Centennial Valley Water and San. District % of BudgetRate ($/kgal) 0 – 100%$ – 120%$ – 140%$ %+$7.80 Fixed monthly fee $12.50

Case Study: Centennial Valley Water and San. District Aerial photo analysis.

Key Study Findings Water Budgets are Being Used Across the USA Water Budgets Can Meet Cost of Service Requirements Water Budget-Based Rate Structures, Like Utilities, are Unique Landscape Water Budgets Are Most Frequently Implemented Capable Utility Billing System and Customer Level Data REQUIRED

Key Study Findings Implementation Costs Vary Water Budget-Based Rate Structures Spur Conservation Savings Most Water Budgets Are Seen As “Fair” Landscape Penalty Rate Structures Are Less Successful Water Budgets Offer Great Potential as a Drought Response Tool

For More Information…. Published report from AwwaRF – Fall 2007 Journal article – publication date unknown Contact - Peter Mayer, or Bill DeOreo Thank you!