Determine the feasibility of converting mixed-use CII meters ...

Determine the feasibility of converting mixed-use CII meters ...

Conservation Pricing & the California Urban Water Conservation Council City of Santa Cruz Briefing, March 3, 2015 2 Overview 1. The Council 2. Conservation Pricing and Best Management Practice (BMP) 1.4 3 1. The Council Vision, Mission, Framework, Brand, Assessment Council Vision 4 A water-efficient California that is characterized by reliable and sustainable water resources, healthy ecosystems, and economically strong communities.

Council Mission 5 A membership organization Dedicated to Maximizing Urban Water Conservation throughout California By: Supporting Innovative technologies and practices Encouraging effective public policies Advancing research, education & training Building on collaborative approaches & partnerships Organizational Framework 6

Group 1: water service providers Group 2: environmental advocates 19 Wholesale 230 Retail 21 signatories ~10 active Group 3: everyone else Engineering consultants, manufacturers, trade associations, other organizations Foundation: the MOU 7

Memorandum of Understanding Originally Signed in 1991 Commits water service providers to voluntarily: Develop, Implement & Report on Best Management Practices City of Santa Cruz: Signed the MOU in July 2001 Has been implementing & reporting Council Brand: BMPs 8 Best Management Practices (BMPs)

Two Foundational Utility Conservation Pricing is 1 of 4 Utility Operations BMPs Three Programmatic Retail, Operations, Education Commercial, Landscape Voluntary Reports of Implementation Three Reporting options Traditional, Flex Track, GPCD Assessment & Future

Councils Work More Important than Ever Mature Organization Vision, Mission & Broad Strokes of Strategic Plan Still Relevant Committed Leadership Unique Forum Positive Reputation Some Leverage Time to Revisit the Brand 10 Conservation Pricing General, BMP 1.4 August 12, 2014 Conservation Pricing: the Premise

11 As price of water goes up, people use less. Studies show a range of responses to price increases Duh! Depending upon the study, a Doubling of Price can lead to anywhere between a 20% and a 60% reduction Most recent study (Piper) So Cal, 2014 Showed a drop of 28% for price doubling. Showed a drop of 12% for adding a tier to price structure.

Conservation Pricing: the Challenge 12 As Ratepayers use Less Water, Utility Revenues Decline Water Utilities characterized by Large Fixed Costs Proposition 218 Limits Price of Water to Cost Challenge: how to ensure revenue stability while still sending an effective conservation pricing signal Conservation Pricing & the Council 13 Volumetric water conservation pricing has

been a BMP since the beginning (BMP 11). Since 2008, the commitment has been based on a ratio of Volumetric to Fixed charges, computed one of two ways. Option 1: 70/30 Option 2: Agency specific calculation using Canadian formula or Council-developed simplified model (ALAEA) Brief Background 14 2008 commitment included Council obligation to review after five years. Dissatisfaction with 2008 commitment, by both G1 & G2, although for different reasons, led to shared interests of both groups in revising the commitment. Revision process began in 2013, continues to date.

Proposed Option 3: The Matrix 15 Is a 3-element suite of best management practices. Allows water utilities to measure the strength of their commitment to send conservation pricing signals while structuring their water rates to achieve revenue stability. The Matrix: Overview 16 Section 1.0 - Retail Water Rate Structure Uniform Two Tiers/ Three or More Seasonal Tiers/Allocation Customer % SFR

MFR CII Dedicated Irrigation 1 1 1 3 3 3 5 5 5 1 3 5 Section 2.0 - Proportionality Test Score 1.1-1.19 1.2-1.29

Points 2 4 1.3-1.39 1.4-1.49 1.5-1.59 1.6-1.69 1.7-1.79 1.8-1.89 1.90-1.99 2.0-2.09 6 8 10 12 14 16 18 20 >2.1 23

Section 3.0 - Retail Conservation Pricing Enhancements 3.1 Billing 3.1.1 Billing frequency 3.1.2 Bill format Utility provides monthly billing for one or more customer classes. Water bill (whether paper or electronic) displays water use in gallons or gallons per day (gpd) for at least all single-family residential customers. Points 1 1 3.2 Metering 3.2.1 3.2.2 Dedicated irrigation At least 50% of irrigated landscapes greater than or equal to 1 acre in size are supplied by meters dedicated irrigation meters 1 Submetering

Utility requires individual meters or submeters (in lieu of master-metered accounts) as a condition of service on new MF and/or CII accounts meeting equivalent service conditions (e.g. < four stories in height). 1 AMR/AMI Utility has access to AMR/AMI administrative tools to track use and prioritize conservation messaging. Utility uses an AMR/AMI system to provide customers with alerts for possible high use, leaks, and/or consumption approaching the next tier. Utility uses an AMR/AMI to provide customers with regular access (e.g., web or smart phone) to near real-time water use data. provides notification to customer about water use anomalies, e.g., possible high Advance notification Utility use or leaks, in advance of sending a bill (excluding AMI). Utility provides customer access to account information, billing histories, water use, Website tools allocations, or direct links to conservation services via a web portal (excluding AMI). 1 Utility provides information on water use trends to the customer via water bill or other printed means. 1

Utility provides information to customers that compare their water use to a standard or benchmark (excluding AMI). 1 Utility provides reports to customers that compare their water use to others (excluding AMI). 1 3.2.3 3.2.4 3.2.5 1 1 1 3.3 Communications 3.3.1 3.3.2 3.3.3 Use histories 3.3.4 Benchmarking

3.3.5 1 3.4 Innovations 17 3.4.1 Rate structure Utility is implementing an innovative rate structure to promote efficiency, such as budget- or consumption-based charges (excludes allocation and tiered rates) covered in Section 1). 1 3.4.2 Fees & credits Utility's water system capacity or connection fee structure incentivizes the installation of indoor and outdoor water efficient equipment and measures (including recycled water and onsite reuse). 1 3.4.3

Drought/shortage response Utility has adopted a surcharge or other pricing mechanism to support drought and supply shortage reductions. 1 3.4.4 Revenue streams Water rates provide at least 90% of the revenue for the water system. 1 Things You Might Like About the Matrix 18

The calculations are simple and the math is straightforward. It is flexible, with a lot of options for improvement rather than one pass-fail calculation, e.g., 70/30. It is forward looking, applying to rates and practices that are adopted, rather than revenues received. Agency performance is not subject to external forces, such as drought or the economy. It is more comprehensive in scope and therefore does a better job in capturing the intent of the BMP. 19 Thank You ! Matrix: Section 2 (Proportionality Test) 20 Draft Water Conserving Rates Matrix Section 2 - Level of Pricing Signal (Simplified Version for Demonstration) 1.5 to 1.59 Proportionality Test 1.6 to

1.69 1.7 to 1.79 1.8 to 1.89 1.90 to 2.0 Points Single Family 20 points (+3 4 points 8 points 12 points 16 points Residential pt. bonus >2) The proportionality test compares the total bill (both fixed and variable charges) for a customer with the total bill for another customer using twice as much water. Each agency has three options for calculating the pricing signal: Average use; 2. Peak period use; or 3. Fixed comparison (15 hcf to 30 hcf). 1. Sample Proportionality Test 21

Meter charge: $34.35 per month Average use: 20 hcf 0.75 x average use: 15 hcf 1.5 x average use: 30Blocks hcf Rate Water Rate Structure Tier 1 Tier 2 Tier 3 (HCF) 0-7 7-44 >44 ($/HCF) 2.39 3.81

4.88 Charges Meter Charge Tier 1 Tier 2 Tier 3 Monthly Bill 15 HCF Bill $ 34.35 $ 16.73 $ 30.48 $ $ 81.56 30 HCF Bill $ 34.35 $ 16.73 $ 87.63 $ $ 138.71 Pricing signal = $138.71/$81.56 = 1.70

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