2. THAT funding be approved for a Full-time Billing Clerk, a Full-time Water Clerk and bi-monthly invoice costs; and

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1 COUNCIL REPORT Report No. ENG April 12,21 File No: 56-7/21 Executive Committee To: Mayor and Council From: Tracy Kyle, Director of Water & Solid Waste Judy Lewis, Director of Finance Subject: Bi-Monthly Utility Billing RECOMMENDATIONS 1. THAT Report No. ENG from the Director of Water & Solid Waste and the Director of Finance, regarding the Bi-Monthly Utility Billing be received; 2. THAT funding be approved for a Full-time Billing Clerk, a Full-time Water Clerk and bi-monthly invoice costs; and 3. THAT staff report back on when the bi-monthly billing will begin, a transition plan from annual to bi-monthly billing and seasonal water rates. BACKGROUND Abbotsford is currently universally metered and uses touch read technology to read the water meters. Staff must physically visit each meter to extract the meter read using an electronic probe. A reading is taken once per year and used to calculate the water and sewer charges which are included on the annual tax notice. In December 29 Report ENG was approved to install Advanced Metering Infrastructure (AMI) equipment in Abbotsford. This new technology can read and transmit metering information hourly and has the ability to detect major leaks almost immediately and small leaks within a few days. Leak detection capabilities of the AMI system combined with the ability to monitor water use on a near real time basis will provide information required for water conservation. Another benefit is that the billing cycle can be increased and seasonal rate structures can be implemented. DISCUSSION Staff recommends a bi-monthly utility billing cycle be implemented. The bi-monthly invoices would include current charges for water, sewer and solid waste. Sewer charges are based on the water meter readings and the solid waste would be a 1/6 charge of the annual fee. The solid waste charge will be for garbage, recycling and yard waste for single family residential dwellings and only recycling for multi-family dwellings. Storm drainage will continue to be billed on the tax notice because it is assessment based. Switching to a bi-monthly billing arrangement will have some added costs due to the requirement to mail out invoices every other month. However, there are both fiscal and non-monetary benefits to be realized from this change. The majority of the benefits will be seen in the water utility however, there are some benefits with the sewer and solid waste utilities. The benefits of moving to a bi-monthly billing program for the water utility are:

2 Report No. ENG Page 2 of4 It will provide a net financial benefit of approximately $25, to $5, per year (Schedule A); This proposed billing change will assist in achieving the 25% reduction in per capita water use necessary to sustain growth until a new source is established; Customer awareness of water use and issues will be increased because the usage information will be separate from the annual tax notice; Customers will be made aware of leaks much more quickly and will be more inclined to act on repairing the leaks in a timely manner (before the next bill); and Forgiving large water bills will be reduced or eliminated since leaks will be addressed within a much shorter billing period. ANALYSIS Current Billing Arrangement Utility bills for water are currently incorporated into the annual tax notice. Meters are read once per year and consumption is calculated using the current and previous year's readings. The reading cycle starts in January and is usually completed in March. Tax Notices are due at the beginning of July. It should be noted that currently water billing is for the April to March period and sewer billing is from January to December. A transition plan will be developed to sync the two utilities for billing purposes for simplicity. Under the current annual billing arrangement, revenue from water user fees is collected up to 1.25 years after the water is consumed. Therefore, while expenditures are incurred during the current year to supply water to users, the revenue associated with this water is not received until the following year. This results in a cash flow deficit requiring short term funding from general City operations. Proposed Bi-Monthly Billing Arrangement If the City moves to a bi-monthly billing arrangement, additional costs will be incurred for mailing out invoices and some additional staff costs will also be encountered. A summary of new expenditures is shown in Schedule A. Under a bi-monthly billing arrangement, the delay between when water is consumed and user fee revenue is received can be reduced to as little as a few weeks. Schedule 'A' summarizes how an estimated additional annual revenue of $29, could be achieved with a more frequent billing cycie. This savings would more than offset the estimated incremental costs of $255, from this arrangement. The analysis demonstrates the proposed billing arrangement will not result in a net cost increase and, in fact, actually produces a small positive cash flow. The change in billing cycles would require a one time collection of outstanding revenue and a strategy to avoid creating a hardship for customers would be required. We would likely have to spread the collection of this revenue over a number of billing periods. Staff will report at a later date on when the bi-monthly billing will begin and how the transition from annual to bi-monthly billing will be made in order to minimize the impact to water customers.

3 Report No. ENG Page 3 of 4 Non-Monetarv Benefits Aside from the financial considerations of moving to a bi-monthly billing arrangement, there are considerable benefits from improved customer service and demand management. With the current annual program many customers are not aware of how much water they consume. The consumption information is included on the tax notice but may be lost in the detail with the other tax levies. Providing a separate invoice will help educate the public about their water use and how they compare to the average household. The City is facing some challenges with water supply and needs to cut average per capita consumption by about 25% to sustain growth until a new water source and water treatment plant can be constructed. Bi-monthly billing will provide an opportunity to introduce a surcharge for high water use during peak demand periods (summer). We could also do this on an annual program but customers would not be able to react quickly enough to avoid high bills caused by use of water during peak times. The most effective way of accomplishing the required conservation is to provide information to our customers in as timely a manner as possible, allowing them to react before the summer peak period is over. Staff will report back on proposed seasonal water rates. For now, the current water rates will continue. Additionally, conservation measures such as more frequent billing, can potentially support our efforts to secure grants from senior levels of government. Another major customer service benefit would be leak detection. With the bi-monthly bill customers would act more quickly to repair a leak because they would be paying for it sooner. With the current annual billing arrangement customers only react when they receive a large bill for water that was lost to leakage over a number of months (up to a year and a half). With bi-monthly billing they would be aware of the leak much more quickly and the City would avoid the current situation of having to forgive large bills. FINANCIAL PLAN IMPLICATION For the water, sewer and solid waste utilities, it is estimated that increased annual revenue of approximately $29, could be achieved with a bi-monthly billing cycle. This savings would more than offset the annual incremental costs of $255,. COMMUNICATION PLAN A cornmunications plan will notify customers about the AMI program and billing cycle changes.

4 Report No. ENG Page 4 of4 SUMMARY Staff recommends a bi-monthly utility billing cycle be implemented. The bi-monthly invoices would include current charges for water, sewer and solid waste. Staff will report back on when the bi-monthly billing will begin a transition plan from annual to bi-monthly billing and seasonal water rates., P.Eng. General anager, Engineering & Regio I Utilities Trn'Y~ Director, Water & Solid Waste rl Filiatrault, A.Sc.T. Water Planning Engineer KF:jm

5 SCHEDULE A - Cash Flow Benefit of Moving from Annual to Bi-monthly Billing Part A: Cash Flow Analysis Jan-211 Mar-211 May-211 Jul-211 Sep-211 Nov-211 Jan-212 Mar-212 May-212 Jul-212 CURRENT OPERATIONS Waterworks $ $ $ $3,75, $ $ $ Sanitary Sewer 1,, Solid Waste 5,, 18,75, PROPOSED OPERATIONS Waterworks 2,5, 2,5, 2,5, 2,5, 2,5, 2,5, Sanitary Sewer 1,666,667 1,666,667 1,666,667 1,666,667 1,666,667 1,666,667 Solid Waste 833, , , , , ,333 5,, 5,, 5,, 5,, 5,, 5,, DIFFERENCE PER PERIOD $ $5,, $5,, ($13,75,) $5,, $5,, $5,, $ $ $ $11,25, 11,25, $ ($11,25,) Present Value of Operating Cash Flows $ $4,97, $4,94, ($13,51,) $4,88, $4,85, $4,83, $ $ ($1,67,) Net Present Value of Cash Flows $29, I Assumptions: Discount rate of: 3.5% Total annual revenue of: Waterworks $15,, Sanitary Sewer $1,, Solid Waste $5,, Current Operations: Waterworks - 25% of current year revenue received in July of current year and 75% received in July of following year. Sanitary Sewer - 1% of current year revenue received in July of current year. Solid Waste - 1% of current year revenue received in July of current year. Proposed Operations - current year revenue received immediatelty following two month usage period.