HomeMy WebLinkAbout1991-11-19; Municipal Water District; 134; Revised Inclining Block Water Rate StructureI
CARLSBAD MU[-YPAL WATER DISTRICT - A’NDA BILL $+,‘m-
AB # 13q TITLE:
MT& h- /y-‘?/
DEPT. Consideration of a Revised Inclining
Block Water Rate Structure CITY MGR. w
RECOMMENDED ACTION:
Adopt Resolution No. $)bo approving the recommendations of the Water Commission on issues
pertaining to the District’s inclining block water rate structure
ITEM EXPLANATION
At the Board of Directors meeting held on October 22nd, the issue of the District’s inclining
block water rate structure was discussed. During the first seven months of the new rate system,
the District has accumulated over $1,200,000 in additional revenue due to the rate structure. The
District had met its 20% conservation target as a whole. Revenue generated by the higher rates
included single family residential customers who used more than their 15unit allocation, as well
as those other categories of users that did not conserve at least 20%.
The Board of Directors referred this topic to the Water Commission. Two meetings have been
held and resulted in a recommendation from the Commission on two key topics:
1. What changes should be made to the rate structure, if any?
2. What should be done with the current funds on hand?
REVISIONS TO THE CURRENT RATE STRUCTURE
The first issue discussed is the future of the inclining block rate structure. Staff has been working
with the Information Systems Department in the development of a computer model that would
specify the effect of any rate changes on the amount of additional revenue received by the
‘District. After reviewing the data, the Commission is recommending some changes to the current
system. The proposed rate structure will eliminate one of the blocks, reduce the rate of the blocks
and increase the number of units billed at the lower blocks as shown on the following page:
Current System
Categorv Cost # of Units
Block 1 $1.15
Block 2 $1.73
Block 3 $2.30
Block 4 $2.88
Up to Allocation
1%- 10% Over Allocation
1 l-20% Over Allocation
20%+ Over Allocation
Commission Recommendation
Cateaorv @sJ # of Units
Res. Lifeline $ -90
Block 1 $1.15
Block 2 $1.43
Block 3 $1.73
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Up to Allocation
l%-20% Over Allocation
20%+ Over Allocation
As mentioned earlier, there were single family customers who conserved more than 20% and
were billed units at the higher rates. The Commission is recommending a refund to those users.
The current system will need to be revised to prevent this from recurring in the future. Therefore,
the Commission is recommending a revision by setting all single family allocations on actual
demands during fiscal year 1989-90 less the conservation target in effect instead of a District-
wide average.
If consumption patterns continue in a manner similar to the August-September billing cycle, the
cumulative effect of the revisions to the rate structure will generate an estimated $33,000 per
month. The August-September billing cycle is one of the District’s higher demand months. Other
months could produce less penalty revenue.
.A11 of the proposed changes in the rate structure could be implemented retroactively to the
October-November billing cycle.
USE OF CURRENT FUNDS ON HAND
The Commission felt that a portion of the funds on hand should go to improvements in customer
service, a refund to customers, and the establishment of a rate stabilization fund and a reserve
fund. Specifically, the funds should be expended as follows:
I. Customer Service
The Commission agrees with staff that additions to the water billing system would give existing
personnel more time to devote to the traditional customer service functions. Due to the quick turn
around on this issue, there was not sufficient time to specify the extent of the improvements and
the actual costs. Staff will be analyzing this issue in detail and return a finite list of
improvements to the Commission and ultimately the Board of Directors in mid January. However
at this time, the Commission is recommending an appropriation of $100,000 for this purpose. The
funds will be placed into a reserve account and utilized following staffs analysis and Board
approval.
II. Refund to Customers
The Commission also recommends that a refund to customers be performed. This refund is to
be done in two separate steps. First, all single family residential customers who conserved more
than 20% should receive a refund. Under the current rate structure, single family residential
customers receive a 15 unit allocation. Any water used over the 15 unit allocation is billed at
higher rates. Some single family customers with justifiably higher consumption patterns have
conserved more than 20% over their 1989-90 usage but still paid penalty rates due to the 15 unit
allocation. The amount to be credited on the December-January bill will be the difference
between the bills based on a 20% reduction over 1989-90 usage and the current 15 unit allocation
system. A graph depicting the refund for a customer who used 40 units in the 1989-90 base year
is below:
Effect on Single Family Customers
Units (748 Gallons)
Total Bill $46.05
._.---..
r-t, ‘.i: .. ” ___..-- - .-.. 2 Units -._-_
15 Units 26 Units
I I
Current Proposed
Single Family Customer
0 Block 1 ($1.15) E! Block 2 ($1.73)
0 Block 3 ($2.30) m Block 4 ($2.88)
In this example, the additional revenue paid by this customer totals $16.15 ($46.05 - $29.90). The
refund will be based on the price difference between the base rate of $1.15 and the various
inclining block rates. The customers would have had to pay the base for the water used up to the
allocation. The Commission is recommending a refund to all single family customers who fall
into this category. The total amount refunded to all 13,000+ single family residential customers
would be an estimated $140,000.
The Commission also wanted to give all customers an immediate benefit. The Commission is
recommending that the first five units be given without charge to all customers on a future water
bilk The most efficient manner to implement this recommendation would be through a credit on
the water bill. The 5 unit credit for one month (probably the December-January billing cycle)
would reduce the revenue on hand by approximately $97,700.
III. Rate Stabilization Fund
The Metropolitan Water District (MWD) is expected to increase water rates dramatically next
year. The latest estimate is a 24% increase effective in either March ‘or July 1992. The
Commission recommends that 50% of the remaining additional revenue, as well as 50% of all
future additional revenue should be allocated to this fund. The fund balance can be applied to the
water rate to reduce the relatively large increase from MWD when it occurs.
IV. Reserves
The fundamental reason for the inclining block rate structure is to recover any potential penalties
that may be assessed by the San Diego County Water Authority (SDCWA). The District should
maintain a reserve in place that can be used in the event that the 20% conservation level is not
met in future months. The Commission recommends that 50% of the existing and future revenue
should be allocated for this purpose. Ultimately, if these reserves are not expended on penalty
charges from the SDCWA, it could be applied to the rate stabilization fund or other programs.
Staff will monitor this fund and return with an update and a recommendation on the most
effective use of the reserve fund. This analysis will be completed in mid-January.
In summary, the allocation of existing inclining block rate revenue should be as follows:
Customer Service $100,000
Refund to S-F Customers 140,000
5 Units to all Customers 97,700
Sub-Total 337,700
Rate Stabilization Fund
Reserves $431,150
$431,150
Total $1,200,000
FISCAL IMPACT
The Commission is recommending a reduction in the number and cost of the inclining blocks,
an increase in the number of units billed at the lower blocks and a return to setting single family
allocations on actual demands in 1989-90 less the conservation target in effect. The recommended
revisions will reduce the additional revenue received by over 87%. Using the August-September
billing cycle as a guide, the revisions would have reduced the additional revenue from $260,000
to $33,000 during that billing cycle.
The Commission’s recommendations will reduce the current funds on hand by approximately
$337,000. The remaining funds, of approximately $862,000, and future funds will be divided on
a 50%-50% basis between a rate stabilization fund and a reserve fund.
EXHIBITS
Resolution No. 68 Revising the Inclining Block Rate Structure 3
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RESOLUTION NO. 760
A RESOLUTION OF THE BOARD OF DIRECTORS
OF THE CARLSBAD MUNICIPAL WATER DISTRICT
REVISING ITS INCLINING BLOCK WATER RATE STRUCTURE
WHEREAS, the su 1 plier of water to Carlsbad, the San Diego County Water Authority
(Authority), continues to half a water rate structure that penalizes agencies for exceeding their
monthly allocations; and
WHEREAS, the Authori
double the current wholesale
block water rate
allocations could nearly
a revised inclining
Board of Directors amends th
as follows:
the Carlsbad Municipal Water District
escribed in Resolution No. 731 to read
rate system will be
2. Monthly allocations for new commercial and industrial sers will be based on an
a average monthly usage for comparable existing developments. If adeq ate comparable uses do
\ not exist, the allocation will be determined on a case-by-case basis by &e District’s General
Manager. \ , \ \
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3. Water consumed by all customers up to their monthly allocation shall be billed at the
Block 1 rate (current retail), with the exception of single-family residential customers (SFR) who
will receive the f?st 7 units at a lifeline rate. For those customers that exceed their monthly
allocation, increas higher block rates will be charged. Based on the percentage by which the
customer exceed k rates will be as follows:
First 7 units (SFR)
Block 2
Block 3
The additional
allocation by 30%, the water bill will include
rate.
if a customer exceeds his/her
blocks, not just the Block 3
Block 3 water rate.
is as follows:
Phase II 10% \\ \ \
Phase III \ 15% \
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Phase IV 20%
Phase V 30%
Phase VI 40%
Emergency 50%
If a conservation percentage is declared that does not match any of the phases, the District’s
Board of Directors will set a conservation target as the basis for the inclining block rate system.
6. The General Manager, upon receipt of a completed application form demonstrating a
clear need, may approve an additional water allowance for special circumstances including but
not limited to the following circumstances:
a. Change in ownership or occupancy of a residence that results in an increase of
more than three persons. Additional allocations of three units per month will be
granted for every added permanent resident.
b. Water demands for medical equipment in the home or to accommodate a medical
condition.
C. Unusual needs or special hardships
d. The use of reclaimed water
Installation of ornamental fountains or swimming pools, and the maintenance of new landscaping
does not qualify for exemptions.
7. Single-family residential customers whose water consumption is currently at or below
the average residential demand minus the current conservation target will not be required to
reduce further.
8. All customers, except those referenced in section 7, must reduce their current monthly
water demands at a level equivalent to monthly usage during fiscal.year 198990 less the current
.
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conservation target as defined in section 5. All single family residential customers whose
consumption is below the semi annual allocations(as defined in Section 2) shall be exempt from
the following procedures.
s the aforementioned parameter, a written notification shall be sent. If
month, an excess user charge equivalent to $50.00 or 100%
of the water us onth will be assessed, whichever is greater. For the third consecutive
violation, a flow restricting may be installed in the ter. This action
shall be taken to assure compli
Such action shall be take
where the customer has an opportunity
the customer has repeatedly viol
water and that such action is reas
targets and for all structures constructed since 19&T?-90 will be set as described in sections 1 and
2.
As determined by the service may be restored upon
application of the customer
restricting service the customer that customer is ready, willing and
able to comply with restoration of service, the
customer shall pay r City of Carlsbad (Ci
and restoration as n the rules governing
Any willful tampering with or removal of
termination of service for a period to be determined
9. Any customer against whom a penalty is
right to an appeal, in the first instance to the Distri \
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right of appeal to the District’s Water Commission, on the merits of the alleged violation, upon
written request of the customer to the District within fifteen days of the date of notification of
violation. \
10. Any addition* revenue generated by the inclining block rate structure or the
conservation rebates after d$ducting the penalty charges imposed by the Authority shall be
equally appropriated between > ate f stabilization fund and a reserve fund.
11. The effective date of thy Resolution shall be the beginning of the meter reading cycle
in October (October 15, 1991).
f the Carlsbad Municipal
vote, to wit:
AYES:
NOES:
ABSENT:
E A. LEWIS, President
ATTEST: \ \ ‘\
ALETHA L. RA ANZ, Secretary