New Utility Rate Ordinance Released - Updated

Rates will go down for the biggest users, up for everyone else.

By Dan Schroeder

The Ogden City Council has a busy agenda for tonight’s meeting, much of it in preparation for the start of a new fiscal year on July 1. And looming large on the agenda is the presentation of the new proposed water rate ordinance and related reports and documents.

The full agenda packet weighs in at 38 megabytes, so I’ve extracted three manageable excerpts for the convenience of those who are following the water rates issue:

• The draft ordinance and a related policy resolution, along with summaries by the council staff;
• The consultants’ report, describing the rate recommendations and the analysis behind them; and
• The appendices to the consultants’ report, showing more details of the analysis. (In this excerpt I’ve removed some pages of graphs which are rather unwieldy and, in my opinion, unnecessary.)

There’s a wealth of fascinating information in these documents, at least for numbers geeks like me. I’ll write about more of these details in a future article. For now, though, let’s just cut straight to the “bottom line” and answer the most obvious question: What’s going to happen to your water bill?

The nominal (proposed) water rate increase for the first year (effective this July 1) is 7.8%, composed of a 5% real increase plus 2.8% for inflation. This will be followed by another 5% increase next year, and a 3% increase the year after next, plus cost-of-living increases (tentatively set at 2.5%) every year.

But the initial 7.8% increase is accompanied by a major restructuring (and simplification) of the water rate system, and any major restructuring inevitably produces winners and losers. Who are the winners, and who are the losers? That is, whose rates will initially increase by more than the nominal 7.8%, and whose will increase less?

The answers are on page 19 (pdf page 20) of the consultants’ report, where you’ll find a table of percentage increases arranged by type of customer and amount of monthly water use. For those who (like me) prefer a more visual representation, I’ve produced this graph of percentage changes for residential customers (click for a larger version):

I apologize for this graph’s complexity, much of which is due to the complexity of the old water rate system. To figure your rate increase, you need to know whether your property is also served by secondary water; if so, look at the purple lines. Otherwise you should look at the blue lines, except during summer (May through October) if your monthly use is above 12,000 gallons; then look at the green lines. Finally, you should choose the dashed line if you’re one of the 7% of residents who has an extra-large one-inch connection, but look at the solid line if you’re among the other 93% of us with 5/8 or 3/4 inch connections. Whew!

The graph’s horizontal axis shows the amount of monthly use. Notice that the scale of this axis becomes more and more compressed as you go to the right. The grid lines go by hundreds up to 1000 gallons, then by thousands up to 10,000, and so on. The median residential indoor use is about 4,000 gallons, while the median use during the summer for those who irrigate with culinary water is about 10,000 gallons.

And now you can see that the “losers” include everyone whose water use is below these median levels, and quite a few of those above. This is because the “base rate,” which you pay even if you use no water at all, is rising by 17% (or almost 20% if you have a 1-inch connection). The “winners,” on the other hand, include those who use a lot of water for summer irrigation, as well as the few whose monthly usage is truly enormous—hundreds of thousands of gallons. Most of these customers will actually see their bills decrease by about 5%.

Don’t pay too much attention to the big purple and blue spikes near the middle of the graph. While these large increases will affect certain customers, they are the results of eliminating some unfair discounts that these customers were getting under the old water rate system.

I’ve also produced a similar graph for commercial water customers, with larger connections (click for a larger version):

Again, you can see that this proposal would shift some of the revenue from the few who use a lot of water onto the many who use less. There are some interesting differences among the various connection sizes, but I won’t take the time to explain them in detail here.

It’s unclear to me whether the selection of “winners” and “losers” in this rate restructuring was mostly accidental or mostly intentional. Nothing in the report indicates that anyone was trying to shift the burden from large water users to small ones, and I never heard anyone state such a goal explicitly during the many meetings I attended. However, the consultants have consistently expressed a preference for higher base rates, in order to produce a more stable revenue stream. And some city council members have pushed for a bigger discount for those who irrigate with culinary water during the summer. That sentiment seemed to drive the council's informal decision, on April 10, among the options put before them.

On the other hand, almost everyone involved in this process has expressed at least some desire to discourage wasteful water use and encourage conservation. That's the fiscally prudent approach for the long term, because it lessens the need to develop new water sources and expand the system. Besides, it only seems fair to charge customers based on their actual water use. The new rate structure would be a step backward in this respect.

Update 5/1/12 7:03 p.m.:  Dan S. is now live-blogging from the City Council Chambers. Click "comments" to follow his real time posts.

Update 5/2/12 7:00 a.m.:  The Standard carries a short Mitch Shaw story this morning, briefly summarizing the probable outcome of last night's meeting:

•  Ogden council to consider new utility rate ordinance to cover water system improvements

Comments, anyone?

Update 5/10/12 9:00 a.m.:  For the benefit of those WCF readers attentively following the water rates revision issue, here's a link to the 5/1/12 Ogden City Council Regular meeting, where the supporting data for the proposed new utility rate ordinance were discussed in minute detail:

• Ogden City Council - May 01 2012