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CITYOF RALEIGH
Preliminary RecommendationsConservation Rate Structure
City Council Presentation
February 3, 2009
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Implementation of
Conservation Rates Initial Issues to ConsiderWho uses the water?
How is the water being used?
Where are the greatest opportunities for conservation?
What mechanisms are available to achieveconservation?
Pricing
Education and Awareness
Start by evaluating customer usage patterns
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System-Wide FY 2008
Consumption
85.3%
4.6%
0.5% 2.0%
1.7%
0.9%4.9%
Raleigh Garner Rolesville Wendell Wake Forest Zebulon Knightdale
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FY 2008 Calculated
Water User Charge Revenue
75.0%
0.8%2.1% 6.4%
4.3%
8.3%
3.2%
Raleigh Garner Rolesville Wendell Wake Forest Zebulon Knightdale
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Merged UtilitiesMonthly Bill Comparison
Residential Customer: 5/8 Meter, 6 ccf
Monthly Bill Comparison (6 ccf)
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Raleigh
Current
Garner Wake Forest Knightdale Wendell Rolesville Zebulon
Water Sewer
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Raleigh / GarnerFY 2008 Consumption
19.7%
0.7%
3.3%
5.8%
1.1%
6.5%
62.9%
Commercial City Owned Industrial Intermunicipal Institutional Residential Irrigation
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Key Observations Raleigh / Garner represents 90% of total system
usage
Biggest opportunity for conservation measures is
Raleigh / Garner Residential class 63% of consumption 65% of consumption including irrigation
Merged Utilities will continue to have similar price
differential to recover merger costs 10.1% consumption 16.7% revenues
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Proposed Rate Structure
PLUS
Current Rate Structure
PLUS
Current & Proposed Rate
StructureBimonthly Service
ChargeCharges Vary By Meter Size
Monthly Service
ChargeCharges Vary By Meter Size
Uniform
Volume Charge
3 Tiered
Residential
Volume Charge
Uniform or
2 Tiered
Non-Residential
Volume Charge
All irrigation usage (residential &
non-residential) will be charged at
Tier 3 residential rate
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Residential Water Rate
Structure The recommended water rate structure will have thefollowing three tiers:
9%+10Tier 3
31%104Tier 2
60%40Tier 1
% UsageMax (ccf)Min (ccf)
Why choose 3 Tiers: Provides the flexibility to adjust and enhance conservation opportunities
Low-volume users are protected Provides adequate pricing incentives to use less water
Note: All irrigation usage will be billed at Tier 3 rates, which is notreflected in the percentage above
Note: 1 ccf = 748 gal 4 ccf 3,000 gal 10 ccf 7,500 gal Average Usage 6 ccf/month
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Revenue Neutral Rate
ScenarioCurrent FY 2009 Uniform Rates Equivalent FY 2009 Tiered Rates
Residential
$ 1.96 per ccf
Non-Residential
$ 1.96 per ccf
Non-Residential
$ 1.96 per ccf
Residential
Tier 1: 0 4 ccf $ 1.57 per ccf (-20%)
Tier 2: 4 10 ccf $ 2.74 per ccf (+40%)Tier 3: 10 + ccf $ 3.92 per ccf (+100%)
Tiered rates set so that the average user (6 ccf / month) will have an average cost
equal to the average rate of $1.96 per ccf. Example only does not represent
actual rate recommendations.
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Non-Residential Water Rate
Structure Initial Recommendation: Maintain uniformvolumetric rate structure Set to the average unit rate of the system ($1.96) Price falls between the Tier 1 and Tier 2 residential rate Provides more equitable cost recovery
Optional Non-Residential 2-Tier Rate Structure 2nd Tier set to target largest water users
Moderate price differential to fund other conservation initiatives &
programs Modeling capability is in place Can be implemented as part of future adjustments to the
rate structure
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Sewer Rate Structure
Bimonthly Service
Charge
Uniform
Volume Charge
Current Rate Structure
PLUS
Proposed Rate Structure
PLUS
Monthly Service
Charge
Uniform
Volume Charge
There is no cost justification for a tiered rate for wastewater service Focus will be on revenue sufficiency Reinforces water conservation rates lower usage = lower cost Does not address rates for reuse water
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Proposed Rate Structure The cost of water increases as usage increases
Targets elective usage to reinforce conservation
Limited demand impact depends on price elasticity A 10% increase in cost leads to a 1.5% to 3.0% decrease in
usage Allocation of total usage to rate tiers:
Total
Residential:
Non-Residential
Raleigh / Garner FY 2008 Total Usage
100 %
11.4 %Tier 3
19.9 %Tier 2
37.5 %Tier 1
31.3 %
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Regional Comparison of
Water Costsfor Residential Customers
6 ccf Monthly
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Raleigh Raleigh
Tiered
Durham Cary OWASA
Base Charge Volume Charge
$15.65 $15.65 $15.96 $17.79
$26.24
15 ccf Monthly
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Raleigh Durham Raleigh
Tiered
Cary OWASA
Base Charge Volume Charge
$33.29 $37.98
$46.21 $47.88
$68.15
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Next Steps Integrate Council input and finalize conservation rate
structureNeed final Council approval of rate structure by early March
Develop updated utility financial forecast Integrate final rate structure into the Model
Integrate 10-year capital investment plan
Develop recommended 5-year plan of rate adjustments
Develop specific rate recommendations for FY 2010 Presentation to Council in March
Rate structure implemented with new ERP system atthe end of Nov. 2009
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Questions and
Discussion