Water Conservation Rates

Water Rates in the Southeast

Throughout the Southeastern United States, many water rate methods are being implemented. In the water-rich Southeast, many water providers are currently implementing declining block rate structures. Basically, declining block rate structures encourage high water usage and is contrary to water conservation efforts. This practice usually is adopted as a way to bring high-water using industries to an area for economic gain.

With population growth in the urban/suburban areas, increased water pollution, and declining aquifer and streamflow levels throughout Georgia, many water providers are turning to water conserving rate structures. Water conservation rate structures can help utilities and communities reduce water demands, as well as help meet revenue requirements.

Water providers should look to achieve these goals when they adopt a water conservation rate structures:

• Reducing peak usage,
• Reducing seasonal usage, and
• Reducing total system demand.

The many community benefits of implementing water conservation rates include:

• Communicating an overall conservation consciousness,
• Rewarding efficient users,
• Surcharging for nonessential and non-efficient water users.

Utilities can achieve significant economic goals from water conservation rate structures. These include:

• Price equity among customers,
• Minimizing potential for litigation, and
• Maintaining revenue stability

Types of Water Conservation Rates

Inverted (inclined) block rates

Generally, inverted (inclined) block rate structures are the most widely accepted effective water conservation rate structures. Inverted (inclined) block rates increase as consumption increases. The advantages are that they can be highly conservation oriented and are generally understandable by customers. With proper educational programs conducted prior to the rate change, they are generally accepted. There are challenges in developing appropriate blocks cutoffs and unit rates and they may result in revenue instability. This is where proper rate analysis, conducting user class profiles, and rate model testing come into play.

Case Study: The Irvine Ranch Water District in Southern California has a well- respected and aggressive conservation rate structure. Their inclining block rate structure ensures enough funds to cover operation and maintenance and help enhance infrastructure. The water district established a baseline charge for necessary water use that generated enough revenues for general operation. Any water use that exceeds the individual users baseline amount costs incrementally more money. These extra funds are then returned to the supplier for infrastructure improvements. Ultimately, the water district has been able to repay its debts and encourage water users to decrease demand.

Seasonal Rates

Seasonal rates are rates that vary during different periods of the year, most typically during peak outdoor water usage. Indoor usage is typically calculated during winter, non-growing season months. Usage above average indoor use is charged a higher rate to discourage excessive water use. Seasonal rates are generally accepted and understood by customers, but as with all rate structures must be communicated properly to your community before putting them into place. Challenges include the possibility of substantial impact on high volume users and less predictable impact on demand.

Hybrid

Hybrid rates are any combination of the rates discussed here. Rate structures vary by customer class. For example, setting excess/individualized use rates for non-residential customers and inverted or increasing block for residential users. Any combination of rate structures may be used, and implementation issues for each customer class is addressed.

Some design features to keep in mind regarding setting rates are as follows: block cutoffs, number of blocks, magnitude of unit charges, and definition of season.

Additional Resources

• American Water Works Association. Water Rate Structures and Pricing, Second Edition, Denver, CO: AWWA, 1999.
• Chesnutt, Thomas W. and Janice A. Beecher. "Conservation Rates in the Real World." Journal AWWA, 90:2 (Feb. 1998).
• Raftelis, George A. 1993. Comprehensive guide to water and wastewater finance and pricing. Lewis Publishers, CRC Press LLC, Boca Raton, Florida. http://www.crcpress.com/
• Stallworth, Holly, PhD. 2000. Conservation pricing of water and wastewater. http://www.epa.gov/owm/water-efficiency/water7.pdf

Information for this page was collected from:

• Elfner, M.A. 2003. Why Water Conservation Rates are a Good Thing. Georgia DNR. December 2003.
• Keyes, A.M., M. Schmitt, and J. Hinkle. 2004. "Critical Components of Conservation Programs that Get Results: A National Analysis." AWWA – Water Sources Conference Proceedings. Jan. 2004. 15 pgs.
• Stephens, Frank and Bobby Sills. 2002. "Water Conservation Rate Structures." Presented at Georgia Pollution Prevention Assistance Division Water Conservation Workshop. http://www.p2ad.org/Assets/ppt_files/wcw3.ppt
• Wong, A., et al. 1999. Sustainable Use of Water: California Success Stories. Pacific Institute for Studies in Development, Environment, and Security. CA. 372 pgs.