Staying Afloat with Water Revenues Balancing the ebb and flow of revenue stability with conservation

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Staying Afloat with Water RevenuesBalancing the
ebb and flow of revenue stability with
conservation

• Mayors Water Council
• December 3, 2009
• Sandra Ralston
• Todd Cristiano
• Malcolm Pirnie

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Water ConservationA Necessity for Sustainable
Utilities

• 1 of worlds 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

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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 OM
• Doing more with less

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Volumetric Rate Structure Spectrum
Water Budget Allocation Domestic (indoor
usage) Irrigation (outdoor usage)
Water Budget Basis Indoor people per household
average winter consumption Outdoor Irrigable
area (square feet) Evapotranspiration
The City of Boulder, CO implemented a 5-tiered
water budget structure in 2007
Flat Rate
Declining Block
Uniform
Seasonal
Inclining Block
Budget/ Individualized






Less
CONSERVATION ORIENTATION
More
More
Less
REVENUE STABILITY
More
Less
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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!
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Conservation Planning ModelsCapturing the Moving
Parts
Reduced OM
Additional Source of Supply

• Dynamic modeling tools
• What if scenario analysis
• Optimization of variables
• Real-time analysis with Stakeholders
• Results summary dashboard
• Flexible and updatable

Delayed Capital Expansion
Inclining Block Structures
Reduced Revenues
Rate Increases
Budget-Based Rate Structure
Revenue Instability
Pricing Objectives
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Addressing Conservation Challenges
Rate Increase ??
Consumption 5
Rate Increase/ Decrease ??
Delayed CIP
2009 2013
Rate Structure Change
Customer Bill Impact ??
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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
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Discussion
Sandra Ralston Principal Consultant Charleston,
SC sralston_at_pirnie.com 843-853-7140
Todd Cristiano Senior Consultant Denver,
CO tcristiano_at_pirnie.com 303-316-6541