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HomeMy WebLinkAboutProcess for Selecting a Rate Structure Alternative that Contains the Best Features of WRAB and StaffCITY OF BOULDER WATER RESOURCE ADVISORY BOARD AGENDA ITEM MEETING DATE: September 8, 2004 TITLE: Process for Selechng a Rate Structure Alternarive that Contazns the Best Features of WRAB and Staff Recommendahon REQUESTING DEPARTMENT: Ned Wilhams, Director of Pubhc Works for Uriliries Joanna Crean, Pubhc Works Admmistrator Carol Lmn, Uhlrties Fmancial Mana er BOARD ACTION REQUESTED: Determme the Process for Selectmg a Rate Structure Alternahve that Contams the Best Features of WRAB and Staff Recommendahon FISCAL IMPACT: None at tlus time. The September 8, 2004 Water Resources Advisory Boazd (WRAB) meetmg is a WRAB and staff work session The purpose of the meetmg is to determme the process for movmg forwazd with two water rate structure ophons for future Council consideration The water rate structure agenda item was taken off the August 3, 2004 City Council meehng. The City Manager asked that WRAB and staff work on developmg no more than two, well defined alternahves for Council considerahon, m accordance w~th the Council direchon recerved at the February 2004 Study Session. As a reminder, Attachment A is a summary of what WRAB and staff ongmally recommended at the Study Session Attachment B is the nunutes of the Study Session and Attachment C~s the Weekly Informahon Packet (WIP) that was sent to Council suminanzing the direchon given at the Study Session The essence of tomghYs meetmg is azound the Council direchon to• • Return to Council wrth two water rate structure altemarives o Simple approach that does not reqmre a new bilhng system o More complex solutron wrth consensus that contams the best features of WRAB and staff recommendahon Staff was intending to develop the rate structure that did not requ~re a new bilhng system Tomght, the focus of the meetmg will be on the process for the "more complex" soluhon ATTACHMENTS: • Attachment A Study Session - Summary of Water Rate Structure Recommendahons • Attachment B: Mmutes from Study Sess~on (only the Council direction discussion) • Attachment C: Study Session Summary WIP ATTACHMENT A SUMMARY OF WATER RATE STRUCTURE RECOMMENDATIONS THAT WERE MADE AT THE COUNCIL STUDY SESSION February 24, 2004 COMPARISON OF SINGLE-FAMILY RESIDENTIAL RATE STRUCTURE ALTERNATIVES Consumption Blocks Water Budaet - Standard Lot Block 2- Vanes-Uses Tax Assessed Lot Size Block 2- Ne~ 4,000 gals for indoor Block 3- 101 % to 125% of Outdoor Goal Block 3- Outdoor Budget Shaped 2 or 3 Times Block 4- 125% to 150% of Outdoor Goal Block 4- Use Above Total of Biocks 1, 2, and 3 Block 5- Over 150% of Outdoor Goal Key Assumption for Indoor Block Block 1 is established around average or typical Block 1 is fixed for low mdoor use (3,000 gals) single-family residential customer Blocks 2 is fixed and is the next 4,000 gallons for indoor use Key Assumption for Outdoor Block 2 uses customer specific tax assessed lot Block 3 is established around average or typical Block sizes, w/ application rate of 8 66 gallonsls f of single-family residential customer Based on total lot size assumed imgation reqwrements for 9,000 s f lot with imgable area of 5,200 s f(apphcation rate of 8 66 gallons/s f of total lot srze) If shaped twice monthly allocation is 5,000 or 20,000, rf shaped three times monthly allocation is 5,000, 10,000, or 20,000 2nd Block Shaped for ET (Monthly yes (monthly) Yes (2-3 times annually) AllocatioNWater Bdl Chanaesl4 Advantages • Outdoorwatenng allocation • Rewards indoorconservation mdiwdually tailored to lot size • Compatible to city's exis6ng • Monthly shap~ng of water allocation billing system soflware • Block 3 has relationship to outdoor watennp needs Disadvantages • Potential for a large • No indiwdualization of number of appeals block 3 • Overall complexity and customer understanding • Passible customer perception of ineqwties COMPARISON OF MULTI-FAMILY RESIDENTIAL RATE STRUCTURE ALTERNATIVES Type of Structure Water Budget - Irrigable Water Budget - Irngable Area Area Consumption Blocks Block 1- First 4,000 gals per living unit Block 1- First 2,000 gals per living unit Block 2- Next 2,000 gals per living unit Block 2- Next 3,000 gals per Irving unit Block 3- Irrigable Area - Varies by Month Block 3- Imgable Area Shaped 2 or 3 times annually Block 4- 101 % to 125% of Outdoor Goal Block 4- Usage Above Total of Blocks 1, 2& 3 Block 5- Over 125% of Outdoor Goal Key Assumption for Indoor Use Block 1 established as 80% of single- Block 1 is fixed for indoor use at 2,000 gallons per (1st and 2nd Block~ famdy residential's block 1 ailocation Block I~wng unit Block 2 ~s the next 3,000 gallons per living 2 is next 2,000 gallons per living unit unit Key Assumption for Outdoor U 3rd Block, Based upon 3rd Block, Based upon (3rd Block) customer speafic irngable customer specific irngable area w/ applicaUon rate of area w/ application rate of 15 gallons/s f of 15 gallons/s f of im able area irn able area 2nd Block Shaped for ET (Monthly AllocationlWater Bill Yes (monthly) Yes (2 or 3 times annually) Changes)? Advantages • Uses individual outdoor watering • Uses mdividual outdoor watering allocation allocation • Shaping of water allocation • Monthl sha in of water allocation Disadvantages • Measurements needed to • Measurements needed to use customer speafic use customer speGfic ungable area irngable area • Master metered vs • Master metered vs indrvidually metered individually metered customers customers • Small block size for the 4th block COMPARISON OF COMMERCIAULARGE USER RATE STRUCTURE ALTERNATIVES Block w~nter renoa ~~ct-apnq Consumpdon Blocks Block 1- 90% Averege Monthly Use Block 1- Up to 80% of Average Monthly Use Block 2- All Usage Over Blockl Block 2- 81 °/a-100% of Average Monthly Use Summer Penod (May-Sept) Block 3- 101 %-200% of Average Monthly Use Block 1- 90% Average Monthly Use Block 4- Use Above 200% of Average Monthly Use Btock 2- Ail Usage Over Block 1 Key Assumphon for Indoor Use Block 1 is up to 90% of the customer's Block 1 is set at up to 80°/a of the customers Average Monthly Use, based upon a three- Average Monthly Use from the prior year Block 2 is year average The same block 1 size is for usage between 81 % and 100% of the customer's used for both winter and summer periods Average Monthly Usage Block 3 is usage above the The use of 90% represents emphasis on Average Monthly Use amount and twice the Average this class to improve efficiency Monthly Use Key Assumption for Outdoor Use No specific block targetmg No speafic block targeting outdoor use Any outdoor outdoor use Any outdoor use is likely billed at the use is likely billed at the 2nd block pnce 3rd or 4th block price 2nd Block Shaped for ET (Monthly Allocation/Water Bill Changes)7 N/A N/A Advantages • Use of 90% of average • Encourage efficient use monthly use • Compatible to aty's existing • Price difference for seasonality billing system soflware • Compatible to aty's existing • Ease of customer bdling system software understanding • Ease of customer understanding • Lack of an "excessive use" • 2nd block dces not relate Disadvantages block for mdoor use well to system water • 2nd block does not relate supply characteristics to system water supply charactenstics COMPARISON OF METERED IRRIGATION RATE STRUCTURE ALTERNATIVES Type of Structure Water Budget - Imgable Area Water Budget - Imgable Area Consumption Blocks Block 1- Customer Specrfic Imgable Area Block 1- Up to 80% of Customer Speafic Imgable Area Block 2-101 % to 150% of Outdoor Goal Block 2- 81 % to 100% of Outdoor Goal Block 3- Over 150% of Outdoor Goal Block 3- Over 100% of Outdoor Goal Key Assumption for Establishmg 1st block is based upon 1 st block is based upon Outdoor Watenng Reqwrements customer speafic imgable customer speafic imgable area wl application rate of area w/ application rate of 15 gallons/s f of 15 gallonsls f of irn able area im able area 2nd Block Shaped for ET (Monthly AllocatioNWater Bdl Changes)? Yes (monthly) Yes (2 or 3 times annually) AdvanWges • Outdoorwatenng allocation • Outdoorwatenng allocation • Shaping of water allophon every month • Shaping of water allocation 2 or 3 times a year • Penalty for "excess" use (block 3) • Block 1 encourages additional conservation • Penal for "excess" use Block 3 Disadvantages • Measurements needed to • Lack of a"transition" block before Block 3 use customer speafic imgable area • Possible customer perception of significant inequitities in water allocation ATTACHMENT B: Minutes from the February 24, 2004 Boulder City Council Study Session Council Direction T. Eldridge asked if the proposal will show a sigmficant reduchon m water usage. Why do we need to s~gruficantly reduce water usage, except m yeazs of drought~ Why aze we doing all of tlus for? Regardmg the WRAB recommendahon for residenhal - the disadvantages aze potenhal for a large number of appeals, overall complexity m customer understanding, possible customer percephon of inequahhes When we pegged the masimum AWC, rt was pegged at an area that would take of 90% of the population. There is an issue with large famihes bemg penahzed because they are large and they are above the 90% He did not beheve m domg a custom billmg system, we need to buy a system that m use in other places, has economics and has upgrades that come automaticalty The rates m between the blocks (the differences m rates between block two and three may be different for residential and mulh-unrts) comes down to customer percephon of mequahhes He was not convmced to make Uus big change We need to get the commercial uidustnal on the same rate as the rest of the city We need to change (reduce, lower) block three that went up to $6 60 with no rahonale. We may want to reduce block two as well. We ought to have a mimmum AWC On the imgation - we would need to consider public nght of way. J. Stoakes asked how much staff time and costs has been spent over the last year on this pro~ect N. Williams responded that between $80,000 and $120,000 has been spent J. Stoakes asked why aze we here We need to keep the bilhng system simple and off-shelf wrth automahc upgrades. We need to correct last years rate mcrease and take rt back to where it was, or a much more reasonable amount. If we pursue changes, he supported the staff recommendahons - they address the fair and simple aspects that people aze lookmg for. He recommended that staff does a final check, involving WRAB and consultants, and bnng us back the final recommendahons to move forward G. Riggle does not need additronal mformarion about rate altematives There is not another rate structure or combmahon that he wants to consider On page 29 (handout of shdes), the most he could support is number 2, consider small changes to the current rate shucture, which do not requue the accelerated purchase of a new billmg system - to acknowledge the need for a new bilhng system m the 5-10 year hme frame C. Gray recommended that we do the work, have more mdrnduahzed water budgets, mclude commercial as soon as possible Water budgets help us determme when the taps are sold and how much supply we have and how that affects our ulhmate yield for the crty. The water budgets also allow us to be able to allocate our own water depending on our own needs. She generally supported WRAB's suggesrion for the water budget wrth a few excephons (do the work now) A. Shultheiss there aze thmgs with our current rate structure system that aze unfa~r, or are tecluucally do not make sense. One is the conservarion chazge between resident~al and commercial, another is that we are basmg summer or outdoor usage on wmter mdoor usage and that does not make sense The rate study got more creahve than rt needed to be to solve the problem The soluhon is bigger than the problem It makes sense to buy a billmg system that can handle different possible rate structures, mcludmg water budgets, even if rt costs a httle more He does not addrtional mformat~on on the rate structures presented tomght There is perhaps another rate structure out there A final decision should be scheduled after we determme what sort of bilhng system to pursue m the next few months. He did not tlunk a decis~on needs to be made whether to change our rate structure nght now. W. Toor leaned towazd the staff recommendahon and thmks there is value to simphcrty, and was concerned that a water budget tied to lot size would be comphcated and that many people would perceive to be unfau To the extent of what a water budget would allow us to respond to drought srtuahons through a more flexible mechan~sm, m which people know their allocahon and are able to work withm that allocat~on is appealmg He questioned whether the mcidence of drought is high enough for that advantage to overwhelm some of the disadvantage He leanmg towards the staff recommendarion - rt is a modest fix - he hked the component of breakmg up block one mto a block one and block two, where there ~s fairly modest costs differences between them to give some small mcenhve for mdoor conservation He hked the idea of shapmg the outdoor budget based upon the weather and the avazlabihty of water The abihty of hau~ng an automahc techmque at lookmg at our pro~ected water supply and water demand and shapmg that block three to it is attrachve He said the WRt1B recommendahon fixes the AWC issue and fixes an approach to the commercial industnal He was OK with the staff recommendation for commercial mdustnal as a short-term approach He agreed wrth the WRAB comments that we ought to look at the block structure for commercial mdustnal. Tlus year - he supported (m the short term) gettmg the commercial mdustnal up to the same block two and block three rates It makes sense to remove the stage one drought surchazge At th~s pomt, he did not support changmg the block two rates that were established last year, he would support some modification (reduction) to the block three rates. T. Eldridge supported a small amount of the changes to our exisnng situation He would hke to see, before suumier, to equahze coxntnercial mdustnal with the rest of our rates and to reviewed the block two and block three that we implemented a couple of yeazs ago. R Buchanan considered J. Gordon's earlier comment with the issue of fa~mess and that the fee that we chazge should be representahve of the actual cost. She struggled with that concept m addihon to putting the water budget on top of that She was not clear how water budget really msures efficiency and conservatron. She was strugghng wrth the lot size - how does rt ensure efficiency She would hke to engage the mmds of the unnamed community members who have been talking to council members mdividually - she would hke to heaz from the commumty m a town meering (for example) before gomg forwazd. M. Ruzzin said we here because we are trymg to address the mefficient use of water and not penahze those who may be usmg a lot of water, but are usmg it efficiently. We aze here because we are trymg to provide better flexibility to the customers (m particulaz our residenhal customers) Regazdmg the study - he sa~d we need to take advantage of Uus opportumty to do this comprehensive look at our rates He supported havmg the staff recommendahon analyzed as the other structwes have been analyzed We need addihonal analysis of the pros and cons. He supported a combinahon of the WRAB recommendat~on and the staff recommendat~on - the two block mdoor for example. He said we should look at the block three on the residenhal side - not too sure to go mto block two. He did not support the drought surcharge on block one - and would support seemg that el~mmated We need to pursue the commercial and mdustnal side of this aggressrvely. We have to deal wrth the equrty issue We need to do an m depth analysis of the way Tabor impacts all of the operations of the city. Would hke to further pursue the PIF issues He supported an mformal council meetrng to meet wrth the pubhc to discuss water issues The implementahon hmehne - we need to figure out how we aze gomg to hold to a Jan 2006 implementahon - we ought to get this done more quickly He suggested another study session on this item, before acrion He wants to see another combmahon of rate structures (for example between WRAB and staf~. A final decision should be scheduled for council after council gets additronal mfo and potentially a second study session. He does not want ttus decision to be calendared for the Apn12005 council calendar - hopefully withm the next few months or by the end of summer S. McGrath supported gettmg it down to one proposal that we are all reachng to, as opposed to ~umpmg all over the place - acknowledgmg that it would need work - he supported the staff recommendation, or some combmation between WRAB and staff. We need to consider options presented by the pubhc. He supported havmg an open house with council He was concerned about the relarionship between the rate structure and the drought plan - we aze movmg with the rate stnxcture and not the drought plan. The drought plan is new and went through a brutal drought - take a look at that - was it successful - and how does it play with the rate structure. G. Riggle heazd two pomts of agreement to address the dispanty between commercial and residenhal conservahon rates - tlus suinmer (which would fall under the category of small changes to the current rate structure which do not reqmre a new b~lhng system), and secondly, to take a hard look at AWC. W. Toor also heazd that council was mterested m takmg a look at the drought stage one surcharge and block three - to be looked at m the short term. C. Gray also sazd there was consensus for council to hold a panel on water issues with a range of expert view points (either an open house or more structured panel). W. Toor - two ~ssues to do someUung to get equity between commercial mdustnal block two and block three rates ttus yeaz - fa~rly sunple and secondly lookmg at some other way of allocatmg commerc~al mdustnal. (~) suggested avoidmg accelerated acquisihon of a new billmg system would be preferred W. Toor suggested that staff and WRAB work together to articulate two alternahves - simple alternarive - consensus that contams the best features of the staff and WRAB recommendahons - G. Riggle and to associate at least some raw costs (implementahon and ownership) with the two alternahves (~) asked if the council meeting wrth the pubhc should occur before the two alternahves are presented to the board M. Ruzzin suggested that a formal pubhc heanng go before WRAB and then another council study session G. Riggle hoped to discuss a new study session format at the council retreat m Mazch. ATTACHMENT C: WEEKLY INFORMATION PACKET MEMORANDUM TO: Mayor Will Toor and Members of Crty Council FROM: Frank Bruno, City Manager Ned Wilhams, Director of Public Works for Uhhties Joanna Crean, Pubhc Works Admmistrator Carol Lmn, Utilities Fmancial Manager Carol Elhnghouse, Coordmator of Water Resources DATE: March 3, 2004 SUBJECT: Study Session Summary - Water Issues, February 24, 2004 ACTION REQUESTED The following narrahve suminanzes the water issues study session held February 24, 2004 Please review the matenal and send comments or correchons to Joanna Crean via e-mazl at crean~a,ci.boulder.co us or phone at 303-441-3038 by March 19, 2004. PRESENT Mayor Will Toor, Deputy Mayor Tom Eldndge, Council members Robm Bohannan, Crystal Gray, Shaun McGrath, Gordon Riggle, Mark Ruzzm, Andy Schultheiss, Jack Stoakes, Water Resource Advisory Boazd member Ken Wilson, Crty Manager Frank Bruno, City Attomey Jerry Gordon, Ned Williams, Joanna Crean, Cazol Lmn, Cazol Elhnghouse, Chns Puccio, and Tom Gould (consultant) PURPOSE The purposes of the February 24, 2004 study session were to: • Provide an overview of the city's water supply system, the Drought Plan and 2002 response to the drought, and the status of Boulder's water supphes for 2004; • Present the background and context for the water rate structure evaluatron, • Discuss the advantages and disadvantages of alternahve rate structures, and • Receive direction from City Council on next steps. OVERVIEW OF THE PRESENTATION AND DISCUSSION The study session was split mto two presentahons. Cazol Ellmghouse presented the first topic, which focused on the crty's water supply system, the Drought Plan and pubhc response m 2002, and the water supply status for 2004 Carol provided background mformahon on the watersheds suppl}nng Boulder's water, mcludmg annual snowpack and streamflow data She also discussed the Drought Plan and the rehabil~ty cntena Carol ended her presentatron with data about the current water supply status and indicated that snowpacks in Boulder's water supply basms were 70 percent of average for February 1 and the water levels m Boulder's reservous are above average Council members asked several clanfying questrons dunng the presentatron, all of which were answered dunng the study session The second presentahon focused on the water rate structure alternahves Ned Williams mtroduced the team which mcludes Pubhc Works, Information Technology, Water Resources Adv~sory Board (WRAB), and a consultant The team has been working on the uhhty rate structure and bilhng system evaluatron Jerry Gordon provided a legal perspect~ve on the water rate structure. He responded to a legal queshon that was razsed by some members of the public and Council about water rates potenhally violatmg TABOR After review of the issue, the Crty Attorney's Office mdicated that the water, wastewater and stormwater/flood management utihty funds aze exempt from the provisions of the TABOR amendment because they meet the defimtron of an "enterpnse" fund Crty staff then bnefly provided background on the issues that were raised dunng the 2002 drought that resulted m City Council direcring staff to complete a rate structure and bilhng system evaluahon Tom Gould with the consultmg firm Economic and Engmeenng Services, Inc. (EES) discussed the approach used to evaluate the rate structures and presented the fundamental concepts related to the alternahves analyzed Ken Wilson presented WRAB's recommended rate structure alternatrve for each customer class of service. Ned Wilhams presented the staffls recommended rate structure alternahve for each customer class of service Ned concluded the presentahon by highhghtmg the fact there are a number of choices available to City Council regazdmg rate structure alternahves To assist m gethng guidance from City Council, the followmg questions were answered by each Council member at the conclusion of the presentahon • Does Council need addikonal mformatron to make a decision when staff returns to City Council with an achon item~ • Is there another rate structure alternahve, or a combmahon of rate structures, that Council would hke to consider, or are there rate structures that Council would lilce to ehmmate from final considerahon~ • Would Council prefer to schedule this as an agenda rtem in March/Apnl for a final decision? COUNCIL RESPONSES Concerns and issues that were raised by Council members durtng the rate structure discussion mcluded the following • Fazrness - different volumes of water at different pnces • Simphcity - keep rt simple and don't make the rate structure/bilhng system too complex • Equrty - different rates far different customer classes of service. • Reduce water use - select a rate structure to encourage conservarion • Bilhng system - standard/off-the-shelf package versus customized system • Lower rates from pnces implemented m July 2003. 2 • CommerciaUIndustnal rate structure needs to be fixed now • Engage experts m discussion about rate structures, mcludmg the ideas from Steve Pomerance about the electnc mdustry • Pursue more mdividualized water budgets • Disconnect average wmter consumption (AWC), block 1, from outdoor use, block 2 • Need to raise awazeness of how much water customers are usmg. • Keep the rate structure and Drought Plan separate except for mcenhves for efficient use • Set outdoor water amounts at an adequate level that supports landscape styles that the commumty wants. • Financial impacts Queshons that were asked by Council members dunng the presentahon but were not answered m the study session aze provided below. Staff will provide the answers to these queshons m a future Weekly Informarion Packet (WIP). • How long have Plant Inveshnent Fees (PIFs) been m existence m Boulder? • Did the new Safeway on 28`" Street pay a PIF or did the previous store (Kmart) cover the PIF? • Is there value m takmg stafPs recommendahon and runnmg it through the same kmd of analysis that was used for the other rate structure alternahves evaluated as part of the study~ • How does Broomfield, which uses a umform rate, bill for water~ On average, how does Broomfield water consumphon compare to Boulder? • How do the Drought Plan and the rate structure relate to one another and how will they be kept separate~ COUNCIL DIRECTION It was suggested that staff provide Council with an annual or bi-annual report that outlmes where the crty is m terms of water supply and demand and how much demand new pro~ects have added. Also, it was suggested that staff should mclude employment m further studymg chmate and populat~on changes and modelmg of future land and water use. Staff will pursue both of tttese suggeshons The azeas where there was agreement from the Council members included the followmg. • Address the dispanty between commerciaUindustnal and residenhal conservation rates (blocks 2 and 3) before this suminer. • Evaluate the connechon between AWC and block two (outdoor use) • Review surcharges in drought Stage I ~ Revise rates from those implemented m July 2003 for block 3 and possibly block 2 • Convene a panel on water issues with a range of expert viewpomts • Analyze other approaches to commerciaUmdustnal customer class of sernce. • Return to Council with two altemahves, mcludmg eshmates of implementahon and ownerstup costs for each alternative o Simple approach that does not requue a new billmg system o More complex soluhon with consensus that contazns the best features of staff and WRAB recommendation Areas that were not clanfied dunng the study session and therefore srill need fitrther Council discussion and direchon, mclude the followmg: • There was mterest m domg a more m-depth analysis of the impacts of TABOR for all operahons of the c~ty At this trme, based on the mformahon that was provided by the City Attorney's office, staff is not performing th~s analysis unless otherwise directed by Crty Council • There was mterest m convemng a panel of "experts" or providmg an opportumty for more public panc~ipation directly with Council members on the rate structure alternatives and related issues dunng a future study session or an open house. Council will discuss this m con~unchon wrth the March 9 study session on Council procedures Based on Council directron at the study session, staffwill do the following • Develop an agenda item with ordmance language changes to make the rates for residenrial and commerc~aUmdustnal customers the same, ehmmate the surchazge m Drought Stage I, and propose new rates (pnces) for all customer classes that are lower than the rates that were implemented m July 2003 Staff will use the exishng cost of service rate model to determine these pnces The agenda rtem will be brought to the Apnl 8 Crty Council meehng for a first readmg Assummg the second readmg takes place at the Council meehng on Apn120, then withm a 30-day effecrive penod, the new rates would go mto effect on June 1. • Coordmate wrth Informahon Technology staff to make improvements to the city's current uhhty bilhng system to accommodate changes such as disconnechng the AWC from blocks 2 and 3. • Follow-up with another WIP wrth mformahon that responds to ttte queshons raised by Council but that were not answered dunng the study session (summanzed under "Council Responses") • Develop an agenda rtem or coordmate another study session to get direction on the longer term, focusmg on the two altemahves that Council would hke to consider (a simple ophon and an ophon that combmes the WRAB and staff recommendahon). • Meet wrth Steve Pomerance to further understand his proposed approach. • Pursue addihonal evaluahon of ttte commerciaUmdustnal customer class to fmd other ways to equrtably determme allocations of water and pnces 4