City seeks to change tiered water system

By Valerie Shelton, Editor

 

In 2015, cities across the state were mandated to make drastic conservation measures—in Clovis a reduction of water use by 36 percent—due to the severe California drought. During the same time, the tiered system for billing water costs to residential and commercial users came under scrutiny. The mantra was cities could not just charge more in the higher tiers as a way to get them to conserve. Unindexed Document

Though the City of Clovis long had a tiered rate structure, with that structure coming under fire, city staff decided to review the rate structure with the help of a consulting firm to make sure it complies with proposition 218 requirements that state tiered water rates must be tied to the cost of service.

After some analysis, staff is recommending the city change the tiered system to better reflect the city’s actual cost—which means an increase in the fixed portion of the bill and a different tiered structure where those in higher tiers are only being charged according to the extra expense that excess water actually imposes on the city’s infrastructure. While the proposed new structure is revenue neutral from a city standpoint, since the fixed rate is increasing this cane mean higher bills for some low water users.

At a Feb. 16 city council meeting, Alison Lechowicz, a financial analyst from Bartle Wells Associates, presented the new rate structure being recommended.

The current structure, Lechowicz explained, only charges a fixed rate of $16.80 which does not meet all the fixed costs covered by the city so that the water can get to each user’s tap. To cover the city’s fixed costs, it is proposed that the city increase the fixed rate to $21.22.

As for the tiered system, residential users currently receive the first 10,000 gallons free of charge. After that initial tier, three higher tiers come into play. Under the second tier, which is 10,000 to 35,000 gallons, users are charged $1.71 per 1,000 gallons; in tier three, 35,000 to 70,000 gallons, users are charged $2.14 per 1,000 gallons; and in tier four, over 70,000 gallons, users are charged $2.57 per 1,000 gallons.

This structure, Lechowicz said, does not work as those using under 10,000 gallons have no reason to conserve at all. It also doesn’t best meet the typical consumers who do fall into tier two. Instead, the new structure being proposed eliminates the 0-10,000 gallons free and tier one is considered up to 23,000 gallons at a charge of 86 cents per 1,000 gallons under normal conditions or a charge of $1.04 per 1,000 gallons during drought conditions. Tier two would be 23,000 to 40,000 gallons, at a cost of $1.45 per 1,000 gallons during normal conditions or a cost of $2.10 per 1,000 gallons during drought conditions. A third tier would then be anything above 40,000 gallons, with costs being $1.78 per 1,000 gallons during normal conditions or $2.66 per 1,000 gallons during drought conditions.

A new structure is also being proposed for commercial users (see chart).

Lechowicz said increasing the fixed costs and changing the tiered structure not only meets the state’s regulations but actually works out better for the city’s water users, the majority of which will fall within tier one.

“We really had to look at each type of cost the city incurs to provide water service and how we are going to recover each part of the cost from customers,” Lechowicz said. “As a second step we had to think about whether these costs are fixed costs or are these costs related to each unit of water that passes through the system. What we are proposing is we found that the city’s fixed costs are higher than the current rates recover so instead of the currently residential bimonthly fixed charge of $16.80, we are proposing to increase it to $21.22 and that really recovers the cost of keeping infrastructure online ready to go as soon as that customer turns on the tap, water is ready to come out. There is tremendous cost for maintaining that infrastructure for customers.

“We’re also proposing to eliminate the current water allowance. Customers are allowed to use up to 10,000 gallons bimonthly in their base minimum charge before the metered water rate comes into effect and a more fair way to do it is to charge customers even at low levels of use per gallon because right now if a customer uses 8,000 gallons they are really paying a monthly fee for 10,000 and that doesn’t encourage that 8,000 gallon user to reduce water consumption further, no not really. We proposed to adjust the tiered rate structure to better account for the current consumption patterns so the peak users are assigned to the top tier, the most expensive tier, mid-level usage would be at the second tier and a base level of average use would be the cheapest tier. We also looked at drought water usage versus normal year water usage and we would propose that the city adopt the drought rate and if water conditions approve, the city can transition to the non-drought rate schedule.”

If approved after public notice and the public hearing process, the rates would not be able to go up by more than three percent annually, at the discretion of the council. That three percent optional annual increase is similar to the optional annual increase amounts for wastewater and garbage rates. The council has traditionally chosen not to increase unless needed and have even instead approved decreases in these areas.

In addition to the new rate structure, staff also recommends increases certain fees. Currently, the fee for meter testing is $60 and it is recommended it increase to $84. The after hours turn on fee is currently $125, which they propose to increase to $174. The same day turn on for water shutoffs is currently $50 and that also is recommended to be increased to $60.

While council members understand the new structure is needed the meet state regulations, some said they were concerned about the impact the new structure would have on those using the least amount, who are used to the low fixed rate and the $0 cost for those first 10,000 gallons. While that only accounts for a small percentage of the city’s consumers, Mayor Pro Tem Bob Whalen said it is significant to them, especially since the last set of increases in 2010, 2011 and 2012 were large increases.

“I know we haven’t had an increase since 2012, but the one before that was a bit of a doozy,” Whalen said. “If I recall, it was January of 2010 there was a 20 percent increase. In July of 2010, there was an additional 15 percent increase. In July of 2011, there was a 15 percent increase and in July of 2012, there was another 5 percent increase…I think my hope was perhaps that would be enough for a very long time and that we would not have to have another increase.”

Although those increases in 2010, 2011 and 2012 were large, city staff noted that those were the first increases since 1993.

According to Lechowicz, the city of Clovis water rates under both the old and new structures are low compared to neighboring cities.

The council made no decisions at the Feb. 16, but set a public hearing for April 11, 2016. As part of the process, if 50 percent plus one of constituents object to the new water rates they will not be approved and the city would have to go back to the drawing board.