Staying Afloat with Water Revenues Balancing the ebb and flow of revenue stability with conservation Mayors Water Council December 3, 2009 Sandra Ralston Todd Cristiano Malcolm Pirnie

Water Conservation A Necessity for Sustainable Utilities  1% of world’s water supply suitable for consumption  Water shortages projected for 36 states with next 5 years  Conservation programs can be an effective tool in protecting vital resources and minimizing costs BUT  Conservation-based rates can affect the stability of water revenues

Water Utility System The ‘Ebb and Flow’ of Conservation  Rate revenue before conservation  Rate revenue after conservation  Reduced consumption leads to:  Potential revenue instability  Rate increases  “I use less, and my bill goes up!”  Reduced consumption also leads to:  Capacity benefit – Delayed expansion projects  Reduced O&M  ‘Doing more with less’ Available Capacity

Volumetric Rate Structure Spectrum CONSERVATION ORIENTATION Flat Rate Declining Block Declining Block Uniform Seasonal Inclining Block Inclining Block Budget/ Individualized Budget/ Individualized Flat Rate Declining Block Uniform Rate Seasonal Inclining Block Budget / Individualized The City of Boulder, CO implemented a 5-tiered water budget structure in 2007 The City of Boulder, CO implemented a 5-tiered water budget structure in 2007 Water Budget Allocation: Domestic (indoor usage) Irrigation (outdoor usage) Water Budget Allocation: Domestic (indoor usage) Irrigation (outdoor usage) Water Budget Basis: Indoor people per household average winter consumption Outdoor Irrigable area (square feet) Evapotranspiration Water Budget Basis: Indoor people per household average winter consumption Outdoor Irrigable area (square feet) Evapotranspiration More Less REVENUE STABILITY More Less More

Rate Structures and Pricing Objectives  Rate structures and prices should be designed to: Provide a sufficient revenue stream Easy to understand/transparency Equitable Legally compliant Meet utility-specific policy goals and objectives -Provide stable revenue stream -Sustainability/Conservation goals/Education -Low income/Affordability -Growth pays its own way -Minimize impact to large volume customers Selected pricing policies can have conflicting objectives!

Conservation Planning Models Capturing the Moving Parts Delayed Capital Expansion Reduced O&M Additional Source of Supply Rate Increases Reduced Revenues Revenue Instability Inclining Block Structures Budget-Based Rate Structure Pricing Objectives  Dynamic modeling tools “What if” scenario analysis Optimization of variables Real-time analysis with Stakeholders Results summary dashboard Flexible and updatable

Addressing Conservation Challenges Consumption 5% Rate Increase ??% Delayed CIP Rate Increase/ Decrease ??% Customer Bill Impact ??% Rate Structure Change

The Conservation – Revenue Stability Balance A successful conservation program promotes: Sustainable water resources for future generations Sustainable financial viability A successful conservation program promotes: Sustainable water resources for future generations Sustainable financial viability Dillon Reservoir 2009 Summit County, Colorado

Discussion Sandra Ralston Principal Consultant Charleston, SC Sandra Ralston Principal Consultant Charleston, SC Todd Cristiano Senior Consultant Denver, CO Todd Cristiano Senior Consultant Denver, CO