Water Pricing, Customer Usage: It s Complicated..

Transcription

1 Water Pricing, Customer Usage: It s Complicated.. October February 26, , 2018

2 2 Supporting the fair, effective, and financially sustainable delivery of environmental programs through: Applied Research Teaching and Outreach Program Design and Evaluation Where we work: How you pay for it matters

3 Compare to your peer group

4 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

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

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

7 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?)

8 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.

9 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.

10 Six Rate Structures Uniform Variation (Yes it s an Oxymoron.) $100 $80 Total Monthly Bill $60 $40 $20 $ CCF

11 Two Utilities Sales Distribution

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

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

14 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 Cumulative Production Savings Achieved between June 2015 and May 2016 Compared to 2013 Baseline 50% 25% 0% Ratio of Highest Tier Rate to Lowest Tier Rate in 2016 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.

15 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

16 What did Drive Savings?

17 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 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 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.

18 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 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.

19 Pricing Impact on Basic Usage Versus Driving Curtailments

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

21 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 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.

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

23 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 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