Water Pricing, Customer Usage: Its Complicated.. February 7, 2018 - - PowerPoint PPT Presentation

October 26, 2017

Water Pricing, Customer Usage: It’s Complicated…..

February 7, 2018

2

How you pay for it matters

Supporting the fair, effective, and financially sustainable delivery of environmental programs through:

• Applied Research
• Teaching and Outreach
• Program Design and Evaluation

Where we work:

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Study Background

• Interest in understanding the relationship between usage,

pricing, and other factors across the state.

• Interest in understanding behavior of individual customers

during the mandatory curtailment period

Thank you…

• Utilities and their conservation and billing professionals
• State Water Resource Control Board
• California American Water
• Urban Water Institute
• ..

Research Assistant Jack Watts Research Assistant AR El-Khattabi Research Assistant Caitlin Seyfried Research Assistant Kyrsten French Project Manager Jeff Hughes Research Project Director Shadi Eskaf

EFC Research Team

Some Research Questions

• What pricing signals were customers exposed to during the

drought?

• What role did pricing have in overall state success in meeting

curtailment requirements?

• What is the relationship between different types of pricing

signals and usage compared to other factors that influence usage?

• Can utilities with uniform rate structures meet ambitious

curtailment targets? (Do utilities need budget based rates/increasing block rates to meet targets?)

Elevator-Pitch Take-Aways and Findings

• Rate structures can only get you so far. The type of rate structure

influences pricing signals but utilities can craft aggressive pricing signals with almost any type of rate structure.

• Price was not the primary tool for many utilities. There is no compelling

statewide evidence that pricing was the dominant factor that led to meeting curtailment targets.

• Pricing does matter. There is evidence that price and pricing signals

influence basic usage (per capita, sales per account etc.)

• Adapt to local conditions. Sales distribution and local conditions vary and

will require different tools and approaches.

Study Methodology

• Develop and analyze an integrated statewide database of

pricing, usage, and other factors known to influence usage.

• Collect and analyze customer level sales behavior for

specific utilities. Challenges/Limitations: Precision of data, data availability, diversity of experiences, study time/resources.

Six Rate Structures Uniform Variation (Yes it’s an Oxymoron….)

$0 $20 $40 $60 $80 $100 5 10 15

Total Monthly Bill

CCF

Two Utilities’ Sales Distribution

The strength of the price incentive to encourage residential water conservation varied greatly in 2015

6% of 345 water systems more than doubled the residential water bill for residential customers that doubled their water use from 6 ccf to 12 ccf

0% 25% 50% $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 Cumulative Production Savings Achieved between June 2015 and May 2016 Compared to 2013 Baseline Increase in the Monthly Residential Water Bill from 6 ccf to 12 ccf in 2015

Cumulative savings achieved were not associated with how much more (in $) residential customers had to pay when using more than average levels of consumption in 2015

Analysis by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Sources: CA Water Control Board's May 2016 Supplier Conservation Compliance (June 21, 2016), CA Water Control Board's EAR water rates survey. Savings were calculated by the Water Control Board using water systems' self-reported water production data, and rates were self-reported by the water systems.

0% 25% 50% 1 2 3 4 5 6 7 8 9 10 Cumulative Production Savings Achieved between June 2015 and May 2016 Compared to 2013 Baseline Ratio of Highest Tier Rate to Lowest Tier Rate in 2016

The difference between the highest tier water rate and the lowest tier water rate charged during the mandatory conservation period was not associated with greater or lower cumulative savings

Analysis by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Sources: CA Water Control Board's May 2016 Supplier Conservation Compliance (June 21, 2016), California American Water Company's survey of California water rate structures. Savings were calculated by the Water Control Board using water systems' self-reported water production data. The ratio for uniform rate structures is 1.

High water production savings were achieved under all types of rate structures

There was no statistically significant correlation between any rate structure design and the cumulative savings achieved between June 2015 and May 2016

Residential Water Rate Structure Design in 2016

What did Drive Savings?

Analysis by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Sources: CA Water Control Board's May 2016 Supplier Conservation Compliance (June 21, 2016) and June 2014 - June 2017 Urban Water Supplier Report Dataset (August 1, 2017). Savings and residential GPCD were calculated by the Water Control Board using water systems' self-reported water production data.

Water systems that started with a higher level of per-capita water use were able to achieve greater savings than water systems with more efficient customers

Statistically significant at the 0.1% level

Water systems that issued more warnings during the mandatory conservation period were able to achieve greater cumulative savings during that period

Statistically significant at the 0.1% level

Analysis by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Sources: CA Water Control Board's May 2016 Supplier Conservation Compliance (June 21, 2016) and June 2014 - June 2017 Urban Water Supplier Report Dataset (August 1, 2017). Savings were calculated by the Water Control Board using water systems' self-reported water production data. Number of warnings issues were self-reported monthly by water systems.

Pricing Impact on Basic Usage Versus Driving Curtailments

Some anecdotal evidence that very “loud” pricing signals could be effective especially combined with other tools

Water systems that charged higher bills for 10 ccf of water use had lower average residential water use in 2016

Statistically significant at the 1% level

Analysis by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Sources: CA Water Control Board's June 2014 - June 2017 Urban Water Supplier Report Dataset (August 1, 2017), California American Water Company's survey of California water rate structures. Residential GPCD was calculated by the Water Control Board using water systems' self-reported water production data.

Average residential water use in June 2016 was, on average, higher in communities that had higher temperatures during that month than in

• ther communities

Statistically significant at the 0.1% level

Analysis by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Sources: CA Water Control Board's June 2014 - June 2017 Urban Water Supplier Report Dataset (August 1, 2017), NOAA PRISM. Residential GPCD was calculated by the Water Control Board using water systems' self-reported water production data.

Higher volumetric water rates were strongly associated with lower residential per-capita water use in 2015

Statistically significant at the 0.1% level

Analysis by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Sources: CA Water Control Board's June 2014 - June 2017 Urban Water Supplier Report Dataset (August 1, 2017), CA Water Control Board's EAR water rates survey. Residential GPCD was calculated by the Water Control Board using water systems' self-reported water production data, and rates were self-reported by the water systems