May 18, 2009

The More You Conserve, the More You Pay

My water bill for Jan/Feb was $136.19 for 10 units of water. Today I got my Mar/April bill. I used almost twice as much water (19 units) but I paid nowhere near twice as much. In fact, I paid only $23.49 more for the extra 9 units. On Tuesday night the Poway council will look at new water rates for the level 2 (L2) water shortage. The new blocked rates increase as water use increases. According to the proposed rates, single family customers will pay $2.64 for the first 15 units of water, $2.97 for 16-40 units, $3.30 for 41-80 units, $3.96 for 81-120 units, and $4.62 for any units over 120. But, those who use less water will still be paying more per unit of water than most of the higher consuming customers. Why? Because the fixed costs that Poway tacks on the everyone's bills disproportionately ding the low end user.

I have to pay $101.09 even if I do not use a drop of water. $22.38 of that is a "basic service water charge" that every single family user pays, whether they consume 0 units of water or over 200 units. That fee will increase to $24 during the summer. Every single family customer also pays a "basic service sewer charge" of $15.48.  In addition, customers pay a sewer consumption charge that costs more per unit of water for those who use less. 

The graph at the top of the page show what the new level 2 (L2) water rates will be with the basic service (but not the sewer consumption) fees included.  One unit of water costs $42.12 with the fixed fees included. The rate decreases rapidly and then appears to level out. But it really doesn't. Here is a closer look at the graph (click on graphs to make them larger):

Notice the little point on the graph above 81 units of water?  A person using 81 units of water gets the best bargain. They have to pay $3.57/unit. People using less than 81 units will pay a lot more for their water. Someone using only 9 units of water will pay $7.03/unit, which is almost twice as much as the person using 81 units. People using 20 units will pay $4.70/unit with the fixed charges included. 

People who use more than 81 units will see their costs/unit increase but the increases won't be as drastic as for the very low end users. Someone using 150 units of water will only have to pay $3.88/unit. Yes, some one using 150 units of water is paying a lot less per unit than the person using only 15 units ($5.27/unit). The rates still reward the water hogs.

I didn't include the sewer consumption fees in the chart or in the data, because the assigned tiers (and rates) do not necessarily correspond to current water consumption. But, If I had been able to include those numbers in the data, the rates would have been even more skewed in favor of those who consume more. 

The proposed water rates do very little to incentivize low end users to conserve water. In fact, because the fixed fees and the sewer consumption charge are such a big chunk of the low end users' bills, they are likely to be pissed off when they do conserve and find out it has almost no impact on what they have to pay. I know I have figured out that saving a few bucks a month by taking shorter and less frequent showers is not worth it when I am paying over $100 before I even use a drop of water. 

If Poway really wanted to conserve water, and make the rates more fair, they should drop the fixed fees and restructure the sewer consumption fee. Otherwise those who use less water are subsidizing those who use more water.


Anonymous said...

By mixing fixed, direct charges with consumption based charges, you paint a distorted picture. "Low water" users are not unfairly charged and their is incentive for them to conserve.

Looking at your charges:

The Basic Water Service charge of $22.38 is charged to all residential customers with 5/8" or 3/4" water meter size. It is claimed as the cost of service, incurred whether you use any water or not. It is similar to cable TV charges; connect cable TV and pay monthly charges whether you watch TV or not.

The Basic Sewer Service charge of $15.48 is a similar charge and every residential customer pays it.

No one likes these charges, but they are applied equally and supposedly related to direct service costs (hookup, meter reading, billing, etc). Lowering these charges for "low water" users would have to be made up from the money and hard work of others.

The water consumption charges are based on the amount of water you use. Use 10 units and pay $26.10; use 19 units and $23.49 more, or $49.59. This is also fair for everyone. Each residential customer pays the same for a unit of water, just as they pay the same for a gallon of regular gas (on a given day) at the Poway Mobil station, or a gallon of 1% milk (on a given
day) at the Poway Henry's market. The more you conserve the less you pay.Sewer charges are more complicated, but more fair for the "low water" user. They are NOT based on your current use; i.e., your 10 or 19 units of water. The charge is based on last winter's use; the sewer commodity rate according to City of Poway, Ordinance No. 666:

"... residential commodity rate is based on November through April winter months water usage to exclude any excess water used on landscaping in the warmer months. The lowest water consumption during this period is selected for each of the three most recent years and then averaged. We calculate 85% of that averaged amount to estimate sewer discharge. This figure is used to place the customer in one of seven
sewer tiers for a one year period"
You are in Tier 3 and now pay a bi-monthly rate of $72.23. Poway assumes Tier 3 reflects your indoor water use; i.e., water going down the sewer.(But I am sure you know all this.)

The accuracy of this method is debatable, but it is less accurate for larger property lots where more landscape water is needed. The indoor water use of a four member family on a small lot is similar to a four member family on a large lot. It is reasonable to think that a family on a one acre lot will use more water on landscape than a family living on a fifth-acre lot. This water does not go down the sewer yet the large lot family is paying sewer charges on it (more so than on a smaller lot).

Things get worse if Poway enacts an inclined block rate.The inclined block rate does not consider efficiency of use. A family using 100 units could be efficiently using water on a five acre parcel, while a family using 30 units on a small property could be wasting water (e.g., inefficient irrigation, 30 minute showers, leaking pipes and faucets, etc). But the water-wasting family using 30 units is going to get the price breaks, and the 100 unit, efficient-user family on a larger lot is going to be penalized.

The inclined block rate is wrong for Poway with large areas zoned as large lots. A water budget method will more effectively identify inefficient water use and promote water conservation. It more equitably charges customers for water use.

Chris Cruse said...

Jeff, do you really think it cost $37.86 per customer each time the city reads a meter and sends a bill?
Note: the city charges a separate hookup fee.
And the sewer consumption charge is not based on last winter's use. Sigh! I wish it were. It is based on the average lowest use for 2, 3 and 4 winters ago.

Anonymous said...

Actually, I would like to know exactly what makes up the Basic Water Service charge and the Basic Sewer Service charge. I expect it is more than meter reading and sending a bill -- and by hookup, I was generalizing the expenses of maintaining a hook up. Regarding hookup fees -- based on what I hear, I do feel they charge an insane amount for a water meter. I would like one just for my landscape water, but not at what they charge.

The city website reads: "All revenue from the City's water charges are used exclusively for the recovery of costs associated with providing water services and to fund maintenance and capital improvements of the City's water system."

If you know they are gouging us with these fixed charges, or using this charge to pay for things unrelated to providing water and sewer service -- please share the details.

Regarding the sewer bill -- I quoted Ordinance No. 666 and it says the three most recent years (winters). Dry winters can haunt you for a long time. How do you get 2, 3, and 4 years?

I admit I find the charging methods difficult to understand and validate.

Chris Cruse said...

Jeff, I read that same ordinance and then asked Tina White (Director of Administrative Services) why the city wasn't using the data from my 3 previous winters. She told me that the city moved up the new sewer rates to January from their usual July change date. As a result, the city only had complete data from winter 05-06, winter 06-07 and winter 07-08. I have to wait until my first bill after Jan 2010 for my winter use during 08-09 to figure in. I was really bummed by this because winter 05-06 was extremely dry. There was no month when I did not have to do some irrigation. By pushing the new rates forward to Jan., the city lets that very dry year affect sewer consumption rates for an extra year.

Here is what Ms White told me in response to my question about fixed charges on my bill:

"When setting water rates, the City must consider how much of its water system costs are fixed – meaning costs that are not affected by the amount of water sold. Some examples of fixed costs are the cost of debt service, reserve requirements, and capital improvements. Fixed charges guarantee enough revenue to meet our basic costs during periods of low water sales due to drought or other reasons. The second part of your water bill is the charge per unit of water sold to cover the cost of operation, maintenance, and administration. With this two-part structure, all customers share equally in the basic costs of the water system and each pays only for the water used. Currently, about 14% of our water revenue comes from fixed charges; the remaining 86% comes from the charge for every unit of water we sell."

As I said, I think the low end water user is disproportionately shouldering an unfair share- why should they pay the same as the big users for capital improvements and debt service and to keep the city afloat in a down turn?

I most certainly would welcome a forensic audit of the city's water finances.

As for your comparison with the cable bill, I have to disagree with you. I had basic cable service for years and years. I even had "sub basic" cable service. I received several channels for paying for that service. Later I added telephone and computer service and paid an additional fee. But I never paid for a "basic service fee" and did not get anything for it. If I do not use a single drop of water in the next billing period, I still have to pay over $100.

Your gas and electric bill is done in tiered charges. You have a baseline amount and higher rates for consumption that exceeds that baseline. In addition, there are some other fees on the bill, but nothing so disproportionate as the fixed water charges.

Anonymous said...

OK -- from your comment, Ms White says, "When setting water rates, the City must consider how much of its water system costs are fixed – meaning costs that are not affected by the amount of water sold. . . ."

That is -- Not affected by the amount of water sold. Do you feel that, in fact, there are costs here based on the amount of water sold?

Even if you don't use a drop of water -- there is the issue of the "public good." It is the same reason I, and many others, pay for public schools though we have no children in attendance, and for roads that we never drive. Everyone pays so there is access to water for residents, business, city landscapes, public buildings, and fire fighting, etc.

btw: When does a person become a low water user and become what you call a "water hog"?

Regarding the cable bill -- my point is that you are typically paying a fixed cost each month. Other than pay-per-view type and phone service (I assume), there typically are no consumption based charges -- you don't pay per each minute of viewing or each byte of data you receive. If you don't use the service, you still pay.

Chris Cruse said...

The fixed charges on the water bill are used to pay off bonds and to cushion the water dept budget. It is sort of like a parcel tax, where every parcel pays the same amount. PUSD bonds are not paid with a parcel tax; they are paid by a tax that varies depending on the assessed value of each property. Parcel taxes are inherently regressive.

While Ms White says bond costs are not related to consumption, I disagree. Some of the improvements are related to having to house or cover a greater supply of water. The city bought a cover for the water to prevent evaporation. It is a good investment, but the part of the cover that covers my 10 units of water costs way less than the part that covers someone else's 200,000 units of water. Yet we each pay the same to pay off the bonds.

The cable charges and water are really not comparable. As you stated, there is no consumption component on the cable bill (unless you are ordering extras or paying for a phone bill). The cable bill is mostly for access, as you stated. But the cable doesn't get "consumed" the way water does, so it really isn't comparable. And I don't think we should all have the same water bill, no matter how much we use.

Anonymous said...

OK -- Then I say go for it. Tackle this problem of the fixed charged based on these details of what you think are water consumption charges. I don't think your case that it affects low-water users is a valid complaint otherwise.

Regarding the cable fixed charge example -- I think you may have lost the context and scope of my initial comparison. Oh well, we will agree to disagree.

I was curious about your feelings about what separates a low water user from what you called a "water hog". To many people, I think a water hog is anyone that uses more water than them. That is the message I get from the city council members.

The solutions to this water cut we are having has nothing to do with low water users vs. high water users. It is about using water efficiency, and setting standards for efficient water use (water budget). Use water inefficiently or truly waste water (exceed your budget) -- THEN AND ONLY THEN pay more per unit of water or pay penalties.

btw: Though I don't agree with many of your views regarding the use and cost of water -- I appreciate your blog. You bring up some good points and provide informative education about the escapades of Poway's government and about Poway's overall history.

Chris Cruse said...

I am happy you are commenting on my blog. I hope my blog provokes a lot of discussion.

Re: fixed water capacity charge- all customers who have a 3/4 pipe pay the same fixed charge ($22.38) , whether they use 2 units or 200 units each bi-monthly period. But those with a bigger pipe pay more- from $43.23 for 1 in pipe to $1,1119.45 for an 8 in pipe. Why do those with bigger pipes pay more? Because they use more water?

When the city added a sewer consumption charge to the fixed sewer charge, they really didn't make it a true consumption charge. It was sortof a hybrid between being a fixed and consumption charge. Those in higher "tiers" pay more for their consumption, but less per unit. So, the low end user ends up paying more per unit to put water in the sewer and they get hit with the same upfront fixed charges as high end users to pay off the bonds. The point I am trying to make about the new steeper water consumption charges is that those who use a lot of water still pay less overall (per unit) than someone who uses 40 units or less per bi-monthly period.
I discussed this in some of my other blogs. I also discussed the Irvine Ranch plan which addresses water "efficiencies". It is an interesting approach and I think it is worth looking at it. But we also need to fix the unfair sewer consumption rates and the fixed rates which can be more than 3/4 of a low end user's bill.

I think the golf courses are water hogs, especially Maderas because it was supposed to use reclaimed water but never did. There are also a couple of very water intensive companies in the industrial park. I think that those companies might be better off locating in a place that has plentiful water and should never have been encouraged to locate in Poway or maybe even in the arid southwest. On one of my blogs I linked to a list of the top 200 residential water users in Poway. I'm not sure if I can link to it in the comments, but here is the web addy:
There are some real water hogs on that list who use a lot of water in the winter time too.

All of this is colored by the fact that water is not plentiful. I've got no problem with someone being a "water hog" if there was enough water to go around and I was not subsidizing them.

Anonymous said...

I see you are writing about fixed fees again.

As I understand it, the fixed fees are what the city believes it must recoup from a water customer whether or not they use a drop of water (similarly with sewer service). It is independent of any rate method used to charge for actual units of water consumed. To the customer, it is the price of admission giving one access to water regardless of whether or not they take advantage of that access.

If the city does not charge the fixed fee, they will have to find another way to recoup the money. It sounds to me that you want the city to incorporate these fixed fees into the consumption fee because you believe this will make things fair for low water users. But how can the city do this in a way fair to all customers, and ensure it will get the money required to keep the water system up and running?

Under your plan -- what would happen if during a billing period, not one customer consumed any water? Not a single drop of water was used by anyone. The city would not get any money to pay for the water system it must have so every resident can have access to water when they need it.

Your proposal seems to depend on the believe that a fixed cost fee is not truly based on fixed costs. But I have no reason to believe these are not fixed costs as the city claims.

Chris Cruse said...

Let's suppose that the Poway Water Dept was a private business. They would have to sell bonds to get some start up money or refinance bonds down the road. They have administrative costs, building costs, materials costs and raw water costs and treatment costs. Just like our current water dept does.

There is no way that a private business could sell water to consumers where 50 - 75% of the customer's bill was a recurring up front fixed fee. Businesses roll those costs into the cost of the product. Even SDG&E rolls those types of costs into a rate fee. The water districts started doing this in a big way after Prop 13 -because they needed new ways to supplement their revenue stream. At first it was just a small water capacity fee and then a small sewer fee. And then they started charging a separate sewer fee that was structured like a fixed fee but it was tiered and based on winter water use.
Then they started to increase all of these fixed fees and the especially increase the sewer consumption fee for smaller users. These fees are now the major portion of the small lot owner's water bills.

The city doesn't really have to worry about getting customers. It has no competition. No private business is allowed to pipe water to our homes. So the city doesn't have to worry about whether anyone will use the water or not. In fact, they can pretty well figure out what the demand will be. A bigger problem is getting enough water to meet the demand.

And, yes, I think it is fair to roll the fixed fees into the consumption fee. That is what other utilities and businesses do.

Anonymous said...

You aren't answering my questions. Sure it is possible to roll the fixed fees into the overall bill - but show me how this will be equitible to water users? But maybe all you really want is a lower water.

You write, "There is no way that a private business could sell water to consumers where 50 - 75% of the customer's bill was a recurring up front fixed fee." Yes they could -- and basically do - you just don't know it is happening. Most private companies do not break down their product cost and present it to the customer.