Transcript Water Rates and Rate Structures in Northeastern Illinois Presented by Margaret Schneemann Water Resource Economist Illinois-Indiana Sea Grant University of Illinois Extension Chicago Metropolitan Agency for.

Water Rates and Rate Structures in
Northeastern Illinois
Presented by Margaret Schneemann
Water Resource Economist
Illinois-Indiana Sea Grant
University of Illinois Extension
Chicago Metropolitan Agency for Planning
Conservation-oriented Pricing: Providing
Incentives to Reduce Use
 Goal of conservation-oriented pricing is to charge the
full cost of water service.
 Objectives of full-cost pricing may include:
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Conservation - efficient use of water resources
Infrastructure investment and economic development
Bring long-term supply and demand into balance
Sustainable utilities via revenue recovery and stability
Clear, legal and defensible rates
Importance of Demand Management
Strategies in the NE IL Region
 Demand Growth
 NE IL demand may increase up to 64% by
2050 (Dziegielewski and Chowdhury, 2008)
 Surface Water Supply Limits
 Lake Michigan Supreme Court Decree
 Inland Surface Water
 Minimum Flow requirements
 Contamination Vulnerability
 Deep Bedrock Aquifer
 Falling water table
 Cannot meet future demand scenarios (Illinois
State Water Survey, 2009).
 Shallow Aquifer
 Contamination vulnerability
 Interference drawdown, including stream flow
capture
Source: CMAP, 2008
Water Pricing and Northeastern
Illinois Water Supply Planning
NE IL Water Demand Scenarios: 2005 – 2050
Scenario
Most Resource Intensive
(MRI)
Current Trends (CT)
Less Resource Intensive (LRI)
Source: Dziegielewski and Chowdhury, 2008
Demand
Increase
Real Annual %
Increase in Water
Prices
64.1%
0%
35.8%
0.9%
7.2%
2.5%
 Water pricing is a critical demand management strategy for
meeting increasing regional water demands.
Northeastern Illinois Water Pricing
Guidelines and Regulations
 Sanitary Districts Act, 1889
 The Rivers, Lakes, and Streams Act, 1911
 The Water Authorities Act, 1951
 Supreme Court Consent Decree, 1967
 Level of Lake Michigan Act, 615 ILCS 50/1 et seq.
 Water Use Act, 1983
 Title 17 IL Administrative Code
 The Great Lakes Compact, 2008
Northeastern Illinois
Water/Wastewater Rate Survey
 The 11-county northeastern Illinois regional water
planning area is served by about 420 active water
supply systems (U.S. EPA SDWIS; CMAP, 2009).
 Systems with service populations less than 1,000 and
ancillary systems not included.
 Rate information is collected from websites, local
ordinances, and telephone contacts.
 Result is a sample of 290 water supply systems.
Conservation-oriented Rate Characteristics
Customer Class Price Differentiation
 Price according to user costs imposed on the system
Billing Frequency
 More frequent billing sends stronger conservation signal.
Rate Structure
 AWWA recommends two part tariff, USEPA recommends increasing block,
CUWCC full cost-based, conservation-oriented rates.
Volumetric Charge
 Increasing Rate, Uniform Rate and Peak Pricing (Seasonal Rates) can be
designed to encourage conservation.
Fixed Component of Bill Provide price signal to reduce use
 Fixed charge portion of the bill does not provide a conservation message.
 No more than 30% of the total bill should consist of base charges.
Price Differentiation by Customer Classes
Price According to User Costs Imposed on the System
Rates differentiated by
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Type of Customer
Meter Size
Meter Type
Location
Structural Attributes
Water Source
Real Estate Tax Status
Senior Citizen Status
 45% of systems have one rate class for all customers
 Almost 80% of systems have 1 to 4 rate classes
 6% of systems have over 21 customer classes
Residential Billing Frequency by Water Source
More Frequent Billing Sends Stronger Conservation Signal
Rate Structure: Basic Residential Charge
AWWA Recommends Two Part Rate Structure
Water Rate Structure
Wastewater Rate Structure
Two-part, one block
Total Charge= Base Charge + p1x*
Volumetric, one block
Total Charge = p1x*
Flat
Total Charge = Base Charge
Rate Structure: Volumetric Charges
Price Subsequent Units Consumed Based on Associated Costs
Water Rate Structure
Uniform Rate:
Increasing Block (2 Blocks):
Decreasing Block (2 Blocks):
Flat:
Wastewater Rate Structure
Volumetric Charge = p1x*
Volumetric Charge = p1x1+ p2(x* - x1) where p1 < p2
Volumetric Charge = p1x1+ p2 (x* - x1) where p1 > p2
Volumetric Charge = FC
Rate Structure: Volumetric Charges
Increasing Rate, Uniform Rate, and Peak Pricing can be
Designed to Promote Conservation
Median Volumetric Charges for 1,000 gallons Water in NE IL,
Residential and General Accounts
Rate Structure: Base Charge and Provision
Fixed Charge does not Provide a Conservation Message
Fixed versus Volumetric Share of Water Bill
Base Charge Recommend Maximum 30 percent of Total Bill
Regional conservation potential of non-price conservation programs
 NE IL Average 90 gpcd
 Low Conservation 10 gpcd decrease
 High Conservation 25 gpcd decrease
Source: Dziegielewski and Chowdhury, 2008; CMAP, 2009
Fixed versus Volumetric Share of Water Bill
Water Rates and Rate Structures in
Northeastern Illinois - Conclusions
Pricing Characteristics
 Customer Class Price Differentiation
 Billing Frequency
 Rate Structure
 Volumetric Charge
 Fixed Component
Water Rates and Rate Structures in
Northeastern Illinois - Conclusions
Regulatory Environment
 Regional Water Authority
Future Research
 Cost Study
 Scarcity Value
 Land Use Connections
Water Rates and Rate Structures in
Northeastern Illinois
Presented by Margaret Schneemann
Water Resource Economist
Illinois-Indiana Sea Grant
University of Illinois Extension
Chicago Metropolitan Agency for Planning
Questions?
[email protected]
312.676.7456