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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 11/19/2002 - ITEMS RELATING TO UTILITY RATES FOR 2003 AGENDA ITEM SUMMARY ITEM NUMBER: 35 A-B DATE: November 19, 2002 FORT COLLINS CITY COUNCIL FROM: Michael B. Smith Wendy Williams SUBJECT : Items Relating to Utility Rates for 2003. RECOMMENDATION: Staff recommends adoption of the Ordinances on Second Reading. EXECUTIVE SUMMARY: A. Second Reading of Ordinance No. 167, 2002, Amending Chapter 26 Article VII, Division 4 of the Code of the City Relating to Wastewater Fees. B. Second Reading of Ordinance No. 168, 2002, Amending Chapter 26, Article VII, Division 2 of the City Code Relating to Stormwater Fees. Wastewater Rates Ordinance No. 167,2002,which was unanimously adopted on First Reading on November 5,2002, increases the City's wastewater rates by 2%. The increase is needed to fund the operations and maintenance of the City's wastewater system and to finance capital improvements.It is being applied "across the board"for all customers. A typical single-family residential customer's monthly bill will increase from $16.29 to $16.61 (32 cents per month). This Ordinance also adopts several housekeeping changes to standardize verbiage regarding base monthly charges and to delete references to obsolete"Category I"customers. The changes will become effective on billings issued on or after January 1,2003, if said billings are calculated based on flat rates or winter quarter water use. The changes will become effective on billings issued for meter readings on or after January 1, 2003, if said billings are calculated based on metered water use or measured sewage flow. Stormwater Rates This Ordinance, which was adopted on First Reading on November 5, 2002, increases the City's stormwater rates 10%"across the board"for all customers. The 10% increase is consistent with both the 2002-2003 budget and the 2001 Stormwater Financing Plan adopted by City Council Resolution 2001-93. The increase is necessary to fund the operations and maintenance of the City's stormwater system, to pay debt service and to accelerate the citywide capital improvements program. The increase is to be effective on billings issued on or after January 1, 2003. AGENDA ITEM SUMMARY ITEM NUMBER: 33 A-C FORT COLLINS CITY COUNCIL DATE: November 5, 2002STAFF• Michael B. Smith Wendy Williams SUBJECT: Items Relating to Utility Rates for 2003. 1 RECOMMENDATION: I Staff recommends adoption o he Ordi nces adi I FINANCIAL IMPACT: The Water Rate Ordinance is projected to increase annual Water Fund operating revenues by approximately 6% assuming a 15% projected reduction in consumption. Wastewater Fund operating revenues are project o in a by rai ge Fund operating revenues are projected to increase 10%. I• EXECUTIVE SUMMARY: A. First Reading of Ordinance o. 166 002, Amen din Cha ter 26, Article III, Division 4 of the Code of the City oCeN 1 s Re 'n to a at and Charges for Water. B. First Reading of Ordin 2 ending apter 26 Article VII,Division 4 of the Code of the City Relating to Wastewater Fees. C. First Reading of Ordinance No. 168, 2002, Amending Chapter 26, Article VII, Division 2 of the City Code Relating to Stormwater Fees. Water Rates The proposed water rate structures vary by customer class but are all designed to encourage conservation. The customer impacts vary within each customer category based on relative levels of water usage. In general, customers with low use will see modest increases (or in some cases reductions) in their total water bills while the larger users in each customer class will experience a bigger percentage increase. Customer conservation efforts will help to moderate the rate impacts at all levels of use. { Ordinance No. 166,2002, is based on the direction received from City Council at the September 10 and October 22, 2002, study sessions. The water rates are designed based on the assumption that DATE: November 5, 2002 2 ITEM NUMBER: 33 A-C 2003 water use will decrease 15%system wide for all customer classes. If consumption drops to the projected level, the proposed rates will provide a 6% increase in Water Fund revenues. The Ordinance provides for increasing step rates for single-family and duplex customers and seasonal rates for multi-family and commercial customers. It is difficult to predict customers'response to the Utilities'conservation campaign that combines the new rates, education and water restrictions. If reduction in usage is less than the 15% target revenues will increase more than the 6% required. If reduction is more than 15%, there will be a shortfall of revenues in the Water Fund. In either case, mid-year rate changes may be necessary in 2003. The construction rate and mis onWan V20a_ rant water rental and service charges have also been update o refled changes will become effective on billings issued for meter r ings ond on billings issued on or after January 1,2003,for unmeteredates an existing Code provision regarding an agreed upon charge for past meter installation work that Colorado State University pays to the City as a contractual matter due to the fact that the charge is a matter of contract. Wastewater Rates As proposed in the 2002-2003 budget, Ordinance No. 167, 2002, increases the City's wastewater rates by 2%.The increase is needed to fund the operations and maintenance of the City's wastewater system and to finance capital iCalcus e b ' ads the board" for all customers. A typical single-family resideo er's t y b w)al btease from$16.29 to $16.61 (32 cents per month). This is bas m av 56gns per month winter quarter water consumption. This Ordinancp a sekee changes to standardize verbiage regarding base monthly charges and to delete references to obsolete "Category I" customers. The proposed changes will become effective on billings issued on or after January 1,2003,if said billings are calculated based on flat rates or winter quarter water use. The proposed changes will become effective on billings issued for meter readings on or after January 1, 2003, if said billings are calculated based on metered water use or measured sewage flow. The Water Board recommended approval of the 2002-2003 wastewater rate plan during its review of the 2002-2003 budget in the fall of 2001. Stormwater Rates If adopted by City Council, the sto r will i e 10% "across the board" for all customers. The 10%increase is consistent with both the 2002-2003 budget and the 2001 Stormwater Financing Plan adopted by City Council Resolution 2001-93. The increase is necessary to fund the operations and maintenance of the City's stormwater system, to pay debt service and to accelerate the citywide capital improvements program. A typical single-family residential customer's monthly bill will increase from $11.79 to $12.96 ($1.17 per month). The typical bill is based on an 8600 square foot lot with light run off. The proposed increase is to be effective on billings issued on or after January 1, 2003. The Water Board approved the 2002-2003 stormwater rate plan during its review of the 2002-2003 budget in the fall of 2001. Electric Rates No changes are proposed to the electric rates for 2003. DATE: November 5, 2002 3 ITEM NUMBER: 33 A-C Impact on Average Residential Customer The table below summarizes the impact of the proposed rate adjustments on a typical single-family residential customer's monthly utility bill. The table shows rate impacts on median customers who both meet and fail to meet the targeted 15% reduction in water use. In contrast to the 2% and 10% across the board increases for all wastewater and stormwater customers, water customers who use more water than the median customer specified in this table will experience a larger percentage increase than the median. Likewise, water customers who use less water than the median customer will experience a smaller percentage increase(or in some cases even a reduction)in their water bills. Typical Residential Customer 2002 i,� 'p, "J e-t,3 15% Reduction in Water Use Rates atl �1G t;e11 R$ ismr 'sueI+✓ n Proposed $i J;x :, 2003 Increase Increase Watery (SOth percentile 117,131 gal/yr) $ _ $29.23 $0.10 0.3% ,� fi'Wastewater , :. (5456 gal./mo.WQC) $16.29 � Electric (700 kWh per month) $43 34 $43.34 $0.00 0.0% Stormwater (8,600 sq.ft. lot,light runoff) _ _ '" i; ?fi $12.96 $1.17 10.0% Total Monthly Utility Bill 100.55 , $102.14 $1.59 Note:Water,Wastewater and Etc'AL calculati s inclu 6 payment in eu of taxes. BACKGROUND- Water Rates Single-family Residential Customers A five-step increasing block rate is proposed for the single-family residential customers. It is projected that the increasing block rate will encourage conservation by sending a strong price signal to the customer to reduce water use. The proposed rate lowers the fixed monthly charge and increases the variable volume in is from the fixed fees to the increasing volume charges,m t of the a im t ill ex nced in the summer months and customers will see little increa in the ter m The foll ing table summarizes the changes and the projected impacts on re DATE: November 5, 2002 4 ITEM NUMBER: 33 A-C Single-family Gallons per Month Mo. Charge* % Increase above Step 1 Current Rate Fixed Charge per Month $14.69 Charge per 1000 Gallons(all gal. used) $1.31 Proposed Rate Fixed Charge per Month $12.00 Step Charge per 1000 Gallons: 1 0-7,000 $1.68 2 7,0 000 _...$22A, 33% 3 001-2 , 11.8 67% 4 001-33, 0 3.36 100% 5 A1 AL $4.20 150% * 6%Payment in lieu of taxes is added to the water rates per City Code 26-118 (c). 6% Increased revenue with 15% reduction. 26.8 % Increased revenue with no reduction. The annual impacts on single-family residential customers vary based on water use and are summarized in the table below. The table shows rate impacts for customers at the 25th, 50th and 75th percentile of use for cust rs ePa yrelon the targeted 15% reduction in water use. For computation p oses it assu of 15% is obtained during the six summer wateringmonths 7lings f M t V 15% Reduction in Use 10I i Single Annual Annual ,;" Gallons Annual $ % Family Gallons Cost with 15% Cost Change Change Customer 2002 Reduction Proposed (Percentile) Water i, in Use 2003 Rat Rate 25th 70,952 $285 60,309 $263.50 ($21.88) -7.7% 50th 117,131 $349.52 99,561 $350.74 $1.22 0.3% 75th 172,284 $426.09 , :, ;_, 146,441 $473.45 $47.36 11.1% Note: Calculations include 6% payment in lieu of taxes. DATE: November 5, 2002 5 ITEM NUMBER: 33 A-C Duplex Customers The duplex rate has five steps. The charges for each step are the same as for the proposed single- family residential rate with the exception that the first step is for all gallons used between zero and 9,000 gallons. This level of usage represents the same proportion of customer billings in the duplex rate class as zero to 7,000 gallons is for the single-family residential class. Duplex 7 7�� Month Mo. Charge* % Increase above Step 1 Current Rate Fixed Charge per Month $17.32 Charge per 1000 Gallons (all gal.used) $1.31 Proposed Rate Fixed Charge per Month $14. Step Charge per 1000 Gallons: 1 0-9,000 $1.68 2 9,001-13,000 $2.24 33% 3 13,001-20,000 $2.80 67% 4 20,001-33,000 $3.36 100% 5 Above 33,000 $4.20 150% * 6% Payment in lieu of a h peKity Code 26-118 (c). 5.6 % Increased revenu ith 1503teduc n 26.9 % Increased reven with no duct' Flat Rate Customers The flat rate for residential customers (single-family and duplex) will be increased 6%. There are approximately 2000 residential flat rate customers remaining on the system and it is anticipated that the vast majority of these will be converted to meters before the 2003 lawn watering season. Multi-Family Residential Customers A seasonal rate is proposed m ec u m e oposed rate reduces the fixed monthly charge and increase tevolm 0 gJr s. The volume charge will vary by season, increasing 25% in n onths, through October. The proposed multi-family rate follows: Multi Family Current 2002 Rate* Proposed 2003 Rate* Base Charge per account $14.69 $12.00 Base Charge per additional dwelling unit $ 5.06 $ 4.00 Winter Charge per 1000 gallons (Nov.-Apr.) $1.310 $1.742 Summer Charge per 1000 gallons (May-Oct) $1.310 $ 2.178 * 6% Payment in lieu of taxes is added to the water rates per City Code 26-118 (c). 6.0 % Increased revenue with 15% reduction. 18.2 % Increased revenue with no reduction. The irrigation patterns of multi-family customers vary because some premises have separate commercial irrigation taps while others customers irrigate using the building's water service. With the seasonal rate structure, customers with a summer irrigation component will experience the larger increases in their total water costs since a larger percentage of their use will be at the DATE: November 5, 2002 6 ITEM NUMBER: 33 A-C I ihigher summer quantity charge. Multi-family customers with flat usage patterns throughout the i year will experience seasonal shifts in their cost per gallon but the overall annual increase will be less than for customers with heavier summer use. An alternative future way to address the irrigation component of multi-family use could be to set step thresholds at levels based upon each individual customer's account history similar to the way winter quarter consumption is used for wastewater rates. This approach requires additional analysis and is dependent upon reprogramming the customer information system program to perform this option. i Commercial Customers The proposed commercial rates are also structured seasonally with a 25% higher quantity cost per gallon in the six summer months than in the winter. The seasonal rate form was favored by City Council at the October 22, 2002 se The water rates are designedLsedd a ass at c ercial customers will decrease usage 15% in 2003. If consd t ojecte el, the rates will provide a 6% increase in Water Fund revenues. If no reduction in use is achieved the rates will generate a revenue increase of approximately 21%. For all commercial customers, the proposed rate will provide a 25% greater price incentive to conserve during the summer months of May through October. I Commercial customers with higher proportional use during the summer months will experience the largest increases in total co sh e ha4ee stasonal shift in the commercial class may not all be for tcor use, i1may 1ko cl e s al shifts in business activities. Overall increases will be less r com cial t rs who water use does not fluctuate on a seasonal basis or whose grease d ' e er mo The proposed Ordinance retains the conservation step currently in place for commercial customers with less than six inch meters. The conservation quantity charge applies to all gallons used per month in excess of a threshold amount. The threshold amount is set at approximately five times the average use for each meter size. The quantity charge for the conservation step is 43.7% higher than the seasonal quantity charges for water use at less than the threshold amount. This is consistent with current ati i to As recommended for multi f ily cus ers, native ture way to address the irrigation component of commercial use be olds els based upon each individual customer's account history similar to the way winter quarter consumption is used for wastewater rates. This approach requires significant further analysis and depends upon reprogramming the customer information system program to perform this option. The following table displays the proposed seasonal commercial rate changes by meter size. The change in each subclass' fixed base charge is unique to that meter size based on guidelines from the last cost-of-service study. Although the thresholds for each step are unique by meter size, the cost per gallon for each step is consistent across the meter sizes. } DATE: November 5, 2002 7 ITEM NUMBER: 33 A-C Proposed 2003 Rate 2002 Rate Monthly Charge* Commercial Water Rate by Gallons Per Monthly Winter Summer Meter Size Month Charge* November-April May-October 3/4" Meter Base Charge per Account $12.97 $10.64 $10.64 Charge per 1000 Gallons 0-100,000 $1.310 $1.480 $1.850 Charge per 1000 Gallons >I0007007 $1 883 $2.127 $2.659 3.0% Increase with 15% reduction 17.1%o Increase with no reduction 1" Meter Base Charge per AccountK$1.310 1 $29.69 $29.69 Charge per 1000 Gallons $1.480 $1.850 Char a er 1000 Gallons 3 2.127 $2.659 3.3% Increase with 15% reduction 19.5% Increase with no reduction 1-1/2" Meter Base Charge per Account "003 $80.73 $80.73 Charge per 1000 Gallons 480 $1.850 Charge per 1000 Gallons 2.127 $2.659 8.5% Increase with 15% red tion 24.6% Increase with no redu2" Meter Base Char a er Account $121.66 $121.66 Charge per 1000 Gallons 0- $1.310 $1.480 $1.850 1,200,t000 $ Charge per 1000 Gallons >1,2083 $2.127 $2.659 3.0% Increase with 15% redu 18.1% Increase with no red on 3" Meter Base Charge per Account .78 $185.56 $185.56 Charge per 1000 Gallons 0- 10 $1.480 $1.850 1,400,Char a er 1000 Gallons >1,4083 $2.127 $2.659 9.9% Increase with 15% reduction 27.1% Increase with no reduction 4"Meter Base Charge per Account $304.87 $291.31 $291.31 Charge per 1000 Gallons 0- $1.310 $1.480 $1.850 2,500,000 Charge per 1000 Gallons >2,500,000 $1.883 $2.127 $2.659 7.9% Increase with 15% reduction 23.4% Increase with no reduction i DATE: November 5, 2002 8 ITEM NUMBER: 33 A-C i Proposed 2003 Rate 2002 Rate Monthly Charge* i Commercial Water Rate by Gallons Per Monthly Winter Summer Meter Size Month Charge* November-April May-October 6" Meter Base Charge per Account $809.95 $565.1 l $565.11 Charge per 1000 Gallons Ail gallons $l.3 l0 $1.480 $1.850 8.9% Increase with 15% reduction i 23.4% Increase with no reduction 8"Meter Base Charge per Account 8.32 $998.32 Charge per 1000 Gallons Igall $ 0 3hf$1.480 $1.850 7.5% Increase with 15% red ion 20.9% Increase with no reducti i Total Revenue for Commercial Class 6.0% Increase with 15% reduction 21.4% Increase with no reduction * 6% Payment in lieu of taxes is added to the water rates per City Code 26-118 (c). i Board Recommendations The Water Board and Natural Advi y rev ed the water rate proposals prior to changes made after the Sepher d o r 22 stud essions. The rate design that was reviewed by the Boards targe re uction in use. Bot cards endorsed implementation of water conservation rates. Neither Board has reviewed the proposals now before Council that include higher targeted reductions and seasonal rates for the multi-family and commercial i customer classes. As reflected in the attached minutes, Water Board members had concerns that the "drought" rate structures should not be permane a d that-rates should be reviewed annually in order to adjust the rates for normal conditio nce rou p io a as d. The motion adopted by the Board included these conce s. The card' rea The Water Board recommends approval of the proposed war con ion to d that t rates be evaluated on an annual basis, and when the extreme con rtions are over, the steps in the rate structure be adjusted to reflect that." The Natural Resources Advisory Board expressed concerns about the 10% targeted reduction and the original non-tiered commercial rate proposal that was presented. Copies of the minutes from the Water Board and a letter from the NRAB are attached. I I