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<br />Proposed Water and Sewer Rate Changes and Increases <br />May 8, 2007 <br />Page 3 <br />Third, our rates and fees should encourage conservation. Conservation can significantly reduce <br />long-term OWASA system costs to our customers by avoiding or deferring the need to develop <br />an additional water source such as Jordan Lake. The estimated capital cost of obtaining water <br />from Jordan Lake is about $40 million. Conservation is why we implemented seasonal water <br />rates for all customers in May, 2002. The increasing block rates proposed for inclividually- <br />metered single-family residential customers will strengthen our pricing signal, especially for <br />non-essential water uses. Increasing block rates will also help offset rate increases and eliminate <br />the seasonal penalty for small volume users. <br />Please see the attached examples of water and sewer bills with increasing block rates and with <br />the current seasonal rates. <br />The seasonal rate structure is proposed to continue for other customers because the increasing <br />block rate structure would not fit or be fair to the variety of commercial, institutional and master- <br />metered multi-family customers who generally do not have irrigation needs. Seasonal rates have <br />also proven to be an effective pricing strategy for reducing peak water demand by non-residential <br />customers. <br />While education and information are an important part of our overall conservation program, an <br />appropriate rate structure is essential to achieve our conservation goals. Increasing block rates <br />for residential customers have proven successful in many other communities and are common <br />where water is scarce. <br />The block rate structure would also more equitably allocate a greater share of water system costs <br />to high-volume residential customers whose demand creates the need for higher system capacity. <br />At the same time, water-wise customers will typically experience lower bill increases than the <br />combined 9.5% rate increase because they will benefit from the lower block rates applicable to <br />consumption under 6,000 gallons per month. <br />Conclusion <br />We look forward to meeting with you later this month and the opportunity to receive your <br />feedback and respond to your questions. <br />Please feel free at any time to contact me (918-3651 or patandmac(cr~,earthlink.net) or Ed Kerwin, <br />our Executive Director, (537-4211 or ekerwin(a~owasa.org) with questions or comments. <br />Sincerely, <br />Michael A. (Mac) Clarke, Chair <br />OWASA Board of Directors <br />