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HomeMy WebLinkAbout5.a. Water and Sewer Utility Rate Review ROSE.Ev1OUNTF EXECUTIVE SUMMARY UTILITY COMMISSION Utility Commission Meeting: September 14, 2015 AGENDA ITEM: Water and Sewer Utility Rate Review AGENDA SECTION: Old Business PREPARED BY: Patrick Wrase, PE, Director of Public Works / City Engineer and Christine Watson, Pub is AGENDA NO. Works Coordinator C W I 5, ATTACHMENTS: Water and Sewer Rate Models; DNR Memo APPROVED BY: RECOMMENDED ACTION: Motion to Recommend City Council Approval of Water and Sewer Utility Rate Changes for 2016. ISSUE At the July 20, 2015 Utility Commission meeting, members of the Commission requested that staff investigate the impact of adjusting the tiers and/or rates in such a way as to encourage more water conservation by the high-end water customers. In addition, since the last Utility Commission meeting in July, staff was made aware of the Metropolitan Council's intention to significantly increase the sanitary sewer treatment charges in 2016. Staff made the necessary changes to the sanitary sewer rate model and adjusted the proposed rates to accommodate the increased charges. Detailed information is provided in SECTIO; 2 below. BACKGROUND SECTION 1 —WATER RATES To provide some necessary background,below is a timeline of the activity over the past 10-years: • 2005 to 2006: WSB &Associates performed a Water and Sanitary Sewer Rate Analysis. This study helped establish the appropriate base rate for the water utility at that time ($1.02 per 1000 gallons). • 2008 to 2009: City staff developed the first iterations of our current water rate model,with tiered rates to comply with Department of Natural Resources (DNR) standards for water conservation. • 2009 to 2010: Tiered rates were approved by Council for implementation in March 2010. • 2011 through 2015: Rates stayed flat in 2011, followed by annual rate increases of 5% across all tiers in years 2012 through 2015. • 2015: At the July, 2015 Utility Commission meeting, staff proposed reducing the annual rate increase from 5% to 4%beginning in 2016. At the time, staff felt this was an appropriate adjustment to ensure adequate funding for future system expansion while maintaining an annual year-end balance roughly equal to the anticipated annual expenses. G:\Utilities\Rates\20150914 UC Water and Sewer Rates.docx Based on methodology in the American Water Works Association (AWWA) M1 Principals of Water Rates and Fees, the average winter quarter usage can be used as a threshold for defining the first tier. In Rosemount, the average winter quarter usage is 11,200 gallons for residential customers and 106,000 gallons for commercial/industrial/institutional customers (hereinafter referred to as commercial customers). A review of other metro cities and industry technical documents would suggest that doubling each tier thereafter is a typical practice. Based on this information, staff began the investigation with the following changes to the residential tier parameters: Current Alternate Residential Tier 1 0 - 10,000 0 - 12,000 Residential Tier 2 11,000- 30,000 13,000 - 24,000 Residential Tier 3 31,000- 60,000 25,000 -48,000 Residential Tier 4 > 60,000 > 48,000 Adjusting the residential tiers in this manner will ensure that most of the low and average users will fall into the lowest tier,while more of the high-end users will fall into the highest tier with the highest rate. After exploring several alternates for the commercial accounts, staff is recommending that those tiers remain unchanged. In addition to adjusting the residential tier parameters, staff studied the impact of adjusting the rates so there was a larger gap between the two highest residential tiers. This is a suggested practice as outlined in the attached DNR memo from July 2008. Staff explored numerous scenarios in an effort to find one that would best achieve the following goals: • Implement a more progressive rate structure consistent with DNR recommendations to promote water conservation • Generate roughly the same amount of revenue as the model presented to the Utility Commission in July • Maintain year-end balances in the Water Utility Fund consistent with future needs • Do not unfairly penalize commercial customers who use water as a necessary part of their business The proposed alternate (shown in comparison to the current model below) best achieves all of the stated goals. It includes a 1%increase to the base rates in 2016,with 25%increases between the lower tiers and a 50%increase for the highest residential tier. The highest residential rate, the irrigation rate,and the highest commercial rate are proposed to be equal beginning in 2016. G:\Utilities\Rates\20150914 UC Water and Sewer Rates.docx Current Model(presented in July,2015) 2015 Rates 2016 Rates . Est.Revenue Fixed Rate $12.16 $12.65 4% Annual Increase $ 374,586 Residential Tier 1 (0- 10,000 gal) $1.10 $1.14 4% Annual Increase $ 66,232 Residential Tier 2(11,000-30,000 gal) $1.35 $1.40 4% Annual Increase $ 307,770 Residential Tier 3(31,000-60,000 gal) $1.70 $1.77 4% Annual Increase $ 260,058 Residential Tier 4(>60,000 gal) $2.32 $2.41 4% Annual Increase $ 256,310 Irrigation Meters(Multi Fam/Comm/Ind/Inst) $2.44 $2.54 Equal to Corn Tier 4 $ 291,824 Comm/Ind/Inst Tier 1 (0- 100,000 gal) $1.28 $1.33 _ 4% Annual Increase $ 18,919 Comm/Ind/Inst Tier 2(101,000-200,000 gal) _ $1.59 $1.65 _ 4% Annual Increase $ 24,432 Comm/Ind/Inst Tier 3(201,000-300,000 gal) $1.94 $2.02 4% Annual Increase $ 23,054 Comm/Ind/Inst Tier 4(>300,000 gal) $2.44 $2.54 4% Annual Increase $ 165,415 2016 Year-End Balance $6,310,889 $ 1,788,601 2020 Year-End Balance $5,505,001 2025 Year-End Balance $4,770,427 Recommended Alternate for 2016 * 2015 Rates 2016 Rates Est.Revenue Fixed Rate $12.16 $12.28 1% 2016 Increase $ 363,781 Residential Tier 1 (0- 12,000 gal) $1.10 $1.11 1% 2016 Increase $ 100,897 Residential Tier 2(13,000-24,000 gal) $1.35 $1.39 _ 25% Increase over Tier 1 $ 230,170 Residential Tier 3(25,000-48,000 gal) $1.70 $1.74 25% Increase over Tier 2 $ 129,471 Residential Tier 4(>48,000 gal) $2.32 $2.60 25% Increase over Tier 3 $ 432,456 Irrigation Meters(Multi Fam/Comm/Ind/Inst) $2.44 $2.60 Equal to RES Tier 3 $ 299,449 Comm/Ind/Inst Tier 1 (0- 100,000 gal) $1.28 $1.29 1% 2016 Increase $ 18,570 Comm/Ind/Inst Tier 2 (101,000-200,000 gal) $1.59 $1.62 25% Increase over Tier 1 $ 22,291 Comm/Ind/Inst Tier 3(201,000-300,000 gal) $1.94 $2.02 25% Increase over Tier 2 $ 19,773 Comm/Ind/Inst Tier 4 (>300,000 gal) $2.44 $2.60 Equal to RES Tier 3 $ 168,495 2016 Year-End Balance $6,307,642 $ 1,785,353 2020 Year-End Balance $5,484,243 2025 Year-End Balance $4,714,584 * This alternate includes a 1%increase to the fixed rate and base tiers in 2016,with a 4% annual increase thereafter. G:\Utilities\Rates\20150914 UC Water and Sewer Rates.docx SECTION 2—SEWER RATES On August 21, 2015, staff was notified by the Metropolitan Council for Environmental Services (MCES) that the wastewater treatment charges for Rosemount would be increasing 10%in 2016. This had a significant impact on the rate model since that single line item accounts for more than half of the total expenses. To accommodate for this change, staff has adjusted the rate model in the following ways: • Line 8: Show a 4% annual rate increase (up from the original July proposal of 3%) • Line 27: Show actual MCES charges for 2015 and 2016,with a 5%annual increase beginning in 2017. MCES charges have fluctuated greatly from year to year;a 5% annual increase reflects the average over the past several years. The sewer usage rates over the past four years are: Sewer Rates 2012 Rate 2013 Rate 2014 Rate 2015 Rate 2016 Proposed (5%) (5%) (2%) (2%) (4%) Fixed Rate $21.00 $22.00 $22.50 $23.00 $23.50 Usage Rate $1.58 $1.66 $1.69 $1.73 $1.80 SUMMARY Staff is requesting that the Utility Commission make a recommendation that the City Council approve the 2016 proposed sewer rates, and the 2016 proposed water rates and tiers in the recommended alternate. G:\Utilities\Rates\20150914 UC Water and Sewer Rates.docx Water Rate Analysis Description 2014 Projected 2014 Actual 2015 Projected 2016 Budgeted 2017 2018 2019 2020 2021 2022 2023 2024 2025 1 Water Demand(MG) 902.56 815.26 870.00 892.29 914.58 937.48 960.98 985.08 1,009.78 1,035.08 1,060.99 1,087.50 1,114.61 1 2 Estimated Growth 2.5% 1.4% 2.0% 2.6% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2 3 Projected Residential Accounts(excluding association irrigation) 6,860 6,784 6,920 7,095 7,270 7,450 7,635 7,825 8,020 8,220 8,425 8,635 8,850 3 Demands and 4 Connections Commercial Accounts(excluding irrigation) 130 132 135 140 145 150 155 160 165 170 175 180 185 4 5 Institutional/Industrial Accounts(excluding irrigation) 50 49 50 50 50 50 50 50 50 50 50 50 50 5 6 Irrigation-only Accounts(excluding single family) 115 113 115 120 125 130 135 140 145 150 155 160 165 6 7 Water Fixed Charge($/account/quarter) $ 11.58 $ 11.58 $ 12.16 3 12.28 3 12 77 3 13 28 3 13.82 3 14 37 5 14 94 3 15 54 3 16 16 3 16 81 $ 17 43 7 8 Residential Tier 1 (0-12,000 gal) $ 1.05 $ 1.05 $ 1.10 3 1.11 3 1 16 3 1 20 5 1 25 5 1.30 5 1 35 3 1 41 5 1.46 3 1.52 $ 1 58 8 9 Residential Tier 2(13,000-24,000 gal) $ 1.28 $ 1.28 $ 1.35 3 1.39 3 1.44 5 1 50 3 1 56 3 1.62 3 1 59 3 1 76 3 1 83 5 1.90 3 1 98 9 10 Residential Tier 3(25,000-48,000 gal) $ 1.62 $ 1.62 $ 1.70 3 1 74 5 1.81 3 1 83 3 1.95 3 2 03 $ 2 11 $ 2 20 3 2 23 3 2.38 3 2.47 10 11 Residential Tier 4(>48,000 gal) $ 2.21 $ 2.21 $ 2.32 5 2.60 $ 2.71 5 2.82 3 2.93 3 3.05 3 3.17 $ 3 29 3 3.43 3 3 56 5 3.71 11 12 Irrigation Meters(Multi Fam/Comm/Ind/lnst) $ 2.32 $ 2.32 $ 2.44 3 2.60 3 2.71 3 2 32 3 2.93 3 3.05 $ 3 17 3 3 29 $ 3.43 3 3 56 3 3.71 12 13 Comm/Ind/Inst Tier 1 (0-100,000 gal) $ 1.22 $ 1.22 $ 1.28 $ 1 29 3 1.34 3 1 40 $ 1 45 $ 1.51 3 1 57 3 1 64 3 1 70 3 1 77 3 1 84 13 14 Proposed Rates Comm/Ind/Inst Tier 2(101,000-200,000 gal) $ 1.51 $ 1.51 $ 1.59 3 1 62 5 1.68 3 1 75 3 1 82 3 1 89 $ 1 97 3 2.04 3 2.13 3 2.21 $ 2.30 14 15 and Tiers Comm/Ind/Inst Tier 3(201,000-300,000 gal) $ 1.85 $ 1.85 $ 1.94 5 2.02 5 2.10 3 2 18 3 2.27 $ 2.36 3 2.46 3 2.56 3 2 66 3 2.76 5 2 88 15 16 Comm/Ind/Inst Tier 4(>300,000 gal) $ 2.32 $ 2.32 $ 2.44 3 2.60 $ 2 71 3 2 82 3 2 93 3 3 05 5 3 17 3 3 29 3 3 43 3 3 56 3 3 71 16 17 Surcharge-Single Family 5/8"($/account) $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 $ 8.80 17 18 Surcharge-Multi Family 5/8"($/account) $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 $ 6.80 18 19 Surcharge-1"($/account) $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 $ 13.50 19 20 Surcharge-1.5"($/account) $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 $ 28.00 20 21 Meter Maintenance-1"($/account/quarter) $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 $ 6.25 21 22 Meter Maintenance-1.5"($/account/quarter) $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 $ 11.25 22 23 601 49400 Water Utility Fund Beginning Balance $ 5,040,408.25 $ 5,608,503.89 $ 5,858,124.58 $ 6,307,641.78 $ 6,468,692.82 $ 7,018,897.67 $ 6,172,890.36 $ 5,484,242.55 $ 4,923,488.35 $ 4,706,450.55 $ 4,562,868.24 $ 4,580,325.90 23 24 Calculated Fixed Charges $ 331,462.53 $ 351,180.80 $ 363,780.99 $ 387,784.15 $ 413,391 19 $ 440,702.64 $ 469,824.93 $ 500,870.73 $ 533,959.28 $ 569.216.76 $ 606,77666 $ 646,780.22 24 25 Residential Tier 1 (0-12,000 gal) $ 53,676.76 $ 62,113.92 $ 100,896.58 $ 107,520.62 $ 114,590.07 $ 122,133.02 $ 130,179.24 $ 138,760.26 $ 147,909.44 $ 157,662.10 $ 168,055.64 $ 179,129.60 25 26 Residential Tier 2(13,000-24,000 gal) $ 292,393.40 $ 288,633.20 $ 230,170.31 $ 245,281.42 $ 261,408.59 $ 278,615.95 $ 296,971.39 $ 316,546.83 $ 337,418.40 $ 359,666.67 $ 383,376.92 $ 408,639.40 26 27 Residential Tier 3(25,000-48,000 gal) $ 198,065.21 $ 243,888.48 $ 129,470.80 $ 137,970.80 $ 147,042.33 $ 156,721.47 $ 167,046.41 $ 178,057.59 $ 189,797.85 $ 202,312.50 $ 215,649.52 $ 229,859.66 27 28 Residential Tier 4(>48,000 gal) $ 361,486.88 $ 240,373.12 $ 432,456.13 $ 460,847.68 $ 491,148.25 $ 523,478.33 $ 557,965.51 $ 594,744.89 $ 633,959.49 $ 675,760.71 $ 720,308.78 $ 767,773.25 28 29 Irrigation Meters(Multi Fam/Comm/Ind/Inst) $ 255,200.00 $ 244,000.00 $ 299,449.22 $ 311,427.19 $ 323,884.28 $ 336,839.65 $ 350,313.23 $ 364,325.76 $ 378,898.79 $ 394,054.74 $ 409,816.93 $ 426,209.61 29 30 Revenue Comm/Ind/Inst Tier 1 (0-100,000 gal) $ 17,293.65 $ 18,233.60 $ 18,569.78 $ 19,820.80 $ 21,142.18 $ 22,537.57 $ 24,010.75 $ 25,565.74 $ 27,206.70 $ 28,938.03 $ 30,764.35 $ 32,690.46 30 31 Comm/Ind/Inst Tier 2(101,000-200,000 gal) $ 20,998.66 $ 21,444.09 $ 22,291.10 $ 23,792.82 $ 25,379.01 $ 27,054.02 $ 28,822.43 $ 30,689.03 $ 32,658.84 $ 34,737.12 $ 36,929.42 $ 39,241.53 31 32 Comm/Ind/Inst Tier 3(201,000-300,000 gal) $ 20,514.82 $ 18,886.28 $ 19,773.38 $ 21,105.48 $ 22,512.51 $ 23,998.33 $ 25,567.01 $ 27,222.77 $ 28,970.10 $ 30,813.65 $ 32,758.33 $ 34,809.29 32 33 Comm/Ind/Inst Tier 4(>300,000 gal) $ 146,664.00 $ 154,867.20 $ 168,494.92 $ 179,846.15 $ 191,835.90 $ 204,497.07 $ 217,864.19 $ 231,973.49 $ 246,862.95 $ 262,572.41 $ 279,143.65 $ 296,620.47 33 34 Calc.Meter Maintenance-1"(inc.3%/year) $ 18,900.00 $ 19,350.00 $ 19,930.50 $ 20,528.42 $ 21,144.27 $ 21,778.60 $ 22,431.95 $ 23,104.91 $ 23,798.06 $ 24,512.00 $ 25,247.36 $ 26,004.78 34 35 Calc.Meter Maintenance-1.5"(inc.3%/year) $ 9,315.00 $ 9,450.00 $ 9,733.50 $ 10,025.51 $ 10,326.27 $ 10,636.06 $ 10,955.14 $ 11,283.79 $ 11,622.31 $ 11,970.98 $ 12,330.11 $ 12,700.01 35 36 Misc Water Revenues(antenna,interest,new meter sales) $ 240,500.00 $ 245,500.00 $ 245,500.00 $ 263,500.00 $ 265,300.00 $ 267,100.00 $ 268,900.00 $ 270,700.00 $ 272,500.00 $ 274,300.00 $ 276,100.00 $ 277,900.00 36 37 Total Usage Revenue(excluding surcharge) $ 1,966,470.89 $ 1,883,897.00 $ 1,917,920.69 $ 2,060,517.20 $ 2,189,451.03 $ 2,309,104.85 $ 2,436,092.70 $ 2,570,852.19 $ 2,713,845.80 $ 2,865,562.20 $ 3,026,517.68 $ 3,197,257.67 $ 3,378,358.27 37 38 100's-Salaries and Benefits(4%)(add 2 pos.in 2019) $ 443,300.00 $ 452,813.00 $ 449,100.00 $ 495,800.00 $ 515,700.00 $ 536,400.00 $ 737,900.00 $ 767,500.00 $ 798,200.00 $ 830,200.00 $ 863,500.00 $ 898,100.00 $ 934,100.00 38 39 200's-Office Materials and Supplies $ 24,600.00 $ 28,499.00 $ 24,600.00 $ 34,700.00 $ 35,800.00 $ 36,900.00 $ 38,100.00 $ 39,300.00 $ 40,500.00 $ 41,800.00 $ 43,100.00 $ 44,400.00 $ 45,800.00 39 40 216.00-Chemicals(tied to pop growth) $ 70,000.00 $ 51,562.00 $ 70,000.00 $ 70,000.00 $ 71,700.00 $ 73,500.00 $ 75,300.00 $ 77,200.00 $ 79,100.00 $ 81,100.00 $ 83,100.00 $ 85,200.00 $ 87,300.00 40 41 220.01-Water Meter Purchases(replacements) $ 40,000.00 $ 13,930.00 $ 50,000.00 $ 60,000.00 $ 61,800.00 $ 63,700.00 $ 65,700.00 $ 67,700.00 $ 69,800.00 $ 71,900.00 $ 74,100.00 $ 76,400.00 $ 78,700.00 41 42 220.02-Water Meter Purchases(new homes) $ 40,000.00 $ 68,837.00 $ 45,000.00 $ 45,000.00 $ 63,000.00 $ 64,800.00 $ 66,600.00 $ 68,400.00 $ 70,200.00 $ 72,000.00 $ 73,800.00 $ 75,600.00 $ 77,400.00 42 43 300's-GIS,Legal,Office,Computer,Eng,Prof Svcs $ 154,700.00 $ 204,889.00 $ 181,700.00 $ 165,900.00 $ 170,900.00 $ 176,100.00 $ 181,400.00 $ 186,900.00 $ 192,600.00 $ 198,400.00 $ 204,400.00 $ 210,600.00 $ 217,000.00 43 44 400's-Training,Conferences,Contracted Repair $ 56,200.00 $ 38,630.00 $ 79,200.00 $ 79,900.00 $ 82,300.00 $ 84,800.00 $ 87,400.00 $ 90,100.00 $ 92,900.00 $ 95,700.00 $ 98,600.00 $ 101,600.00 $ 104,700.00 44 45 500's-Buildings,Inspections,Purchases,Furniture $ 16,600.00 $ 560.00 $ 16,600.00 $ 16,100.00 $ 16,600.00 $ 17,100.00 $ 17,700.00 $ 18,300.00 $ 18,900.00 $ 19,500.00 $ 20,100.00 $ 20,800.00 $ 21,500.00 45 46 Expenses 530.03-CRP of Water Main $ 150,000.00 $ - $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 $ 150,000.00 46 47 530.04-Well and Tower Maintenance(long-term schedule) $ 37,000.00 $ - $ 320,000.00 $ 190,000.00 $ 355,000.00 $ 55,000.00 $ 546,000.00 $ 541,000.00 $ 500,000.00 $ 250,000.00 $ 250,000.00 $ 225,000.00 $ 225,000.00 47 48 710.00-Transfers for Other Improvements $ - $ 4,796.00 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 48 49 Utility Equipment Purchases(from CIP) $ - $ - $ - $ 27,500.00 $ 13,500.00 $ - $ 72,000.00 $ - $ - $ - $ 27,500.00 $ - $ - 49 50 Well and Tower Expenses(combined) $ 264,200.00 $ 282,468.00 $ 282,100.00 $ 276,100.00 $ 284,400.00 $ 292,900,00 $ 301,700.00 $ 310,800.00 $ 320,100.00 $ 329,700.00 $ 339,600.00 $ 349,800.00 $ 360,300.00 50 51 WTP Operating Expenses $ - $ - $ - $ - $ - $ - $ 50,000.00 $ 50,000.00 $ 50,000.00 5 50,000.00 $ 50,000.00 $ 50,000.00 $ 50,000.00 51 52 WTP Debt Service$10,000,000 15 years @ 4.0% $ - $ - $ - $ - $ - $ - $ 684,600.00 $ 684,600.00 $ 684,600.00 $ 684,600.00 $ 684,600.00 $ 684,600.00 $ 684,600.00 52 53 1/2 of Ground Storage Debt Service $ - $ - $ - $ - $ 207,700,00 $ 207,700.00 $ 207,700.00 $ 207,700.00 $ 207,700.00 $ 207,700.00 $ 207,700.00 $ 207,700.00 $ 207,700.00 53 54 Total Expenses $ 1,296,600.00 $ 1,146,984.00 $ 1,668,300.00 $ 1,611,000.00 $ 2,028,400.00 $ 1,758,900.00 $ 3,282,100.00 $ 3,259,500.00 $ 3,274,600.00 $ 3,082,600.00 $ 3,170,100.00 $ 3,179,800.00 $ 3,244,100.00 54 55 Year End Balance(before debt service) $ 5,710,279.14 $ 5,858,124.58 $ 6,307,641.78 $ 6,468,692.82 $ 7,018,897.67 $ 6,172,890.36 $ 5,484,242.55 $ 4,923,488.35 $ 4,706,450.55 $ 4,562,868.24 $ 4,580,325.90 $ 4,714,584.17 55 56 Balance change amount $ 669,870.89 $ 249,620.69 $ 449,517.20 $ 161,051.03 $ 550,204.85 $ (846,007.30) $ (688,647.81) $ (560,754.20) $ (217,037.80) $ (143,582.32) $ 17,457.67 $ 134,258.27 56 57 Balance change% 13.29% 4.45% 7.67% 2.55% 8.51% -12.05% -11.16% -10.22% -4.41% -3.05% 0.38% 2.93% 57 G\Utiiities\Rates\Water Rates 20150914 Alt 8 new RES tiers 1%cap July 31, 2008 0 Dear Public Water Supplier: RE: WATER CONSERVATION RATE REQUIREMENT Department of Natural Resources(DNR) records indicate that ROSEMOUNT,CITY OF has a water supply system that serves more than 1,000 residents. This letter is intended to inform you of the 2008 amendment of Minnesota Statutes, section 103G.291,that requires all public water suppliers serving more than 1,000 people to adopt a conservation rate structure: subd.4.Conservation rate structure required.(a)For the purposes of this section,"conservation rate structure"means a rate structure that encourages conservation and may include increasing block rates,seasonal rates,time of use rates,individualized goal rates,or excess use rates.The rate structure must consider each residential unit as an individual user in multiple-family dwellings. (b)To encourage conservation,a public water supplier serving more than 1,000 people in the metropolitan area,as defined in section 473.121,subdivision 2,shall use a conservation rate structure by January 1,2010.All remaining public water suppliers serving more than 1,000 people shall use a conservation rate structure by January 1,2013. (c)A public water supplier without the proper measuring equipment to track the amount of water used by its users,as of the effective date of this act,is exempt from this subdivision and the conservation rate structure requirement under subdivision 3,paragraph(c). In addition,Minnesota Statues, section 103G.291, was further amended (underlined portion)to read: Subd.3.Water supply plans; demand reduction.(c)Public water suppliers serving more than 1,000 people ' must employ water use demand reduction measures,including a conservation rate structure,as defined in subdivision 4,paragraph(a),unless exempted under subdivision 4,paragraph(c),before requesting approval from the commissioner of health under section 144.383,paragraph(a),to construct a public water supply well or requesting an increase in the authorized volume of appropriation. Demand reduction measures must include evaluation of conservation rate structures and a public education program that may include a toilet and showerhead retrofit program. Therefore, effective immediately, public water suppliers serving more than 1,000 residents will need to adopt a conservation rate structure before requesting well construction approval for a public water supply well or before requesting an increase in permitted volume for their water appropriation permit. A conservation rate is defined as one that encourages conservation such as an increasing block rate, seasonal rate,time of use rate, individualized goal rate, or excess use rate.These conservation rate structures are described on the DNR web page at: files.dnr.state.inn.us/waters/watermgmt_section/appropriations/conservation rate_structures.pdf Please note that rates that include a basic block volume that exceeds the average household use for the community will not be considered a conservation rate. Suppliers will need to statistically justify their block structure. If you have any questions, please feel free to contact Joe Richter at(651)259-5703, ioesichter@dnr.state.mn.us dnr.state.mn.us or the Area Hydrologist for the county in which your community is located: files.dnr.state.mn.us/waters/area_hydros.pdf. Conservation Rates Minnesota Statutes,section 103G.291,was amended in 2008 to include a requirement for public water suppliers serving more than 1,000 people to adopt a water rate structure that encourages conservation: Minnesota Statutes, section 103G.291,subd.4.Conservation rate structure required.(a)For the purposes of this section,"conservation rate structure"means a rate structure that encourages conservation and may include increasing block rates,seasonal rates,time of use rates, individualized goal rates,or excess use rates.The rate structure must consider each residential unit as an individual user in multiple-family dwellings. (b)To encourage conservation,a public water supplier serving more than 1,000 people in the metropolitan area, as defined in section 473.121,subdivision 2,shall use a conservation rate structure by January 1,2010.All remaining public water suppliers serving more than 1,000 people shall use a conservation rate structure by January 1,2013. (c)A public water supplier without the proper measuring equipment to track the amount of water used by its users,as of the effective date of this act,is exempt from this subdivision and the conservation rate structure requirement under subdivision 3,paragraph(c). In addition,Minnesota Statues, section 103G.291, was further amended to read: Subd.3.Water supply plans;demand reduction.(c)Public water suppliers serving more than 1,000 people must employ water use demand reduction measures, including a conservation rate structure,as defined in subdivision 4,paragraph(a),unless exempted under subdivision 4,paragraph(c),before requesting approval from the commissioner of health under section 144.383,paragraph(a),to construct a public water supply well or requesting an increase in the authorized volume of appropriation.Demand reduction measures must include evaluation of conservation rate structures and a public education program that may include a toilet and showerhead retrofit program. Public water suppliers serving more than 1,000 residents will need to adopt a conservation rate structure before requesting well construction approval for a public water supply well or before requesting an increase in permitted volume for their water appropriation permit. Examples of Conservation Rates: Below are examples of rate structures that encourage conservation. Many variations and combinations of these examples are possible. NOTE: Rate structures often include a service charge(base rate)and a volume based charge. Service charges may cover fixed costs(capital improvements)and the volume charge is often for operation and maintenance costs. Volume charges usually use units of 1,000 gallons or 100 cubic feet(748 gallons). Increasing Block Rates: Cost per unit increases as water use increases within specified"blocks"or volumes.The increase in cost between each block should be significant enough(25%or more and 50% between the last two steps)to encourage conservation. Example: 0-6,000 gallons=$2.50/1000 gallons. 6,000-12,000 gallons=$3.15/1000 gallons. 12,000-24,000 gallons=$4.00/1000 gallons. Above 24,000 gallons=$6.00/1000 gallons. Seasonal Rates: The rate per unit increases in the summer to encourage the efficient use of water during peak demand periods caused by outdoor water uses. Seasonal rates can take the form of a surcharge added to the normal rate or a separate fee schedule for winter and summer periods. Example: Surcharge method- $1.00/1000 gallons is added on top of the regular fee schedule for all water use between May 1 and October 1. Page I Conservation Rates Page 2 Time of Use Rates: Water rates are higher at times of the day when water use demands are high. This rate requires specialized meters that can monitor water use during specified segments of time, for instance, every 15 minutes. Example: Water rates are reduced by $0.75 for customers that agree not to use water for certain purposes or over a set volume of water during certain times of the day or periods of high water demands. Individualized Goal Rate(Water Budget Rate): A rate with tailored allocations developed for each customer. The rates increase as the allocation is used or exceeded by the customer. The allocation is generally based upon winter or January use. Example: A family of four used 6,200 gallons in January. Summer use is higher than January use so a factor is applied to determine a summer allocation(1.5 x 6,200 gallons=9,300 gallons). 0-6,000 gallons=$2.50/1000 gallons. 6,000-9,300 gallons=$2.75/1000 gallons. 9,300-18,600 gallons=$4.00/1000 gallons. (Allocation is exceeded.) Above 18,600 gallons=$6.00/1000 gallons. Excess Use Rates: Cost per unit increases greatly above an established level in order to trigger a strong price signal that discourages excessive use.This rate is similar to an increasing block rate but with much higher charges for the larger volume blocks. Example: 0-6,000 gallons=$2.50/1000 gallons 6,000-12,000 gallons=$3.15/1000 gallons 12,000-24,000 gallons=$5.00/1000 gallons (Excessive Use Rate) Above 24,000 gallons=$7.50/1000 gallons (Excessive Use Rate) Multiple—Family Dwellings: Total water use in a multiple-family dwelling, which has only one water meter for the entire dwelling, may exceed that of a single-family dwelling. The statute does not require individual water meters for each residential unit within a multiple-family dwelling; however,the required conservation rate at which the multiple-family dwelling's water use is billed must consider the number of residential units within that multiple-family dwelling. Example: A four-plex uses a total of 18,000 gallons per month or approximately 4,500 gallons per residential unit. Water use for each residential unit falls within the first block(0-6,000 gallons)of the above Excess Use Rate example. A rate of$2.50/1000 gallons would apply up to a total use of 24,000 gallons for the multiple-family dwelling. Thereafter, the rate increases according to the rate schedule, always considering each residential unit as an individual user. Non-conservation rate examples: Declining(Decreasing)Block Rates: The cost per unit of water(cubic foot or gallon)decreases as the water use increases beyond the basic block. This rate structure provides no incentive to conserve because the cost of water per unit decreases with increased use. Flat Rates: A set fee allows the use of an indefinite amount of water. This rate structure is used where water is unmetered and provides no incentive to conserve water because cost is unrelated to volume used. Uniform Rates: The cost per unit is the same regardless of the volume used. This rate structure is considered conservation neutral. Service Charge (Base Rate)that includes a Minimum Water Volume: The inclusion of a minimum volume of water in the service charge(base rate)discourages conservation especially if the minimum volume exceeds average customer usage. Conservation Rates 10-13-08 pdf