March 18, 2010

Drip, Drip, Drip

It's like water torture. Poway style.
To be more specific, Poway water-and-sewer-rate torture.

On Monday I got my latest water bill. $145.96 for 9 units of water! Nine lousy units of water.
That is an average of $16.22 per unit of water. That's just ridiculous.
Last March, my bill was $136.19 for 10 units of water.  I'm using 10% less water than last year and paying 19% more for it. It just sucks.

What's really bad is that only $27.36 of my bill is for my water consumption.  $118.60 is for fixed fees and sewer consumption.  For 9 lousy units of water and even fewer units down the drain.

I was really PO'd because my sewer use should have back in Tier 2 instead of Tier 3. But there on my bill was a fee $76.25 fee for Tier 3 sewage use.  It took several phone calls over 4 days, but I finally got Donna Goldsmith to call me back and explain that the computer didn't calculate my sewer use correctly. Mine and lots of other people's. So, yeah, I'm back in Tier 2 now. And I can deduct $25.60 from my bill.

What's really crazy is the huge jump in rates from Tier 2 to Tier 3. Somebody using 12 units of water is in Tier 2 and pays $50.65.  If they have company and let them take showers, that could bump them into Tier 3. That will cost them $76.25. That is a 50% increase over Tier 2 and it will cost them $25.60 more for each of the next 6 water/sewer bills. Who made up these crazy rates? And who approved them?

I've asked all 5 councilmembers to take another look at these insane sewer rates, but so far, not one council member has done anything about them. They have, however, voted to roll back planned water rate increases for high end users. That tells a lot about their priorities.

I did some furious googling during one of my sewer rate rage episodes and I came across a previously unknown website called California Urban Water Conservation Council. According to their website,
CUWCC is a partnership of water suppliers, environmental groups, and others interested in conserving California’s greatest natural resource - WATER.
The California Urban Water Conservation Council was created to increase efficient water use statewide through partnerships among urban water agencies, public interest organizations, and private entities.  The Council's goal is to integrate urban water conservation Best Management Practices into the planning and management of California's water resources.

A historic  Memorandum of Understanding was signed by nearly 100 urban water agencies and environmental groups in December, 1991. Since then the Council has grown to 389 members. Those signing the MOU pledge to develop and implement fourteen comprehensive conservation Best Management Practices (BMPs).

I was surprised to find out that Poway was a member of CUWCC. I mean, Poway's sewer rates are an abomination. They aren't even structured as rates.  The difference between Tier 2 and Tier 3 is a ridiculous 50% increase, but the increase in the the higher tiers is a lot more gentle. Poway's sewer rates are designed to extract the greatest return from low end users, not to foster any kind of conservation. In fact, when Poway's sewer fees are converted to rates, the top tier pay less than it cost the city to have their sewage treated at Point Loma. The lower tier rates are many times higher than the rate of the higher volume users.

All the members of CUWCC signed a memorandum of understanding. They agreed to implement some BMPs (best management practices). One bmp details how members are supposed to charge for sewer service:

Part II- Retail Wastewater Rates A. Implementation
This section applies to Water Agencies that provide retail sewer service. Water Agencies that do not provide retail sewer service shall make good faith efforts to work with sewer agencies so that those sewer agencies adopt conservation pricing for sewer service.

Conservation pricing of sewer service is also characterized by one or more of the following components: rates in which the unit rate is the same across all units of service (uniform rates);
rates in which the unit rate increases as the quantity of units purchased increases (increasing block rates); rates in which the unit rate is based upon the ong-run marginal cost or the cost of adding the next unit of capacity to the sewer system. Rates that charge customers a fixed amount per billing cycle for sewer service regardless of the units of service consumed do not satisfy the definition of conservation pricing of sewer service. Rates in which the typical bill is determined by high fixed charges and low commodity charges also do not satisfy the definition of conservation pricing of sewer service.

As I stated before, Poway does not charge for sewer service in unit rates, so I had to convert their tier fee structure to unit rates before considering if Poway was implementing the bmps. It is pretty obvious that Poway doesn't have uniform rates, nor does the unit rate increase as the quantity of units purchased increases. In fact, the unit rate tends to decrease as the number of units purchased increases. Poway's rate structure gives a discount to people who use more sewage water. 

I asked Steve Didier, Director of Administrative Services, whether or not Poway's sewer fees were in compliance with CUWCC bmps. Mr. Didier said that Poway complies because it uses the third criteria:

rates in which the unit rate is based upon the long-run marginal cost or the cost of adding the next unit of capacity to the sewer system. 

I went googling for a definition of "long-run marginal cost".
Here's one from wikipedia:

Long run marginal cost (LRMC) refers to the cost of providing an additional unit of service or commodity under assumption that this requires investment in capacity expansion. LRMC pricing is appropriate for best resource allocation, but may lead to a mismatch between operating costs and revenues.
In long run equilibrium, the LRMC=Long run average total cost (LRATC) at minimum LRATC.
LRMC is the minimum increase in total cost associated with a change in one unit of output when all inputs are variable and when input combinations are optimal before and after the change.[1] LRMC is the slope of the LR total cost function. The shape of the LRMC curve is determined by economies of scale. SRMC = LRMC at the long run cost minimizing level of output.

That sounds like a lot of economics mumbo jumbo. Here is a definition from WaterUK that is a little easier to understand:

long run marginal cost (LRMC)
The additional cost of meeting extra demand for water (or sewerage). In the long run this will include both operating and capital costs. Companies have estimated figures for water both on a steady demand basis and a peak demand basis, and these are published by Ofwat in their annual tariffs report. Ofwat's view is that companies need to refer to LRMC in setting tariffs and charges for bulk supplies.

Long run marginal costs include the cost for treating the sewage now, and any costs for new capital outlays. Suppose Pt. Loma had to build a new plant because it couldn't handle the amount of sewage going through it now, that would be a capital cost that would likely be transferred to the ratepayers. And if they charged different rates for flushing at different times of the day, I suppose that would be a "peak demand" event. But I don't see how we could even measure that because we don't even have sewer meters in the first place.

So, armed with a lot of economic buzz words, I took a fresh look at Poway's sewer rates. Poway Ordinance 666 (oh- it surely is a beast) lays out the water and sewer fees and charges. The paragraph on the sewer charges is titled "commodity rate", but there are no rates listed in the ordinance, only fees/charges.

I converted the fees/charges to a "rate" by dividing the charge by the number of units used.  For example, the charge for Tier 2 (6-12 HCF) (note: HCF=unit) is $50.65. That means, someone who (by the city's guesstimate) uses 6 units pays a  $50.65 commodity fee and someone who uses 12 units (twice as much) also pays $50.65. To find the rate for each, I divided $50.65 by the number of units used. The 6-unit user is paying $8.44 per unit and the 12-unit user is paying $4.22 per unit, half as much as the 6 unit user. In this example, the user who uses twice as much pays half as much as the frugal user. The CUWCC bmps are supposed to promote conservation. Can you figure out how charging the person who uses 12 units half as much per unit as the person who uses 6-units encourages conservation? I sure can't.  And why give the person who uses 12 units such a discount when the rate for the person who uses 13 units jumps back up to $5.87 per unit.
The rates are just crazy. Here is a graph:

I don't think Poway's sewer fees comply with the CUWCC bmps. Even if Poway re-calibrated the rates to smooth out the crazy jumps, the trend is to charge less per unit for the people who use more sewer water. The long-run marginal cost actually has a tendency to raise the costs for additional units of production, or in this case, of sewage being treated. So how does Poway justify lower rates for big users and higher rates for the frugal users? I asked Steve Didier that question in an email:

Steve, the sewer commodity charge are not listed as unit rates. They are tiered fees. Convert them to rates and they are out of compliance with the bmps. The unit rate of the lower tiers is higher than the unit rate of the higher tiers. Does Poway get a discount for adding more sewage to the system?

Steve's response:

No, we don’t.  But remember we’re the middleman in the equation and we do recover our costs from various customer types in different ways.  For example, we charge higher sewer rates to certain commercial customers, like laundromats or drycleaners, considering a higher sewer treatment cost based on the type of business.
For residential customers, the increased cost at each sewer tier is based on the long-run marginal cost of adding the next unit of capacity to the sewer system.  Our sewer rate model recognizes that as water usage goes up, less of that additional water use is returned to the sewer.  This is controlled in our rate model with the sewer cap, which is what creates the lower per unit cost to which you are referring from tier to tier.  Beyond 51 units of water use (tier 7) customers are not charged any more for sewer service because it recognizes that anything over that is likely not being returned to the sewer at all (i.e., landscape use).  But at each higher tier to that point they are paying more, which meets the criteria of the CUWCC BMPs by charging for the marginal cost for adding the next unit to the system.
The City conducted a study in 2007 that validated our sewer rate methodology, which was vetted in an open council meeting and approved by the City Council.  If you would like a copy of that report please request a copy from the City Clerk as a public records request.  Take care.


Director of Administrative Services

City of Poway


I don't buy it. If I run my shower longer, does less water end up in the sewer? The sewer commodity charge is based on winter water use. In a wet winter, wouldn't everyone have their irrigation off? And re-calculating how much ends up in the sewer is not a long-run marginal cost. It is a re-calculation of the winter water use. Not that I don't have issues with that too.

I'm usually in Tier 2 unless we have a very dry winter. Then the extra irrigation bumps me up to a Tier 3 which costs about $150 more per year than being in Tier 2. My own experience is that your sewer rate methodology sucks. It is not valid in my case. My last 3 lowest winter water use were 8 units (2007-2008); 10 units (2008-2009) and 9 units (2009-2010). Yet for the last couple of years I have been assigned to Tier 3. The averaging method makes a dry winter carry over for the next 3 yrs or so. The methodology supposedly compensates for that, but it sure doesn't in my case. The last last couple of years, I have paid for putting more water into the sewer than I received  coming in to the house as fresh water. Poway's sewer fees are structured to extract as much revenue as possible from smaller users. There is no conservation incentive in the rate structure at all. 


Anonymous said...

I'm curious how many gallons 9 units is.

Chris Cruse said...

A unit of water = 748 gallons, so 9 units = 6732 gallons.

Anonymous said...

I live in an apartment, so I don't get a water bill. Is that 6732 gallons in 30 days?

Chris Cruse said...

Poway bills in 2 month cycles. So, my 9 units (6732) were for 2 months of water use. Let's see, that is 3,366 gallons of water per month, or about 112 gallons per day.

Marie Doerner said...

We agree. Southern Powegians