May 19, 2010

Why Gisela was billed $71.00 for 0 units of water

Did you catch the letter from Gisela Koestner in the April 15th edition of the Poway News Chieftain? The one where she complained because she was billed $71 from the City of Poway for using 0 units of water?

I just found out that there’s absolutely no incentive to conserve water. During the past two months I had 0 units water consumption, yet my water bill is $71. I understand the $28 basic water service, but dinging me for $45 for sewer is outrageous! As I see it, I’m a fool to be so conscientious and I will let our City Council and manager know that.



I have been complaining about Poway's unfair sewer rates for about a year now, and to tell the truth, I was somewhat relieved to see that I am not the only one who finds the sewer rates "outrageous" and who is speaking out about it.

Why was Gisela charged $71 for using 0 units of water? There are 4 separate charges on each water/sewer bill. There is a basic water service fee and a basic sewer service fee, a water commodity charge and a sewer commodity charge. Everybody has to pay the $28.00 basic water fee and $16.35 basic sewer fee whether they use any water or not.  Gisela was not charged a commodity use fee for water because she didn't use any water, but she was charged a $28.71 commodity use fee for using the sewer, even though she didn't actually use the sewer  during that billing period. Believe it or not, Powegians can be charged up to $123.80 for using the sewer, even if they don't use it.

So how did that happen? How did it happen that Poway charges a sewer use fee even for people who don't use the sewer? Part of the reason is because Poway doesn't meter for sewer use. They guesstimate it by averaging the previous 3 winters lowest water use and then multiplying the average by 85%.

Sure hope I didn't lose too many readers there.

The other reason Gisela had to pay for using the sewer (even though she didn't) is because of the way Poway structures their sewer fees. Its an abomination. I've blogged about it here and here.
I looked at my old water/sewer bills (I saved them since 1998- the year I started "conserving") to see if I could figure it out when the sewer fees got so out of whack.  The first bill that showed up with the tiered sewer fees was Mar, 1998. Prior to that we had a flat sewer fee- every residential customer with a 3/4 in pipe paid the same amount for basic service but we did not pay a use charge.

The idea behind the tiers was to have those who used more of the sewer, pay more of the costs.  Fair enough! Well, not really, but fairer than the old billing system.  But since the tiers were first introduced 12 yrs ago, the sewer fees have increased even more dramatically than the water rates and that is causing problems. And it is making anomalies within the tier system more glaring.

Click on graph to make larger.

I've pointed out in other posts that Poway's sewer tiers are not constructed in even steps of equal rise or run. The jump between Tier 2 and Tier 3 is particularly huge. The sewer charge in Tier 2 is $50.65. In Tier 3 it is $76.25, a very dramatic 50% increase. It is possible that taking a single shower could bump someone into Tier 3 and cost them an extra $153.00/yr in sewer fees.

To show just how much the sewer charges have jumped over time, I am going to compare my family's  Mar 1998 water/sewer bill with our most recent bill from Mar/2010.

In Mar 1998, we used 9 units of water. Our total  bill was for $61.86. Total water charges were 30.28
Total sewer charges were 31.58. Sewer was just a little over half my bill.

In Mar, 2010 we again used 9 units of water. Our total bill was for $145.96. The water portion of our bill was $53.36. Our total sewer portion was $92.60. Sewer charges were 63% of my bill.

Results: 136% increase in total bill, 76% increase in water portion, and a whoppin' 206% increase in sewer portion.

The city goofed on my Mar 2010 bill. I was really supposed to be reassigned to Tier 2. Normally I am in Tier 2. I only get bumped into Tier 3 after extremely dry winters. We had some extremely dry winters in 2005 and 2006. There was no 2-month period when I could turn off my irrigation completely. We also had taken delivery of 10 new trees from the SDG&E free tree program. I had to water the new trees to keep them alive. But I paid for it in higher sewer bills for the next few years. In 2007-08, 2008-09 and 2009-10, my winter water use was 8 units, 10 units and 9 units respectively.  But I had to wait until Mar 2010 to get back into Tier 2. Here is a comparison to my corrected bill:

We used 9 units of water. Our total bill  $120.36. The water portion of our bill was $53.36
The sewer portion was $67.00. 

Our total bill  increased 95% from 1998. The total water portion increased 76% and the sewer portion increased 112%. The sewer increases still beat out the water increases!

Why are the sewer fees so high? There are a couple of reasons. In my next post I am going to show that the city is over-collecting sewer funds. And they aren't necessarily spending those funds on just the sewer.

It is probably useful to point out that not everyone in Poway pays sewer fees. Some people are on a septic system and do not pay any sewer fees. In fact, several of the council members who have approved our sewer fees don't pay them. Higginson is on septic, as are Emery and Rexford. They are the deciders but they don't really have any experience with how the sewer fees impact people who only use small amounts of water and get huge bills.

In October, 2006, the council again increased sewer fees. There were some complaints about the fees, so they commissioned a study to look at the tiered rate structure and to evaluate alternative rate structures.
The consultant, Raftelis Financial Consultants, Inc. (RFC) looked at 3 rate structures: a flat-rate, the current tiered structure and a uniform unit rate structure. I've posted their entire report, titled, "Sewer Rate Structure Study, Final Report March 9, 2007" here.

The consultant noticed some of the same issues I have noted with the tiered structure, in particular, that the rates varied from tier to tier and that within a tier, users who used different amounts would be billed the same charge.

 ...the City may have to address customer questions and improve upon the existing rate structure.  First, if we look at the rate paid for the average use within each tier, the amount per hcf decreases significantly.  For example, tier 1 customers pay, on average, $5.84 per hcf of sewer usage, while tier 7 customers pay $2.01 per hcf.  Second, customers may be confused by a seven tier system that generates an identical bill for usage at 27 hcf and 37 hcf (the range of usage defined as tier 5). 
RFC believes that the City may be able to address these opportunities by considering changes to the residential sewer rate structure.  RFC did not find inherent deficiencies in the existing rate structure that would necessitate any change at this time.  State law requires that charges be proportionate to system usage and the existing structure meets that requirement.  The question is whether the City believes the current structure best approximates system usage.  If the City chooses to redefine how it approximates a customer’s system usage, it must also revise its rate structure to match the new definition.

I disagree with RFC that the tiered rate structure did not have "inherent deficiencies...that would necessitate any changes at this time".  I think nobody clued in RFC that Poway was a  member of California Urban Water Conservation Council (CUWCC) and had signed an memorandum of understanding with CUWCC agreeing to implement the conservation-based BMPs of CUWCC.

The flat rate structure violates those BMPs so it was kind of a waste of time to even consider it. The current tiered rate structure also violates the CUWCC BMPs. I've discussed this with people from CUWCC and they have agreed with me on this point. Poway city officials disagree. I've blogged about that here.

I also disagree with the consultant's assertion that the tiered structure meets the requirements of State law that requires charges to be proportionate to system use.  Poway doesn't have sewer meters, so they are just guessing how much of the water we purchase ends up in the sewer.  Poway charges lower sewer rates for high volume water users under the assumption that the extra water doesn't make it's way into the sewer. Here is what is wrong with that assumption.  Someone who uses, say 50 units of water, during a winter period, might be using it for landscaping, or to fill up their jacuzzi or to wash a lot of clothes. Someone who uses only 20 units may actually be using half of it for landscaping, but the tiered rates don't reflect that. In the dry winters of 2005 and 2006, I used 20 units in the winter months. I used it for landscaping, but I did not get the discount that the large water users get. Instead I got a 50% increase in my sewer fee.

Here is a graph of the last 3 winter water use for each of the candidates and councilmembers. The last 3 winters were wet enough to turn off irrigation. Maybe some people didn't, but the point I am trying to make is that wintertime water use (without irrigation) can vary widely.

With the exception of Vaus, the wintertime use of these 13 people varied from 3 units to 33 units in 2010, when the city was heavily promoting water conservation and turning off irrigation systems.  Let's assume, for a moment, that everyone was a model citizen and did turn off their irrigation. And that they could maintain that same winter water use for 3 yrs and that rates were the same in 3 yrs as they are today. Here is a graph showing how much each person would pay for each unit of sewage:

Boyack would pay the highest sewer rates- $11.26/unit. Vaus would pay the least, $1. 60 per unit. (Vaus is actually on septic and pays no sewer fees) Even people who had fairly close usage would pay different rates because of the oddities of the tiered structure. Assuming everyone (except Vaus) was using the water mostly for indoor use and that 85% of the water they used ended up in the sewer system, why should they be paying different rates?

The third alternative that RFC looked at was the uniform unit rate.  This structure would charge everyone the same rate per unit. Under this structure, every column in the graph above would be the same height. I'm guessing, but I think the rate would be around $4/unit.

Here is what RFC had to say about uniform unit rate:

Implementation of a uniform rate structure more closely follows cost of service principles in that it charges the same rate for each unit of usage.  This type of structure is widely used in the U.S. and gaining acceptance in California since it also sends a strong resource conservation message with reduction in use resulting in a lower bill.  Approximately two-thirds of existing customers would receive a lower bill under a uniform rate structure.  However, failure to control usage could result in a much higher bill under this structure.  Finally, a uniform structure may be easier for customers to understand.  The uniform rate structure is a good alternative if the City believes metered water use is the best available approximation of sewer system use, and resource conservation is a high priority.  Representative customer impacts under a uniform rate are shown in Exhibit 4.

If the city adopted this pricing structure, the average customers in Tiers 1, 2 and 3 would see  reductions of 22 to 44% on their sewer use portion of their bill.

The consultant also suggested a possible sewer cap modification. If the city used this pricing structure and lowered the sewer cap, the average customers in Tiers 1, 2 and 3 would see reductions of 18 to 42%

Sewer Cap Modification
The City may choose to modify the existing sewer cap under the existing rate structure or under a uniform rate structure.  Since the 1997 Rate Study, the City has increased the sewer cap from 40 hcf to 51 hcf (on a bi-monthly basis).  The sewer cap is intended to set a boundary above which residential water usage is assumed to be outdoor usage.  The cap concept is based on an industry-wide assumption that each person contributes approximately 75 gallons of sewer flow per day.   It is more common to have a lower sewer cap, typically around 40 hcf.  Exhibit 4 shows rate impacts under a uniform rate structure with a 40 hcf sewer cap.

What would happen to Gisela's bill? If the city adopted uniform unit rates, Gisela would still have to pay a sewer use fee unless her 3-yr winter average was less than 0.5 unit.  It is possible to override the winter average if the usage was less. Some cities do that, but even if Poway didn't, Gisella's sewer usage bill would drop from $28.71 to about $4 times her winter average. My guess is that her sewer usage bill would at least be cut in half.

The consultant study conclusions:
The City Council must ultimately determine how well a rate structure meets the needs of utility customers and the City, as a whole.  However, RFC has drawn some conclusions as a result of our analysis and industry experience, as to which options may best fit the City’s needs.
The City should consider residential rate structure alternatives if the existing structure no longer satisfies its pricing objectives; there is no pressing need to change the rate structure.  RFC believes that the City should consider the equity advantages of a uniform rate structure with a sewer cap reduction.  Implementation of these options provides equity based on system use as determined by metered water flow and also encourages resource conservation.  RFC does not believe the City should consider return to a flat rate. due to the disincentive for conservation, the equity disconnect between customer bills and system usage, and the customer impacts for low volume users.  In addition, the advantage of averaging climate fluctuations and resulting customer rate stability suggests that the City should continue its current practice of averaging three years of winter usage.

And what happened after the city looked at the consultant's study? The council decided to keep their tiered sewer charge structure. Remember, 3 of the then councilmembers were not even sewer customers.

It is time to take another look at Poway's sewer rate structure. State law requires that charges be proportionate to system use. I do not think they are. I recently asked the City for data on how many sewer units Poway bills for. I wanted to compare it to the number of sewage units Poway gets billed for from sending their sewage to Pt Loma and the Miramar reclamation plant. The City told me that the number could not be generated. Now, if the city doesn't even know if they are billing for more units or less units than they get billed for, how in the sam hill do they figure our current system (which is not even metered) is accurate or that the charges are proportionate to system use?

The sewer rate structure also must include conservation as a pricing objective. That is one of the requirements of CUWCC. The current system cannot distinguish between landscape use that does not end up in the sewer and profligate use of indoor water which does end up in the sewer. Our current sewer pricing favors the largest, most profligate water users. It is time to consider  a uniform unit rate.

I've been trying to get some attention from our current council members on this issue but with the exception of Betty Rexford (who arranged a recent meeting for me with the staff about the sewer rate structure) I can't get anyone to show any interest. The staff are not the ones to bring this back, it will depend on 3 council members to vote to change the sewer rate structure. I am pleased that some of the candidates are showing some interest.

Note: In my next post, I hope to show where some of this sewer money is going. You might be surprised to find out that Poway has been over-collecting on the sewer fund for years and that there is a pretty big wad of money sitting around in that fund.  Another reason why Gisela had to pay so much for so little.

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