Agenda - 10-07-2008 - 7c - Laserfiche WebLink

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Mr. Kevin Lindley September 24, 2008 Orange County page 4 y-~ Rate Recommendations Due to the small customer base and the large segment of the customer base that would qualify as low income, the County should consider several alternatives to mitigate the substantial impact on customexs of achieving full revenue sufficiency. These alternatives should include the following: 1. Rate structure modifications that will provide rate relief to low water use customers while providing greater consistency with customer equity and cost of service principles; 2. A phased program of rate adjustments designed to avoid rate shock by moving toward revenue sufficiency during the forecast period; and 3. Alternative strategies to address rate affordability for low income customers. Rate Structure Modifications The current monthly minimum charge of $15.20 requires customers with monthly water usage of 3,000 gallons or less to pap for a level of sewer flows they do not discharge into the Efland System. In general, such monthly minimum charges with minimum allowances were originally designed to ensure a certain level predictable or fixed revenues. Although these monthly minimum charges are still used by many utilities, the national trend is moving toward a more equitable and cost justified type of fixed charge set to recover a level of fixed costs that should be recovered regardless of the level of water usage or wastewater discharged. Since the current monthly minimum charge of X15.20 is greater than the volumetric rate of X4.50 per 1,000 gallons of water usage applied to a customer using the minimum allowance of 3,000 gallons per' month (3 x X4.50 = X13.50), the current rate structure includes an "implied base charge" of X1.70. Any customer with no metered water usage during a month is essentially paying for 3,000 gallons, or X13.50 for water usage the customer is not discharging back into the Efland System. As such, the current rate structure is inequitable to customers with less than. 3,000 gallons of metered water use per month. These low use customers are often low or fixed income families focused on limiting their monthly utility expenses. Based on water billing data from Apri12007 through February 2008 provided by Orange and Alamance Counties, approximately 92 customers, or 45% of the Efland System fell within the 3,000 gallon minimum water usage interval. With an average monthly metered water use by those 92 customers of 1,273 gallons, a substantial portion of the Efland System customers are paying for services they do not receive. To improve customer equity, cost of service, and affordability for low income customers, we recommend implementing a base charge and eliminating the minimum usage allowance. Since a good portion of the current 97 customers with water usage under the 3,000 gallon minimum allowance use less than 3,000 gallons, using the implied $1.70 base charge would result in loss of revenues for the County. As such, we recommend implementing a "revenue neutral" base charge of $5.20 be assessed to all customers regardless of water use. Based on water billing data, this revenue neutral base charge and the current $4.50 volumetric charge per 1,000 gallons assessed for all water usage would provide the same estimated wastewater charge revenues in FY 2008 as the current rate structure. Alternative Rate Program Scenarios Since the Efland System has a small customer base from which to recover costs and its wastewater rates have not increased since 1987, significant rate adjustments are required to fully eliminate the current and anticipated future revenue deficits. To demonstrate the magnitude of the potential