WATER CONSERVATION RATES FEASIBILITY ANALYSIS Water Efficiency Strategy Update
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1 WATER CONSERVATION RATES FEASIBILITY ANALYSIS Water Efficiency Strategy Update Mike Fortin, M. Fortin Associates 26 January 2016 P: ,
2 SCOPE OF WORK - Evaluate trends in billable water consumption in order to: (i) Identify annual and seasonal patterns, (ii) identify factors causing changes in use, (iii) determine price elasticity of demand, (iv) model the impacts of alternative rate structures, (v) forecast future use.
3 m3/month Number of accounts 12,000 10,000 8,000 6,000 4,000 2, RESIDENTIAL WATER USE Smallest Middle Largest Smallest Middle Largest Winter Summer Annual the smallest 38% of customers use 20% of the water the largest 9% of customers use 20% of the water Average res. use
4 LINKING WATER RATE LEVEL TO AMOUNT USED Guelph data used to estimate residential price elasticity of demand Price elasticity of demand for water Single det. Townhouse Multi-Res. ICI Winter (indoor use) Summer Excess MEANING?? If price of water 10% then the demand for water by: 10% X 0.34 = 3.4%
5 HOW DOES THIS WORK? 1. Customers react to an increase in cost. 2. BUT! Most don t know or understand water billing respond to average cost or the total water bill rather than the price per m The total cost of water includes the water rate and the wastewater rate so the total water + wastewater rate is the price to consider.
6 WHAT IS A CONSERVATION RATE? Any rate that increases the customer s cost of water and reduces demand is a conservation rate! The increase can t be arbitrary must be cost based. Conservation rate setting uses alternative rate structures to target either customers that use a lot of water or seasons of high water use.
7 Cost of water ($/m3) RATE STRUCTURES Uniform Rate - Guelph WS+WW $1.80 $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $ m3/month
8 Cost of water ($/m3) $3.50 Guelph with a seasonal rate $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $ m3/month Charged on all water during the summer Excess Use Rate is like a seasonal charge but charge only applies to summer water in excess of winter water use.
9 Cost of water ($/m3) $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 Increasing Block Rate - Barrie WS Rate INCREASES at each block threshold This shows an IBR rate structure with 4 blocks. Most residential customers will be in the first block. $ M3/month
10 Cost of water ($/m3) COMBINED RES. WATER & WASTEWATER RATES London Hamilton Kingston Peel Region Barrie Halton Region Niagara Falls North Bay Durham Region Sudbury Owen Sound Thunder Bay New Market St Catharines Windsor Toronto Guelph Aurora Ottawa Markham Waterloo Kitchener $7.00 $6.00 First block rate Last block rate $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 NOTE: UR = uniform rate; IBR = increasing block rate; HBR = hump backed rate
11 ANALYSIS OF THE IMPACT OF CONSERVATION RATES Based on estimates of price elasticity for Guelph Estimated for 5 sizebased groups in each of 4 customer classes Based on 2014 levels of consumption and current rates Range of scenarios My Water Bill
12 Reduction in water use Cost of water ($/m3) ESTIMATED IMPACT OF A SEASONAL RATE $4.00 $3.00 $2.00 $1.00 $1.59 $1.14 $2.27 $2.67 $0.89 $0.73 $2.93 Winter rate Summer rate $ % -0.20% -0.40% -0.60% -0.80% -1.00% -1.20% -1.40% 100% 200% 300% 400% Summer rate multiplier 100% 200% 300% 400% 12.2% increase in my bill 3.8% drop in my usage 0.6% drop overall
13 Reduction in water use Cost of water ($/m3) ESTIMATED IMPACT OF AN INCREASING BLOCK RATE $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $ % -0.50% -1.00% -1.50% -2.00% -2.50% -3.00% $1.59 $5.44 $8.56 $2.72 $2.85 $3.05 $1.36 $1.43 $ % 200% 300% 400% Multiplier for 3rd block $ % 200% 300% 400% 1st block 2nd bock 3rd block -0.6% change in my bill 0.0% drop in my usage 0.0% drop overall
14 Reduction in water use Cost of water ($/m3) ESTIMATED IMPACT OF AN EXCESS USE RATE $10.00 $8.00 $6.00 $4.00 $2.00 $ % -0.05% -0.10% -0.15% -0.20% -0.25% -0.30% -0.35% -0.40% % 200% 400% 600% Excess use rate multiplier 100% 200% 300% 400% Base rate Excess use rate 20.1% increase in my bill 6.9% drop in my usage 1.0% drop overall
15 WATER CONSERVATION RATES FEASIBILITY ANALYSIS Water Efficiency Strategy Update, 26 January 2016 Q&A Mike Fortin, M. Fortin Associates P:
16 FOLLOWING SLIDES ARE NOT USED
17 Number of acounts BILLABLE WATER CONSUMPTION - RESIDENTIAL Residential Water Use, m3/mo 50.0 Summer Annual Winter Summer Excess m3/month, annual average Demand is highly variable for every class of customer! % of accounts lower than this 3 rd quartile Average usage 2 nd quartile 99% of accounts higher than this
18 $/m3 Charges for customer A $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $ Water Budget Rate M3/month Charges for customer B
19 EXAMPLE OF A WATER BUDGET RATE
20 $/m3 Decreasing Block Rate - Durham WS $1.00 $0.90 $0.80 $ ,500 Rate DROPS at each block threshold $0.60 $0.50 $0.40 $0.30 Rate block $0.20 $0.10 $ M3/month
21 4/m3 $3.00 $2.50 $2.00 $1.50 $1.00 $ Humpback Rate - London WS ,000 50,000 $0.0 rate in first block $ M3/month Increasing block first Followed by a declining block
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