Sewer Rate Methodology Study March 6, 2014 Presented by Tom - - PowerPoint PPT Presentation

March 6, 2014

Sewer Rate Methodology Study

Presented by

Tom Gould, Vice President HDR Engineering, Inc. Las Gallinas Valley Sanitary District

Overview of the Presentation

• Review the District’s study of their sewer rate

structure

– Overview of the general approach used – Summary of the technical review – Key Board policy direction – Summary of the results

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Key Steps to the Study

• 1. Review the District’s existing rate structure
• 2. Determine (prioritize) the Board’s rate design

goals and objectives

• 3. Conduct a survey of other California and Bay-

area rate design practices

• 4. Review of conceptual rate structures
• 5. Review the District’s customer data/billing

information

• 6. Develop rate design options (alternatives)
• 7. Review the key (needed) Board policy decisions

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• 1. Overview of the District’s Current Rates
• Rate = $647/unit/year

Sewer Service Units (1) Residential Single‐Family Dwelling 1.0 per living unit Apartment house, condominium, or

• ther multi‐family dwelling

1.0 per living unit Mobile home park or trailer court 1.0 per mobile home pad and 1.0 per tailer space Rooming house 1.0 for up to 2 rooms used for renting, plus 0.25 for each additional room used for renting. Motel Unit with Kitchen 1.0 per living unit Motel Unit without Kitchen 0.5 per living unit (2) Schools Public or private schools without showers or cafeteria facilities 0.01 per pupil, faculty member and employee; pupil count based upon average daily attendance Public or private schools with showers

• r cafeteria facilities

0.02 per pupil, faculty member and employee; pupil count based upon average daily attendance Classification of Use The number of pupils shall be determined by the average daily attendance over the school year immediately preceeding the annual determination of sewer service charges . . . The number of faculty members and school employees shall be that number employeed at the end of such school year.

.

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• 1. Overview of the District’s Current Rates

(continued)

Sewer Service Units

(3) Other Than Above (a) Domestic‐strength users; commercial,

• ffice buildings, retail, churches, halls,

public agencies, laundromats, service stations, medical offices, barber and beauty shops, car washes, convalescent hospitals, hospitals, and other domestic strength discharges. 1.0 per average monthly residential water consumption times strength factor of 1.0 (b) High strength users: 1.0 per average monthly residential water consumption times strength factor shown below: Restaurants/Cafes 2.6 Bakeries 2.6 Mortuaries 2.6 Hotel with restaurant 2.0 Markets with disposal 2.6 Mixed uses (high & domestic strength) 2.0 Industry As determined by formula Other High‐Strength As determined by formula

Classification of Use

c) Other users: For users for whom the above methods do not equitably apply, the assignment of sewer service units shall be based upon available information reasonably applied by the District.

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.

• 2. Prioritization of the District’s Rate

Design Goals and Objectives*

Board Prioritization[1] Rank District Management Prioritization Revenue Stability and Predictability 1 Revenue Stability and Predictability Fair Allocation of Costs to Attain Equity 2 Easy to Understand and Administer Stability and Predictability of Bills 3 Fair Allocation of Costs to Attain Equity Simple and Easy to Understand 4 Freedom from Controversy as to Interpretation of the Rates Avoidance of Undue Discrimination 5 Predictability of the customer bills from year to year

[1] – The first two rate design goals and objectives for the Board were a tie for 1st.

[*] – Based upon the James C. Bonbright’s Attributes of a Sound Rate Structure

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• 3. Survey of Other California Wastewater

Billing Practices and Rate Structures

• Reviewed the State Water Resources Control

Board (State Water Board) rate survey

– FY 2012/13 Wastewater User Charge User Survey – Surveyed 759 agencies with 422 utility responses

• Review undertaken

– Statewide – Bay-Area

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• 3. Frequency of Billing and Rate Structure

(State‐Wide and Bay‐Area)

20 40 60 80 100 120 140 160 Residential Multi‐Family Commercial

Frequency of Billing and Rate Structure Used

Annual & Flat Annual & Volume Based Bi‐Monthly & Flat Bi‐Monthly & Volume‐Based Monthly & Flat Monthly & Volume Based Unknown 5 10 15 20 25 30 Residential Multi‐Family Commercial

Bay Area Frequency of Billing and Rate Structure Used

Annual & Flat Annual & Volume Based Bi‐Monthly & Flat Bi‐Monthly & Volume‐Based Monthly & Flat Monthly & Volume Based Unknown

#1 Resid. #2 Resid. #1 Resid.

State‐Wide Bay‐Area

#1 Comm. #1 Comm.

. . . . .

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3.Other Surveyed Information

• Size of the utility does not appear to correlate to the

bill frequency or the rate structure utilized

– Bill frequency and rate structure appear to be more driven by access to the necessary data and ease/cost of administration

• HDR conducted a more detailed review of local

utilities

– District’s frequency and structure is similar to others – Most use a flat residential rate – Range of treatment in the SFR/MFR rate relationship – Strength relationship are typical of other utilities

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• 4. Review of Conceptual Rate Structures
• Basic Terminology

– Fixed costs and fixed charges – Variable cost and variable/volumetric charges

• Basis for volumetric charges
• Review of the District’s Current Fixed/Variable

Costs

– HDR reviewed the District’s budget and determined 5% of the costs were variable costs

• There appears to be a limited cost-basis for a

significant portion of the District’s rates to be billed on variable or volumetric basis

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4.Basis for Volumetric Billing

• Typically utilize metered water consumption
• Measure an average winter water period

– Intended to remove “outdoor” irrigation use

• District uses mid-December thru mid-

February for their time period

• Commercial is an average of

winter/summer

• HDR found it challenging and

time consuming to work with the individual customer data

– Not easy to cross-reference data and accounts – There are significant administrative issues associated with movement to a volumetric rate

2 4 6 8 10 12 14 16 18 20 J A S O N D J F M A M J

Sewer Billing Using Average Winter Water Use

Water Use

Consumption Basis for Sewer Billings

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• 5. Profile of Residential/MF Usage Patterns
• Reviewed 2011 and 2012

residential and multi-family individual customer data

• Patterns between the two

years were fairly similar

– 2011 MF ranged from 76% to 86% of SFR – Industry literature: 72% - 93%

• Vast majority of residential

customers use 10 CCF (7,500 gallons) or less per month

– Data included some very high residential use – Original data from the water utility was not corrected for customers with leaks

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 200 400 600 800 1,000 1,200

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25+

# of Customers CCF/Month

2012 Residential Average Winter Use

Average Monthly Winter Water Use Cumulative %

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• 6. Development of Rate Design Options
• Board reviewed multiple rate structure options as a

part of this study. Three key Board rate design policy issues

• 1. Rate Structure - Board policy direction – maintain

existing fixed rate structure

• 2. Rate Relationships - Adjust the rate relationship

between residential and multi-family (i.e. multi-family is set at xx% of a single-family residential

• 3. Definition of a Sewer Unit - Adjust or revise the

definition of a sewer unit to 8 CCF/month to reflect a SFR customer and gain consistency across all users

• Specifically impacts commercial and the

calculation of billing units

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• 6. Development of Rate Design Options

(continued)

• Board’s Review of the Options

– Reviewed numerous rate design options

• Fixed and volumetric rates
• Range of rate relationships between single-family and

multi-family (with and without relationship adjustments)

• Definition of an equivalent residential unit (ERU)

– Received public comment and feedback during Board work sessions – Conducted a detailed review of the multi-unit customers (customer definition/migration) – Requested the development of additional rate design

• ptions

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Final Recommendations – Rate Option 5a

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Residential $675.00 /Sewer Unit Multi‐Family [1] $540.00 /Sewer Unit Commercial [2] $675.00 /Sewer Unit [1] ‐ Assumes multi‐family is 80% of a single‐family residential [2] ‐ Assumes 1 commerical sewer unit = connection fee sewer unit (8CCF/Month) Residential & Multi Family: Option 5a ‐ 80% ‐ 8CCF

2 6 10 14 18 22 26 30 Present Annual Bill $647 $647 $647 $647 $647 $647 $647 $647 $647 Option 5a Annual Bill $675 $675 $675 $675 $675 $675 $675 $675 $675 $550 $575 $600 $625 $650 $675 $700 $725 $750

Residential: Option 5a ‐ 80% ‐ 8CCF

• Ave. Winter CCF

50 60 80 100 120 140 160 180 200 Present Annual Bill $6,470 $6,470 $6,470 $6,470 $6,470 $6,470 $6,470 $6,470 $6,470 Option 5a Annual Bill $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $5,400 $4,000 $4,500 $5,000 $5,500 $6,000 $6,500 $7,000

Multi Family (10 units): Option 5a ‐ 80% ‐ 8CCF

• Ave. Winter CCF

10 30 50 70 90 110 130 150 Present Annual Bill $647 $647 $1,294 $1,941 $2,588 $3,235 $3,882 $4,529 $5,176 Option 5a Annual Bill $675 $675 $1,350 $2,700 $3,375 $4,050 $4,725 $6,075 $6,750 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000

Commercial Low strength: Option 5a ‐ 80% ‐ 8CCF

• Ave. W/S ‐ CCF
• Board’s Preferred Option

– Sets the multi-family $/ERU rate at 80%

• f the single-family rate to better reflect

differences in flow contributions (i.e. usage) – Resets 1 ERU to 8 CCF/month which ties to the District’s capital facility charges (basis for the amount of capacity of 1 ERU)

Rates reflect revised multi-unit customer definition/migration

Final Recommendations

Defining Other Customer Groups

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Customer Group Current Rate Policy Recommended Rate Policy Basis for Recommendation Mobile Home Park and Trailer Court 1.0 Per Mobile Home Pad and 1.0 Per Trailer Space Maintain at Current Level Review of Consumptive Use Rooming Houses District has a category for rooming houses Eliminate Category and change to Accessory Dwelling Units (ADU). Establish an ADU in the range of 0.5 to 0.8 living units Rooming Houses is an Old/Unusual Category; ADU is more relevant Motels Motel Unit with Kitchen Motel Unit without Kitchen 0.5 Per Living Unit Eliminate category and move to Commercial Low Strength Administrative ease and places in same context as hotels Schools Public or private schools without showers or cafeteria facilities Public or private schools with showers or cafeteria facilities 0.02 per pupil, faculty member and employee; pupil count based upon average daily attendance. Maintain existing policy/approach Analysis compared current approach to volumetric billing and existing approach is reasonable 0.01 per pupil, facilty member and employee; pupil count based upon average daily attendance. Maintain existing policy/approach Analysis compared current approach to volumetric billing and existing approach is reasonable Administrative ease and places in same context as hotels Eliminate category and move to Commercial Low Strength 1.0 Per Living Unit

Final Recommendations

Review of Strength Factors

BOD SS (mg/l) (mg/l) Residential 175 175 1.0 Commercial (General) Office/Retail 175 175 1.0 Hotels/Motels 175 175 1.0 Retail Shops 175 175 1.0 Halls/Churches 175 175 1.0 Other Domestic Strength 175 175 1.0 Laundromats 175 175 1.0 Service Stations/Car Washes 175 175 1.0 Medical Offices 175 175 1.0 Hospitals/Convalescent Homes/Assisted Living 175 175 1.0 Commercial (High Sewer Use) Restaurants/Cafes 750 650 2.4 Bakeries 1,150 900 3.2 Mortuaries 650 450 2.0 Mixed Uses/Other 600 500 2.0 Hotels with Restaurants 600 500 2.0 Dry Industry 175 175 1.0 Markets with Disposals 800 800 2.6 Other Industry/High Use As determined by District Public Agency: Schools 175 175 1.0 Offices 175 175 1.0 User Group SF

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Summary

• The District’s study has

reviewed the issues in detail to allow the Board to make sound and rational policy decisions

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