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

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

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

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

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!

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

Addressing Conservation Challenges

Consumption 5%

Rate Increase

??%

2009 2013

Delayed CIP Rate Increase/Decrease

??%

CustomerBill

Impact??%

Rate StructureChange

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

Discussion

Sandra RalstonPrincipal ConsultantCharleston, SCsralston@pirnie.com843-853-7140

Todd CristianoSenior ConsultantDenver, COtcristiano@pirnie.com303-316-6541