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Staying Afloat with Water RevenuesBalancing the ebb and flow of revenue stability with conservation
Mayors Water Council
December 3, 2009Sandra Ralston
Todd Cristiano
Malcolm Pirnie
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Water ConservationA Necessity for Sustainable Utilities
1% of world’s water supply suitable for consumption
Water shortages projected for 36 states with next 5 years
Conservation programs can be an effective tool in protecting vital resources and minimizing costs
BUT Conservation-based rates can
affect the stability of water revenues
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Water Utility System
The ‘Ebb and Flow’ of Conservation Rate revenue before conservation Rate revenue after conservation
Reduced consumption leads to: Potential revenue instability Rate increases “I use less, and my bill goes up!”
Reduced consumption also leads to: Capacity benefit – Delayed expansion projects Reduced O&M ‘Doing more with less’
Available Capacity
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Volumetric Rate Structure Spectrum
CONSERVATION ORIENTATION
Flat Rate Declining Block
Uniform Seasonal Inclining Block
Budget/
Individualized
Flat Rate
Declining Block
Uniform Rate
SeasonalInclining Block
Budget / Individualized
The City of Boulder, CO implemented a
5-tiered water budget structure in 2007
Water Budget Allocation:Domestic (indoor usage)
Irrigation (outdoor usage)
Water Budget Basis:Indoor
people per household average winter consumption
OutdoorIrrigable area (square feet)
Evapotranspiration
MoreLess REVENUE STABILITYMore Less
Less More
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Rate Structures and Pricing Objectives
Rate structures and prices should be designed to:• Provide a sufficient revenue stream• Easy to understand/transparency• Equitable• Legally compliant• Meet utility-specific policy goals and objectives
- Provide stable revenue stream- Sustainability/Conservation goals/Education- Low income/Affordability- Growth pays its own way- Minimize impact to large volume customers
Selected pricing policies can have conflicting objectives!
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Conservation Planning ModelsCapturing the Moving Parts
Delayed CapitalExpansion
Reduced O&M
AdditionalSource of
Supply
RateIncreases
ReducedRevenues
Revenue Instability
Inclining BlockStructures
Budget-BasedRate Structure
PricingObjectives
Dynamic modeling tools• “What if” scenario analysis• Optimization of variables• Real-time analysis with Stakeholders• Results summary dashboard• Flexible and updatable
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Addressing Conservation Challenges
Consumption 5%
Rate Increase
??%
2009 2013
Delayed CIP Rate Increase/Decrease
??%
CustomerBill
Impact??%
Rate StructureChange
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The Conservation – Revenue Stability Balance
A successful conservation program promotes:Sustainable water resources for future generations
Sustainable financial viability
Dillon Reservoir 2009
Summit County, Colorado
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Discussion
Sandra RalstonPrincipal ConsultantCharleston, [email protected]
Todd CristianoSenior ConsultantDenver, [email protected]