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HomeMy WebLinkAbout1991-12-03; Municipal Water District; 138; Inclining Block Water Rate StructureCARLSBAD MI - JCIPAL WATER DISTRICT - &>ENDA BILL 46 # / % TITLE: DEPT. HD. 6!f? UlTG. la-3 -‘? / IEPT. ha Continuation of Discussion Regarding the District’s Inclining Block Water Rate Structure CITY MGR. w 3ECOMMENDED ACTION: Receive report and direct staff to take appropriate actions on issues related to the District’s inclining block water rate structure. ITEM EXPLANATION At the November 19th meeting of the Board of Directors, a number of issues pertaining to the District’s inclining block water rate structure were referred to staff for further study. The topics to be researched and reported upon by staff are as follows: I. Issues related to the existing: rate structure A. The District maintains a system that bases single family residential allocations on a District wide average. How was the District wide single-family residential average derived? B. Under the current system, a single family residential customer who consumes more than 15 units could pay more than non-residential customers for using the same volume of water. What are some examples of this? C. The rates recommended by the Water Commission are substantially lower than the existing system. What are some examples of the water bills when the new rates are applied to the current method of allocation for single family customers? D. How do other agencies determine allocation methods for residential customers? II. Issues related to potential revisions or additions to the current system A. If the decision is made to maintain the single-family allocation system, what would be the feasibility of setting multi-family and duplex classifications in the same manner? B. If the decision is made to maintain the single family allocation system, what provisions could be made for those customers who live on large lots? C. Under the system whereby allocations are based on actual demands minus the conservation target in effect, the potential exists that customers using the same volume of water could pay more. This would be the case in an example when one customer exceeds base year usage and one customer reduces usage from the base year. What are some examples of the different costs? III. General Information A. HOW do the local golf courses receive their water supplies? The following is a detailed description of the various issues described on the previous page: I.A. - METHOD OF DETERMINING AVERAGES FOR SINGLE FAMILY CUSTOMERS In May of 1991, the Board of Directors adopted a revised inclining block water rate structure. This revision included the creation of a system that bases monthly single-family allocation on a District wide average in lieu of actual demands in 1989-90 less the conservation target in effect. The methodology used in the development of the District wide average involved taking the total number of units that were used each month during 1989-90 by single family users and dividing by the total number of single family connections. The result was the development of a series of monthly averages which ranged from a low of 10 units per month in February to a high of 21 units in September. The overall 1989-90 average water consumption for single-family customers was 16 units. The monthly averages produced a pattern that followed normal seasonal variations in water use that are similar to what the District experiences for all other classifications. During the first six months of the year (wet season - January thru June), the monthly averages were generally lower that the annual average. Conversely, during the last six months (dry season - July thru December), consumption was generally higher than the annual average. The Board adopted a system that consolidated monthly single family allocations into two semi- annual categories. The wet season average was 13 units per month and the dry season average was 19 units (16 unit annual average). The adoption of two semi-annual allocations was made to allow for the increased irrigation requirements during the warmer months. The current monthly targets are based on these two semi-annual allocations. The wet season allocation of 13 units and the dry season allocation of 19 units are then reduced by the conservation target in effect (currently 20%). The development of the two semi-annual targets results in the current monthly single family allocations of 10 units (13 units minus 20%) in the wet season and 15 units (19 units minus 20%) in the dry season. The following graph depicts the current monthly single family averages and semi-annual allocations. Carlsbad M. W.D. Consumption Rates Units Used n Single Family Jul Aug Sep Ott Nov Dee Jan Feb Mar Apr May Jun 21 20 21 15 17 18 13 10 11 13 16 17 Month 89-90 I.B. - DIFFERENCES IN BILLING RATES FOR SINGLE FAMILY COMPARED TO OTHER CLASSIFICATIONS Under the District-wide average method of allocation for single-family residential customers, any water consumed over 15 units is billed at the higher rates. However, for the other classifications, a 20% reduction is required from 1989-90. If a non-single-family residential customer reduces more than 20%, no “penalty” is charged. Therefore, a single family customer who uses more than 15 units would have a higher water bill than a non-single-family customer who reduces consumption by more than 20% but uses the same number of units as the single-family customer. The following table represents the differential between the water bills of the various customer classifications. Under four different usage patterns, the first column shows the water bill for single family customers while the second, third and fourth columns show the water bills for the other classifications. Due to the fact that the method of allocation is the same for all classifications other than single family, the cost of the other water bills (columns two, three and four) are the same. CURRENT RATE STRUCTURE COMPARISON BETWEEN CLASSIFICATIONS Usage S/F Other Res Commilnd Agllrr All customers have reducad by 20% from base year I.C. - IMPACT ON BILLS FOR SINGLE FAMILY CUSTOMERS IF ONLY THE WATER RATES WERE ADJUSTED The new rate schedule recommended by the Water Commission reduces the charges for the various block rates. The following table represents the current and recommended rates. Current Proposed Rate UP to Rate UP to Lifeline N/A N/A $0.90 7 units Block 1 $1.15 Allocation 1.15 Allocation Block 2 . 1.73 10% over 1.43 20% over Block 3 2.30 20% over 1.73 >20% over Block 4 2.88 >20% over Deleted 3 The left column in the following table specifies the cost of water under the current rate structure, while the right column incorporates the Commission’s recommended block rate structure without changing the method of allocation. CURRENT AND PROPOSED RATE STRUCTURE SINGLE-FAMILY AVERAGE ALLOCATION METHOD Usage Current Rates Proposed Rates 10 $11.50 $9.75 15 $17.25 $15.50 30 $57.50 $40.55 50 $115.00 $75.15 I.D. - COMPARISON TO OTHER AGENCIES One can draw a conclusion that no two agencies in the entire county maintain the same rate structures. Some use the 1989-90 base year, at least one uses a 1988 base year, while others use an agency-wide averages, meter size allocations, or a combination of methods. All agencies customize their allocations and rate structures to suit their needs and, as a result, no two are alike. Several agencies have revised or are considering revising their rate structures to reduce or even eliminate penalties. For example, Poway has eliminated its penalty structure and is now voluntary. San Diego is voluntary and recently chose not to increase its rates. Helix Water District eliminated its top two penalty blocks and Oceanside is considering reducing its top two penalty blocks. Exhibit A provides a summary on the method of allocation for residential customers in other water agencies throughout the county. Those agencies listed as “average” set single-family, multi-family and duplex classifications on an agency-wide average. Those agencies listed as 20% from base set single-family, multi-family and duplex classifications on a reduction from the base year. Those agencies listed as “mixed” set single-family on an agency-wide average and multi-family and duplex users on actual demands minus the base year. Those listed as other or none are self explanatory. 11-A. - FEASIBILITY OF SETTING MULTI-FAMILY AND DUPLEX CLASSIFICATION ON A DISTRICT WIDE AVERAGE If the Board retains the District-wide average for single family classifications and also desires to set multi-family and duplex allocations on a District-wide average, the allocation for each dwelling in a multi-family development under the current 20% conservation level would be 8 units (10 units minus 20%) in the wet season and 10 units (13 units minus 20%) in the dry season. Duplex classifications would have a total wet season allocation of 19 units (24 units 4 minus 20%) and a total dry season allocation of 16 units (20 units minus 20%). Due to the fact that each dwelling in multi-family and duplex classifications is not individually metered, the property owners will have the responsibility of determining consumption patterns within the individual developments. _ Carlsbad M. W.D. consumption Rates - Multi-Family Units Used i Season Avg. 13 * a Month 89-90 Usage par Dwelling Carlsbad M. W.D. Consumption Rates - Duplex Units Used Dry Season Avg. 24 ---- 15 Season Avg. 20 Month 89-90 1I.B. - LARGE LOT EXEMPTIONS A number of concerns were expressed by customers to District staff on the topic of setting allocations on a District wide average. The most prevalent issue is the fact that a number of customers cut more than 20% and are still faced with a substantially higher water bill. This is 5 due to the fact that all units consumed over 15 are billed at the blocks 2 through 4. These concerns were generally expressed by customers with larger lots and correspondingly higher water demands. In many circumstances, residents were required to keep areas landscaped for fire protection and erosion control. The additional watering required for such purposes was often dictated by home owners’ association rules, C. C. & R.s, and/or the City of Carlsbad. In an attempt to mitigate this issue, the Board of Directors also requested an analysis from staff on the feasibility of allowing for large lot exemptions. Staff has completed a preliminary analysis. If the Board wishes to initiate this type of system, staff will return with the program’s specifics. The general provisions of the system envisioned by staff would take into account the following items: * The lot must exceed the 7,500 square foot City-wide standard, and meet a “large lot” definition * Additional allocations would be given based on overall lot size * All reasonable steps must be taken to reduce interior water demands * Additional allocations would only be given for existing landscaping The system is envisioned to be in effect for any lot larger than the City standard of 7,500 square feet and meet a large lot definition (yet to be determined). Depending upon the lot size, additional allotments would be given to the property owner. However, staff would like to develop a system to ensure that those customers have taken all reasonable steps to reduce their interior water demands. These reasonable steps would include the installation of low flow showerheads, toilets and faucet aerators. Also, the potential would exist that some customers could be granted an exemption based on the lot size in order to add landscaping. If the Board desires to create the large lot exemption, staff would recommend that additional allocations be granted for existing landscapes, and avoid promoting the addition of new landscaping under the current drought conditions. There are three drawbacks to this type of program. First, there seems to be a philosophical inconsistency with the large lot exemption when combined with the current method of allocating water to single family residences. On one hand, the current method of allocation charges higher rates for any single family residential customer who exceeds 15 units. However, if the District gives exemptions to all customers with lot sizes above the City standard, the intent of bringing these customers down to the 15 unit range is lost. We would only be creating work for ourselves. The second drawback is the impact upon staff to implement such a program. As evidenced by the volume of requests received on the existing system, a substantial commitment would be needed. Staff has estimated the potential workload impact. Assuming that any single-family resident consuming over 40 units would request an exemption, staff has developed an estimated cost for the time required to implement this program. 6 1. Processing of exemption application 2. . Computer input of exemptions 3. On-site inspections Lot size confirmation Fixture installation confirmation 1,500 hours 575 hours 3,000 hours Total staff hours Based on the example above, the additional staff needed to implement the program would total two full-time employees. Even assuming that only half of the single-family customers using more than 40 units per month file for exemptions, one new full-time person would be needed for implementation. If the Board desires to set multi-family and duplex classifications on a District wide average, a similar type of program for larger developments would need to be developed. The time required by staff would increase from the estimates shown above. Various programs could be developed that require less staff involvement. Without a program coordinator, the potential exists that some residents could have allocations that are based on untrue information. This information could be submitted either intentionally or non-intentionally. In either case, residential water consumption could artificially increase. KC. - DIFFERENT COSTS FOR CUSTOMERS WHO CONSUME THE SAME VOLUME OF WATER A system that bases allocations on water demands during 1989-90 can create a scenario in which two customers who use the same volume of water may have to pay different rates. This would occur in a situation when one customer increases consumption compared to the base year and one customer reduces water use. The following table represents the difference in water bills for customers who use 15, 30 and 50 units each. However, one customer has conserved by 20% and therefore avoided penalties while the other customer has increased water use by 20%. PROPOSED RATE STRUCTURE SINGLE-FAMILY COMPARISONS Reduction from Base Year -20% +20% Current Base Current Base Usage Year cost Usage Year cost IILA. - LOCAL GOLF COURSE IRRIGATION There are three golf courses in the District’s service area. The Aviara golf course is presently using reclaimed water as are other areas within the Aviara development, such as slopes, medians and common areas. The development approval was conditioned on the use of reclaimed water. Due to the concern Aviara had regarding the possible 50% water cutback in April of this year, the developer took steps to utilize reclaimed water for the golf course ahead of schedule. When a 50% cutback was imminent in early ‘91, the irrigation of golf courses with potable water would have been eliminated. The permanent delivery system will not be in place for at least another six months, Aviara installed a temporary pipeline and pump facility to deliver the reclaimed water to the golf course and the development. Approximately 400,000 gallons per day (GPD) of reclaimed water is used to irrigate the golf course. The La Costa North golf course has been using reclaimed water for several years. Because of permit requirements from the Regional Water Quality Control Board, reclaimed water cannot be stored in the ponds on the course during the winter months. In the event of a 100 year flood, the Regional Board is concerned with the potential of the reclaimed water reaching the Batiquitos lagoon. Approximately 400,000 GPD of reclaimed water are consumed at La Costa. The Ranch0 Carlsbad executive golf course irrigates its course with approximately 200,000 GPD of well water from a local source. Therefore, all three local golf courses are utilizing alternate water sources, in varying degrees, to meet their irrigation demands. SUMMARY This concludes staff’s analysis of the topics referred by the Board. Staff is now requesting a decision on the policy issues pertaining to the District’s rate structure. A flow chart has been attached as Exhibit A to depict the policy decisions needed by the Board. ISSUE 1 - METHOD OF ALLOCATION A. The Board needs to decide if any change is needed in the method of allocation for single- family residences. The information presented in this agenda bill that pertains to the method of allocation shows that there are a number of different methods chosen by the various agencies in the county. No two rate structures are identical. As the various tables in the agenda bill document, the impacts on the various user classifications differ on either the District-wide average or base year minus 20% systems. Either system can be administered by the District. B. If the method of allocation remains unchanged, does the Board desire to include a large lot exemption? The large lot exemption seems to be the only way to accommodate the consumers who have justifiably higher consumption patterns. However, there are some 8 philosophical and logistical issues that are raised with this type of system. Apart from the inconsistency that is developed when this system is compared to the intent of the District wide average, the large lot exemption has the greatest fiscal impact. The system could be implemented with the addition of new staff. Other types of programs could be developed with a smaller impact upon staff. However, a system with less staff involvement could have a tendency to increase the allotment given to cusomers which, in turn, could increase residential consumption. C. If the District-wide average is+ maintained for single family users, a decision needs to be made regarding the change in the method of allocation for multi-family and duplex developments. A number of agencies in the county have implemented systems where the methodology used to set single and multi-family allocation are mixed. Staff has developed the wet and dry season allocations for both multi-family and duplex classifications and are included in this agenda bill. If a District-wide average is set for these other classifications, the issue of granting exemptions for multi-family and duplex developments with large lots or landscaped areas could be considered. The issues that surface with such a program are identical to those for single-family classifications. As with single-family, a decision must be made regarding the creation of a system that includes exemptions for multi-family and duplex classifications. Due to the fact that the Commission is recommending a reduction in the block rates, excluding such a program should not have a dramatic financial impact upon either single-family, multi-family or duplex classifications. In closing, it is fair to say that any rate structure could place additional burdens on one or more sectors of the water users. Staff has analyzed all of the issues raised at the November 19th meeting and concluded that any action taken by the Board could result in a system that can be implemented. Some programs have fiscal impacts that are greater than others. However, once the Board has resolved the policy issues, staff can develop the most efficient system to meet the District’s needs. ISSUE 2 - REVISED RATE STRUCTURE A decision is needed on the proposed rates. The Water Commission has recommended a rate structure that would dramatically reduce the additional revenue received by the District. The current and proposed rate structures follow. The Board needs to direct staff to return with the necessary documents to approve the Commissions’s recommendation on the block rate charges or create a different rate strategy. . Current Proposed &a& to uu m to uv Lifeline N/A N/A $0.90 7 units Block 1 $1.15 Allocation 1.15 Allocation Block 2 1.73 10% over 1.43 20% over Block 3 2.30 20% over 1.73 >20% over Block 4 2.88 >20% over Deleted 9 ISSUE 3 - EXPENDITURE OF EXISTING AND FUTURE FUNDS The Commission is recommending a strategy for the expenditure of existing and future funds received as part of the inclining block rate structure. In summary, the Commission is recommending the allocation of existing additional revenue should be as follows: Customer service improvements $100,000 Refund to single fam. customers 140,000 5 Units free to all customers 97,700 50% of funds in reserves 431,150 50% of funds in rate stabilization 431,150 Total $1,200,000 Specifics of the various programs were included in the November 19th agenda bill and discussed at the meeting. A copy of the previous agenda bill is attached. Staff will answer any questions that the Board may have on the expenditures outlined above at the meeting on December 3rd. Staff is requesting a decision on this issue. FISCAL IMPACT The District has accumulated approximately $ 1.2 million from the inclining block water rate structure. Using the August/September billing cycle as a model, the cumulative changes recommended by the Water Commission would have reduced additional revenue by 87%. The amount of revenue received would have been reduced from $260,000+ to approximately $33,000. Once staff is aware of the Board’s preferences on the number of topics outlined in this agenda bill, a complete financial analysis will be performed and returned at a future meeting. Exhibits 1. Exhibit A - Summary of Other Agencies 2. Exhibit B - Flow chart of policy decisions 3. Exhibit C - Agenda Bill from 11-19-91 Board meeting 10 EXHIBIT A - METHOD OF ALLOCATION Comparison to Other Agencies Average System City of Escondido City of Oceanside Olivenhain Municipal Water District Rincon de1 Diablo Municipal Water District 20% from Base Year Helix Water District Rainbow Water District Mix (Combination of average and base year usage) Fallbrook Public Utility District Otay Water District Ramona Municipal Water District San Dieguito Water District S weetwater Authority Vallecitos Water District Valley Center Municipal Water District Vista Irrigation District Other De1 Mar (per capita) None City of San Diego City of Poway 11 8 1% El :-@I- ISI 1”; $ T , I iT$ 1-c EdI .9 pr: I I l.i 5J 1 E+g p- 1: El p $1 - J r ---1 !I! $1 2-51 $1 .g I El I”rn I I t+ g I 1:&k 1 I&l- Y 18 g I 8 Igcd *a I g l3j[ I k-l I g-3 1 2 3 I 3 I &I !i L -- J 3