COMPREHENSIVE WATER AND WASTEWATER COST OF …...FINAL REPORT COMPREHENSIVE WATER AND WASTEWATER COST OF SERVICE AND RATE STUDY Phase 1 Report ‐ Stakeholder Engagement BLACK & VEATCH

FINAL REPORT

COMPREHENSIVE WATER AND WASTEWATER COST OF SERVICE AND RATE STUDY

Phase 1 Report ‐ Stakeholder

Engagement

BLACK & VEATCH PROJECT NO. 192366

PREPARED FOR

Washington Suburban Sanitary Commission (WSSC)

31 MARCH 2017

®

®

©Black & Veatch Holding Company 2017. A

ll rights reserved.

BLACK & VEATCH MANAGEMENT CONSULTING, LLC 18310 MONTGOMERY VILLAGE AVE., STE 500, GAITHERSBURG, MD 20879 +1 302‐660‐9465 | [email protected]

www.bv.com

31March2017

Mr.JoeBeachChiefFinancialOfficerWashingtonSuburbanSanitaryCommission14501SweitzerLaneLaurel,MD20707‐5902

Subject:ComprehensiveCostofServiceAnalysisandRateStudy‐PhaseIFinalReport

DearMr.Beach:

AttachedpleasefindourPhaseIfinalreport,summarizingtheprocess,analysisandresultsofthestakeholderdiscussionandinputregardingalternativeratestructuresforevaluationinPhase2oftheComprehensiveCostofServiceAnalysisandRateStudy.ThisfinalreportincorporatesinputandcommentfromWSSCmanagementandtheBi‐CountyWorkingGroup.

WeappreciatetheopportunitytocontinuetobeofservicetotheCommissioninthisveryimportantmatter.Ifyouhaveanyquestions,pleasedonothesitatetocontactus.

Verytrulyyours,BLACK&VEATCHMANAGEMENTCONSULTINGLLC

PrabhaKumarDirector

PamelaLemoinePrincipalConsultant

WSSC | COMPREHENSIVE WATER AND WASTEWATER COST OF SERVICE AND RATE STUDY

BLACK & VEATCH | Table of Contents i

Table of Contents

1 Introduction.......................................................................................................................1

1.1 StudyDrivers..........................................................................................................................2

1.2 StudyTimeline........................................................................................................................2

2 WSSCOverview..................................................................................................................4

2.1 WSSCMission&Vision.......................................................................................................4

2.2 WSSCValues............................................................................................................................4

2.3 WSSCStrategicPriorities...................................................................................................5

3 StakeholderEngagementOverview...........................................................................6

3.1 Bi‐CountyRateStructureWorkingGroup..................................................................6

3.2 StakeholderRepresentativesGroup..............................................................................7

4 WSSC’sCurrentRateStructure....................................................................................9

4.1 CurrentRateStructure........................................................................................................9

4.2 CustomerAssistancePrograms....................................................................................12

5 WSSCCustomerProfile................................................................................................14

5.1 CustomerAccounts............................................................................................................14

5.2 UsageVolume......................................................................................................................14

6 AlternativeRateStructureObjectivesandPriorities.......................................16

6.1 KeyRateDesignPrinciples.............................................................................................16

6.2 AlternativeRateStructureObjectives.......................................................................16

7 RateStructureAlternatives.......................................................................................18

7.1 Bi‐CountyWorkingGroup..............................................................................................18

7.2 StakeholderRepresentativesGroup...........................................................................30

8 Bi‐CountyWorkingGroupandWSSCDirectionforPhaseII..........................41

AppendixA–Bi‐CountyWorkingGroupCharter........................................................42

AppendixB–PeerUtilityRateStructureComparison..............................................43


BLACK & VEATCH | Introduction 1

1 Introduction TheWashingtonSuburbanSanitaryCommission(WSSC)isabi‐countymunicipalagencythatprovideswaterandwastewaterutilityservicesinMontgomeryandPrinceGeorge’sCountiesintheStateofMaryland.WSSCoperatesunderawater/sewerenterprisefund,fundedprimarilybyuserratesandcharges.

WSSC,whichisoneofthelargestwaterandwastewaterutilitiesinthenation,cameintobeingin1918asaregionalorganizationunderArticle29oftheAnnotatedCodeofMaryland,andasre‐codifiedintoDivisionIIofthePublicUtilitiesArticleoftheAnnotatedCodeofMaryland.WSSCservesnearly1.8millionresidentsinaserviceareaofnearly1,000squaremiles,andmanagesanetworkofnearly5,600milesoffreshwaterpipelineandover5,600milesofsewerpipeline,alongwiththreewaterreservoirs,twowaterfiltrationplants,andsixwastewatertreatmentplants.

Overthelastseveralyears,WSSChasbeenexaminingitsfinancialstructureanditsratestructuretobuildfinancialresiliencytomeetitscurrentandfuturefinancialneedswhilebalancingrevenuestability,equityofcostrecovery,andcustomeraffordability.Aspartofitscontinuingeffortstobuildfinancialresiliencywhileenhancingequityofcostrecovery,in2016,WSSCinitiatedatwo‐phasedcomprehensivewaterandsewerratestudy(Study).

Theprimarypurposeofthetwo‐phasedStudyistoevaluatetheexistingvolumechargeratestructureandrecommendalternativeratestructuresthatbettermeetWSSC’sgoalsandobjectives.Thetwophasesdefinedforthestudyare:

PhaseI:PhaseIoftheStudyincludesadefinitionofthestudyobjectives,anevaluationofthecurrentratestructuresandWSSCpolicies,andanidentificationoffeasibleratestructurealternatives.ThisphaseoftheworkincludedsignificantinputfromstakeholdersthroughthecreationofaBi‐CountyWorkingGroupandaStakeholderRepresentativesGroup.

PhaseII:PhaseIIoftheStudyinvolvesacomprehensivecostofserviceanalysisandadetailedevaluationofuptothreeratestructuresbasedonthePhaseIevaluation,andthedevelopmentofrateschedulesbasedontherecommended“best‐fit”ratestructure.

ThisPhaseIreportprovidesacomprehensivediscussiononthePhaseIstudyobjectives,thestakeholderengagementprocess,alternativeratestructuresevaluated,andthekeyrecommendationsonalternativeratestructuresthatresultedfromthestakeholderengagementprocess.AseparatereportwillsummarizetheresultsofPhaseII.

Phase 1

• Review current rate structure

• Evaluate alternative rate structures

• Select three viable alternative rate structures

• Deliver a Phase‐1 Rate Structure Options Report

Phase 2• Develop a 10‐year financial plan

• Perform cost of service analysis for the three viable options

• Develop draft rate schedules

• Perform bill impact comparison

• Develop a Phase 2 Rate Analysis Report

• Select the “best‐fit” rate structure

• Finalize rate schedules for the recommended rate structure



1.1 STUDY DRIVERS Overthelastseveralyears,WSSChasbeenexaminingitsfinancialstructureanditsratestructuretobuildfinancialresiliencytomeetitscurrentandfuturefinancialneedswhilebalancingrevenuestability,equityofcostrecovery,andcustomeraffordability.

ThekeyinitiativesthatWSSChadundertakeninthepastincludethefollowing:

In2010,WSSCestablishedtheBi‐CountyInfrastructureFundingWorkingGrouptoidentifyeffectivealternativeoptionsforfundingoperationsandthecapitalprogram.

In2012,basedontherecommendationsoftheWorkingGroup,WSSCcommissionedaratestudythatresultedinratestructurerecommendations,whichfocusedparticularlyonprovidingrevenuepredictabilityanddedicatedfundingforwaterandsewerinfrastructureimprovements.Basedonthisstudy,WSSCimplementedatwo‐partReady‐to‐ServeCharge,comprisedofarecalibratedAccountMaintenanceFee(AMF)andanewInfrastructureInvestmentFee(IIF).TheAMFisafixedfeethatrecoversthedirectandindirectcostsassociatedwithmaintainingandservicingeachcustomeraccount.TheIIFisafixedfeethatrecoversaportionofthedebtserviceassociatedwithWSSC’swaterandsewerpipereconstructionprogramsfromtheapprovedCapitalImprovementsProgram(CIP).

Whilethepreviousratestudyinitiativesprovidedprioritiesforfiscalpoliciesandratedesign,andenhancedWSSC’srevenuestabilitythroughtheimplementationoftheReady‐to‐ServeCharges,theexistingvolumechargeratestructurehasremainedlargelyunchanged(otherthanoverallincreasesinrates)sinceitwasimplementedinthe1970s.Theonlymajorchangewasthereductioninthenumberoftiersfrom100to16in1993.TheWorkingGroupalsorecommendedacomprehensivereviewofthebasicratestructure.

Hence,aspartofacomprehensivewaterandsewercostofservicestudy,WSSCdesiredareviewofalternativeratestructuresthatcouldfurtherenhanceequityofcostrecoverywhilehelpingsustainrevenuestability.

1.2 STUDY TIMELINE Figure1summarizeskeystudymilestones,alongwithnecessaryactivitiesinsupportofaFiscalYear(FY)2019implementationofanewratestructure:



Figure 1 Study Timeline


BLACK & VEATCH | WSSC Overview 4

2 WSSC Overview WSSC’scontinuedfocusonitsmission,visionandvaluessupportsitsstandingasanaward‐winningutility,servingbothMontgomeryCountyandPrinceGeorge’sCountywithhighqualitydrinkingwater,andenvironmentallysoundwastewatertreatment.

ThissectionofthereportpresentsabriefoverviewofWSSC’smission,visionandstrategicprioritiesastheyhaveadirectinfluenceontheratestructureevaluationandselection.

2.1 WSSC MISSION & VISION Mission:“Weareentrustedbyourcommunitytoprovidesafeandreliablewater,life’smostpreciousresource,andreturncleanwatertoourenvironment,allinanethical,sustainableandfinanciallyresponsiblemanner.”

Vision:“Wewillbecometheworld‐classproviderofsafe,reliablewaterandwastewaterservicesthatprotectsqualityoflifeforourcommunity.Westriveforthefollowing:

Customersaredelightedwithourexcellentproductsandinnovativeservices.

Relationshipswithourcustomers,employeesandbusinesspartnerssurpassexpectations.

Theenvironmentimprovingasaresultofourcommitmenttosustainabilityandexcellence.”

2.2 WSSC VALUES ThekeyvaluesthatWSSChasdefinedfortheiroperationsandservicedeliveryateverylevelincludethefollowing:

Accountability:

“Weareresponsibleemployeeswhoareaccountableandtakeouractionsseriously.”

Integrity and Respect:

“Weareadiverseorganizationthatencouragesandpracticesequality,trust,openness,andrespectforall.”

Excellence:

“Weachievethehighestlevelofqualityandproductivity,demonstratingexcellenceinprovidingworld‐classservicetoeveryone.”

Individual Initiative:

“Wecreateandseizeopportunitiestogrowpersonallyandprofessionally,contributingtothesuccessofourorganization.”

Environmental Stewardship:

“Wecontinuouslyenhanceandprotectnaturalresourcesandtheenvironmentforthehealthoffuturegenerations.”

Cost Awareness:

“Webalancecostandbenefitinourdailyactionstoachieveoptimalvalueforourcustomers.”


BLACK & VEATCH | WSSC Overview 5

2.3 WSSC STRATEGIC PRIORITIES TohelpWSSCachieveitsmissionandvision,WSSChasoutlinedseveralStrategicPriorities.Oneofthekeygoalsofthistwo‐phasedratestudyistosupportWSSC’sStrategicPrioritiesinseveralareas.

WSSC’sStrategicPrioritiesareasfollows:

Deliver Excellent Customer Service

Deliveranexcellentcustomerexperiencebyprovidingtimely,highqualityproductsandservicestointernalandexternalcustomers.

Enhance Stakeholder Relationships

Enhancerelationshipswithourcommunity,electedofficials,regulators,andbusinesspartnersthroughproactivecommunication,financialstewardship,andexcellentservice.

Improve Infrastructure

Plan,investin,andrenewourinfrastructuretoprovidefuturegenerationswithasustainablesystem,throughinnovative,cost‐effectivetechnologyandworldclassassetmanagement.

Achieve Business Process Excellence and Maintain Financial Stability

Achievefinancialstabilitythroughanimprovedratestructureandimprovedbusinessprocessesthatdriveperformanceandobtaincost‐effectivebusinessoutcomes.

Inspire Employee Engagement

InspireandmotivateemployeesbymakingWSSCagreatplacetowork,thriveandserve.


BLACK & VEATCH | Stakeholder Engagement Overview 6

3 Stakeholder Engagement Overview InPhaseIofthestudy,tofacilitateabroad‐basedinputonalternativeratestructures,WSSCformedtwodistinctstakeholdergroupsasfollows:

TheBi‐CountyRateStructureWorkingGroup(“WorkingGroup”):TosolicitinputfromtherepresentativesofMontgomeryandPrinceGeorge’sCountygovernment;and

TheStakeholderRepresentativesGroup(“SRG”):TosolicitinputfromtherepresentativesofWSSC’sresidentialandnon‐residentialcustomers.

Thissectionprovidesabriefdiscussiononthecompositionandroleofeachofthesetwogroupsandtheapproachusedtodisseminateinformationandsolicitinput.

3.1 BI‐COUNTY RATE STRUCTURE WORKING GROUP ABi‐CountyRateStructureWorkingGroup(Bi‐CountyWorkingGroup),comprisedofrepresentativesofMontgomeryCountyExecutiveandCouncil,PrinceGeorge’sCountyExecutiveandCouncil,andWSSCGeneralManager/CEO,wasformedattheinitiationofPhaseIofthestudy.

AppendixApresentstheBi‐CountyRateStructureWorkingGroup’sCharter.

3.1.1 Bi‐County Group Roles and Responsibilities

ToprovidecleardirectiontotheBi‐CountyWorkingGroup,allmembershelpeddefineandagreedupontheprimaryrolesandresponsibilitiesofthegroup.Thekeyrolesoftheworkinggroupincludedthefollowing:

ReviewWSSC’sbudgetandfinancialpolicies,statutoryrequirements,currentratestructure,andfundingmethods;

Understandanddeliberatethebenefitsandchallengesofeachalternativeratestructurepresentedbytherateconsultant;

ShortlistthreeorfourviablealternativeratestructuresthatcouldeffectivelyhelpachievethekeystudyobjectivesandforwardtotheSRGforconsideration;

Recommendthe“best‐fit”ratestructuretoWSSCGM/CEOandCommissioners;and

Provide,whereappropriate,strategicguidanceandsupportfortheimplementationofthealternativeratestructure.

3.1.2 3.1.2 Bi‐County Working Group Engagement Approach

TheBi‐CountyWorkingGroupparticipatedinthreeworkshopsfacilitatedbytherateconsultant.Thekeyaspectsthebi‐countygroupengagedinduringthethreeworkshopsareasfollows:

1. Workshop#1:Thegroupdiscussedanddefinedthealternativeratestructureevaluationgoalsandpriorities;gainedinsightsintotheoverallfinancialplanning,costofserviceanalysis,andratedesignprocess;discussedthekeyprinciplesinvolvedinratesetting;andgainedanoverviewofthevarioustypesofratestructurescommonlyusedbyutilities.

2. Workshop#2:Duringthisworkshop,theBi‐CountyWorkingGroupreviewedthecomponentsoftheexistingratestructurealongwiththebenefitsandchallengesoftheexistingrate



structure.Thegroupalsodeliberatedonthefivealternativeratestructureoptionsthattherateconsultantpresented.

3. Workshop#3:Inthethirdworkshop,theBi‐CountyWorkingGroupcametoaconsensusonfourratestructurealternativesthattheydeemedshouldbepresentedforSRG’sconsideration.Inaddition,theBi‐CountyWorkingGroupreceivedanoverviewofthecompositionoftheSRGandtheapproachWSSCwastousetosolicitinputfromtheSRGonthealternativeratestructures.

4. Workshop#4:OncompletionoftheSRGseriesofworkshops,theBi‐CountyWorkingGroupmetagaintoprovidedirectionregardingthedevelopmentofuptothree“bestfit”ratestructuresfordetailedevaluationinPhaseII(costofserviceanalysis)oftheStudy.

Chapter7discussesadditionaldetailsontheBi‐CountyWorkingGroup’sevaluationofthealternativeratestructuresandtheirshortlistofoptions.Chapter8providesasummaryoffinal“bestfit”ratestructures.

3.2 STAKEHOLDER REPRESENTATIVES GROUP ToprovideformeaningfulinputfromabroadcrosssectionofWSSCcustomers,WSSCestablishedtheStakeholderRepresentativesGroup(SRG).

3.2.1 SRG Composition

TheSRGcomprisedof22individualswhorepresentedabroadcross‐sectionofstakeholders,including,butnotlimitedto:

RepresentativesfromMontgomeryandPrinceGeorge’scountygovernments

Residentialcustomers,suchas:

● Largehomeowner’sandcivicassociations

● Apartmentgroups

● Representativesforseniorinterests

● LegalAidSociety,UnitedWay,orsimilargrouprepresentinglow‐incomecustomers

● Individualresidentialcustomers

● CustomerAdvisoryBoard

Non‐residentialcustomers,suchas:

● Industrialgroups,oranindividualcustomerrepresentinganindustry

● Hotels

● Buildingindustryassociation

● Environmentalgroups

3.2.2 SRG Roles and Responsibilities

ThepurposeoftheSRGwasnottoarriveatconsensusregardingasingleratestructureforrecommendationtotheCommission,butrathertoprovidemeaningfulfeedbacktotheBi‐County



WorkingGroupandWSSCindeterminingthe“bestfit”ratestructuretoultimatelyrecommendtotheCommission.ThekeyrolesandresponsibilitiesoftheSRGwereasfollows:

Understanding:Discussandgainanunderstandingofdiverseaspectsincluding:

● WSSC’scharter,organization,anddutiesrelatedtoprovisionofwaterandwastewaterservicetocustomerswithinMontgomeryandPrinceGeorge’sCounty

● Currentservicechargeratestructure

● Ratesettingprinciplesandprocess

● Customerbase

● Currenttrendsrelatedtowaterandwastewaterratesetting

● Potentialbenefitsand/orimpactsofalternativeratestructuresforboththeratepayersandWSSC

Participation:ParticipateinuptothreeSRGmeetings.WSSCrequestedactiveengagementbyallmembersinobjectivediscussionsduringmeetingsandbringtothegrouptheirideas,concerns,and/oragreementfromsuchdiscussions.

Stewardship:SRGmemberswererequestedtobestewardsforthegroup,andhelpcommunicateaccurateinformationandresultingrecommendations,inanobjectivemanner,tothelargercommunity.

Recommendations:WSSCrequestedSRGtoprovidefeedbackontheratestructuresunderevaluation.SRG’srolewasmoreadvisoryinnature,andtheyunderstoodthattheBi‐CountyWorkingGroupwillconsidertheSRGrecommendations,alongwiththeresultsofPhaseIIoftheRateStudy,inmakingafinalrecommendationontheratestobecomeeffectiveJuly1,2018.

3.2.3 SRG Group Engagement Approach

TheSRGGroupparticipatedinthreeworkshopsfacilitatedbytherateconsultant.ThekeyaspectstheSRGgroupengagedinduringthethreeworkshopsareasfollows:

1. Workshop#1:TheSRGgainedanunderstandingoftheirrolesandresponsibilities;andacomprehensiveoverviewofWSSC’smission,services,operationsandcapitalprogram.Toprovidebackgroundonrate‐settingmethodologies,theworkshopincludedaholisticoverviewoftheoverallfinancialplanning,costofserviceanalysis,andratedesignprocess.LiketheBi‐CountyWorkingGroupmeetings,theSRGalsogainedanoverviewofthekeyprinciplesinvolvedinratesettingandvarioustypesofratestructurescommonlyusedbyutilities.

2. Workshop#2:TheSRGreviewedthecomponentsoftheexistingratestructurealongwiththebenefitsandchallengesoftheexistingratestructure.Thegroupalsodeliberatedonfouralternativevolumeratestructureoptionsthattherateconsultantpresented.

3. Workshop#3:TheSRGreviewedthreeadditionalratestructureoptionsthattheyrequested.Inaddition,duringthisworkshop,theSRGwassplitintothreeteams,sothateachteamcoulddeliberateinasmallerworkingsessionontheadvantages,disadvantages,andotherconcernsonthealternativeratestructuresandthenreportouttothelargergroup.

Chapter7discussesspecificoutcomesoftheSRGprocess.


BLACK & VEATCH | WSSC’s Current Rate Structure 9

4 WSSC’s Current Rate Structure PresentedinthissectionisabriefoverviewofWSSC’scurrentratestructurecomponentsandrateschedules,alongwithadiscussiononthestrengthsandchallengesofthecurrentratestructure.

4.1 CURRENT RATE STRUCTURE WSSCcurrentlybillsresidentialcustomersonaquarterlybasis,andnon‐residentialcustomersoneitheramonthlyorquarterlybasis.WSSC’scurrentratestructureiscomprisedofacombinationoffixedchargesthatvarybymetersize,andvolumetricchargesthatvarybasedonmeteredwateruse.

Figure2presentsagraphicalillustrationofWSSC’scurrentratestructurecomponents.

Figure 2 WSSC’s Current Rate Structure

4.1.1 Ready‐to‐Serve Charges

WSSC’sfixedchargesincludetwoReady‐to‐ServeCharges:

AccountMaintenanceFee(AMF) InfrastructureInvestmentFee(IIF)

Table1providesasummaryofcurrentReady‐to‐ServeCharges.

ThecurrentIIFchargeshavebeensetthroughFY2020.Fixedchargesprovideapproximately10percentofWSSC’stotalannualwaterandsewerrevenue.



Table 1 Current Ready‐to‐Serve Charges (FY 2017)

4.1.2 Volumetric Charges

InadditiontotheReady‐to‐ServeCharges,WSSCchargescustomersavolumetricchargeforwaterandsewerservicebasedonmeteredwaterusage.Thevolumetricchargeisdeterminedbasedona16‐tierincliningratestructure.Underthisstructure,allvolumeforthebillingcycleisbilledatthehighesttieracustomerreachesforeachbillingcycle,basedonthecustomer’saveragedailyconsumption(ADC),calculatedastotalvolumedividedbythenumberofdaysinthebillingcycle.

Allcustomers,regardlessofcustomertype,arebilledbasedonthesameratestructure.CurrentvolumetricratesaresummarizedinTable2.

Meter Size

FY 2017

Account

Maintenance

Fees

FY 2017

Infrastructure

Investment

Fee

Small Meters

5/8" 16.00 11.00

3/4" 16.00 12.00 1" 16.00 14.00

Large Meters

1‐1/2" 16.00 90.00

2" 27.00 185.00

3" 66.00 585.00

4" 142.00 813.00

6" 154.00 1,265.00

8" 200.00 2,845.00

10" 246.00 4,425.00

12" 246.00 4,425.00

Detector Check

2" 33.00 NA

4" 177.00 NA

6" 255.00 NA8" 461.00 NA

10" 633.00 NA

Fire Service Meter

4" 182.00 499.00

6" 293.00 616.00

8" 452.00 2,524.00 10" 682.00 2,714.00



Table 2 Current Volumetric Charge Rate Structure (FY 2017)

4.1.3 Benefits and Challenges

IndiscussingtheexistingratestructurewiththeBi‐CountyWorkingGroup,therateconsultanthighlightedseveralbenefitsandchallenges.

Benefits:Keybenefitsincludethefactthatbecausethecurrenttieredratestructurehasbeeninplaceformanyyears,customersgenerallyunderstandthestructureanditsapplicationtotheirbillings.Italsoprovidesaconservationincentiveascustomerspaymoreforhigherlevelsofwaterusage.

Challenges:Thestructuredoesresultinsomechallenges,however,including:

Revenuevolatility–Duetoheavyrelianceonusage,factorssuchaschangesinweatherandcustomerconsumptionbehaviormayimpactrevenuegeneration;

Customerbillvolatility–Duetotheapproachofbillingalltheusageatthehighesttierofacustomer’susage,acustomercanseesignificantchangesinbillsevenforpotentiallysmallchangesinvolume.FurthercompoundingbillvolatilityisthefactthatWSSCbillsonaquarterlybasis,sochangesinvolumecanbesignificantfromonequartertothenext;and

Theuseof16tierswithbillingalltheusageatthehighesttier,wherethecustomer’sdailyaveragefallsinto,isanunusualstructureinindustry,anditcanimposeabillimpactburdenonlargenon‐residentialcustomers.

Table3providesasummaryofthecombined(waterandsewer)volumetricrate,bytier,alongwiththecalculatedratedifferentialbetweenthetiers.Italsoprovidesasummaryoftheapproximatepercentageofvolumebilledateachtier,andacalculationoftheapproximatepercentageofrevenuegeneratedfromeachtier,underthecurrentbillingapproach.

Tier

(gallons/day)

Water Rates

($/1,000 gal)

Sewer Rates

($/1,000 gal)

Combined

Rates ($/1,000

gal)

0 ‐ 49 3.38 4.30 7.68

50 ‐ 99 3.78 5.03 8.81

100 ‐ 149 4.18 5.85 10.03

150 ‐ 199 4.67 6.76 11.43

200 ‐ 249 5.46 7.36 12.82

250 ‐ 299 5.92 7.97 13.89

300 ‐ 349 6.27 8.50 14.77

350 ‐ 399 6.53 8.92 15.45

400 ‐ 449 6.78 9.12 15.90

450 ‐ 499 6.98 9.40 16.38

500 ‐ 749 7.10 9.60 16.70

750 ‐ 999 7.27 9.81 17.08

1,000 ‐ 3,999 7.41 10.23 17.64

4,000 ‐ 6,999 7.58 10.46 18.04

7,000 ‐ 8,999 7.68 10.62 18.30

9,000 & Greater 7.81 10.90 18.71



Table 3 Summary of Rate Multipliers, Percentage of Volume and Percentage of Revenue by Tier Under the Current Volumetric Rate Structure

4.2 CUSTOMER ASSISTANCE PROGRAMS WSSChasinplaceaCustomerAssistanceProgram(CAP)thatisadirectresultoftheanalysisanddeliberationsofthepreviousBi‐CountyInfrastructureWorkingGroup.Underthisprogram,eligibleresidentialcustomersreceiveapartialcreditontheirbillinanamountequaltothesumofthetwocomponentsoftheReady‐to‐ServeCharge.EligibilityisbasedonparticipationintheStateofMaryland’sOfficeofHomeEnergyProgram.

InadditiontotheCAP,WSSCcontinuestohaveaWaterFundinplace,fundedbycustomercontributionsandemployeefundraisingactivities.TheSalvationArmyadministersthisfundandaidscustomersexperiencingdelinquentwater/sewerbills,throughapplicationforanawardforassistance.Thisassistanceprovidesupto$300peryear,forcustomersmeetingspecificeligibilityrequirements.

TheCustomerAssistanceProgramisanewprogram,implementedinFY2016,andcurrentlyservesapproximately7,800customers.AuthorityfortheCustomerAssistanceProgramwasapprovedbytheMarylandStateLegislatureandsignedbytheGovernor.TheCAPis100percentfundedbyWSSC.

Note:EvaluationoftheadequacyoftheCAPtoaddressaffordabilityconcernsisnotpartofthecurrentstudy’scomprehensivecostofserviceandalternativeratestructureevaluationscopeof

Tier (gallons/day)

Total

Volumetric

Charge

Tier

Multiplier

Approx. %

Volume

% of

Volumetric

Charge

Revenue

0 ‐ 49 7.68$ 1.00 3% 2%

50 ‐ 99 8.81$ 1.15 12% 8%

100 ‐ 149 10.03$ 1.31 20% 15%

150 ‐ 199 11.43$ 1.49 16% 14%

200 ‐ 249 12.82$ 1.67 10% 10%

250 ‐ 299 13.89$ 1.81 5% 6%

300 ‐ 349 14.77$ 1.92 3% 3%

350 ‐ 399 15.45$ 2.01 2% 2%

400 ‐ 449 15.90$ 2.07 1% 1%

450 ‐ 499 16.38$ 2.13 1% 1%

500 ‐ 749 16.70$ 2.17 2% 2%

750 ‐ 999 17.08$ 2.22 1% 1%

1,000 ‐ 3,999 17.64$ 2.30 5% 7%

4,000 ‐ 6,999 18.04$ 2.35 2% 3%

7,000 ‐ 8,999 18.30$ 2.38 1% 2%

9,000 & Greater 18.71$ 2.44 16% 23%

Current Rates (Water & Sewer)



work.Uponselectionofanewratestructure,WSSCwillcontinuetoevaluatetheCAPtoensureitisachievingstatedobjectives,andrecommendenhancementstotheprogram,ifnecessary,tobettermeettheneedsofdisadvantagedcustomers,whileensuringfinancialstabilityforWSSC.


BLACK & VEATCH | WSSC Customer Profile 14

5 WSSC Customer Profile Ananalysisofcustomerprofileintermsofthetypeofcustomers,usagepatterns,andhistoricaldemandtrendsarecriticaltoreliablyprojectingfuturerevenuesandinperformingadefensiblecostofserviceanalysis.ThissectionofthereportprovidesanoverviewofWSSC’scustomerprofile.

In2014,WSSCissuedareporttitled“WaterandSewerRateStudy–TechnicalReport”thatprovidedasummaryofadetailedcustomeranddemandanalysisundertakentounderstandcustomercharacteristicsandtrends.ThisinformationhelpedestablishthecurrentReady‐to‐ServeCharges.ThecurrentStudyincorporatesareviewofthedataandresultsofthe2014study.Inaddition,therateconsultantconductedadetailedanalysisofFY2015billingdata(themostrecentavailableatthetimeoftheanalysis),toallowtheBi‐CountyWorkingGroupandSRGtobetterunderstandtheimpactofalternativeratestructuresoncustomersaswellasonWSSC’sabilitytomaintainfinanciallystability.

5.1 CUSTOMER ACCOUNTS Figure3providesadistributionofthenumberofaccountsbycustomertype,asidentifiedinWSSC’sbillingsystem.Approximatelyninety‐fivepercentofWSSC’scustomersbelongtotheResidentialcustomertype.Theremainderofcustomeraccountsiscomprisedofmulti‐family,commercialmunicipal/governmentandindustrialcustomers.

Figure 3 Percentage of Customer Accounts, by Customer Type

5.2 USAGE VOLUME Figure4providesasummaryofbilledvolume,bycustomertype.Asshown,whilemostofWSSC’scustomersareResidential/Multi‐family,thesecustomerscontributeamuchlowerpercentageofbilledvolume(approximately74percent).

Residential, 94.5%

Multifamily, 1.1%

Commercial, 3.8%

Muni/Gov't, 0.6%

Ind/Wholesale, 0.0%

Customer Accounts‐ FY 2015


BLACK & VEATCH | WSSC Customer Profile 15

Figure 4 Percentage of Customer Accounts, by Customer Type

Inadditiontothetotalvolumebilledbyeachcustomertype,theaveragevolumebilledpercustomeralsovariesbycustomertype.AsshowninFigure5,Residentialcustomersarebilledprimarilyatthelowertiersundertheexistingratestructure,whereasnon‐residentialcustomers,ingeneral,havehighervolumesandthereforearebilledathighertiers.

Figure 5 Billed Volume by Existing Rate Tiers

Therateconsultantconductedananalysisofexistingbillingdataintheevaluationofalternativeratestructures,todevelophypotheticalratestructuresthatwouldachievethesamerevenuerecoveryastheexistingrateschedule.

Residential, 50.2%

Multi‐Family, 23.7%

Commercial, 16.8%

Muni/Gov't, 9.2%

Ind/Wholesale, 0.1%

Water Volume ‐ FY 2015

‐

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

1,000 Gallons

Billed Volume By Existing Rate Tiers

Residential Multifamily Commercial Munic/Gov't Ind/Wholesale


BLACK & VEATCH | Alternative Rate Structure Objectives and Priorities 16

6 Alternative Rate Structure Objectives and Priorities Bothinthedesignofratestructuresingeneral,andevaluationofalternativeratestructuresitisimportanttodefinethekeyobjectivesandthenprioritizetheobjectivesintermsofimportance.Inaddition,adherencetoindustrybestpracticesandratedesignprinciplesprofferedbyindustryorganizationssuchastheAmericanWaterWorksAssociation(AWWA)andtheWaterEnvironmentFederation(WEF)arealsoimportantforestablishingdefensiblerates.

Therefore,duringthefirstworkshopwiththeBi‐CountyWorkingGroup,allparticipantsdefinedandagreedtoalistofobjectivesandpriorities.TohelptheBi‐CountyWorkingGroupunderstandthecommonindustrypracticeswithrespecttowater/sewerratestructure,therateconsultantperformedandpresentedapeerutilitycomparisonofratestructures.

AppendixBpresentsaseparatememorandumonpeerutilityratestructurecomparison.

ThissectionpresentsasummaryoftheBi‐CountyWorkingGroup’skeyobjectivesandpriorities.

6.1 KEY RATE DESIGN PRINCIPLES Thekeyprinciplesandconsiderationsthatinfluencethedesignofwaterandsewerratestructuresandschedulesareasfollows:

Equitableandnon‐discriminating(costofservicebased)

RevenueStability/FinancialSustainability

AbilitytoprovideappropriatePriceSignals

RecognizesCustomerUsagePatterns&Demands

EasytoUnderstandandAdminister

EnablesCustomerAcceptance

ConsistentwithWSSCPolicies

LegallyAcceptable/Defensible

Facilitatesconsistentinterpretationandapplicationoftheratestructureinbilling

6.2 ALTERNATIVE RATE STRUCTURE OBJECTIVES Tofacilitateadiscussionontheratestructureobjectives,therateconsultantpresentedapreliminarylistofobjectiveswithadescriptionofeachobjectivetotheBi‐CountyWorkingGroup.TheBi‐CountyWorkingGroupdeliberatedonthepreliminarylistandaddedfewadditionalobjectivesbasedoninputfromthemembers.

Figure6providesafinallistofratedesignobjectivesdefinedbytheBi‐CountyWorkingGroup.

Itisoftenthecasethatsomeoftheobjectivescouldbecomecompetingobjectives,andhenceitisnotpracticalinanyratedesigntoachieveallthestatedobjectives.Hence,toassurethattheworkeffortconsidersthemostcriticalobjectivesintheevaluationofalternativeratestructures,eachBi‐CountyWorkingGroupmemberrankedtheobjectivesintheorderofimportance.


BLACK & VEATCH | Alternative Rate Structure Objectives and Priorities 17

Figure 6 Summary List of Key Objectives and Ranking

Therateconsultantcompiledtherankingoftheobjectivesbyeachmembertodeterminethetop‐rankingobjectives.Figure7summarizesthetopfiveratesettingprioritiesthatemergedfromtheBi‐CountyWorkingGroup’sprioritizationwork.

Figure 7 Bi‐County Working Group’s Rate Setting Priorities

Key Objectives 1 2 3 4 5 6 7 8 9 10

Defensibility of Rate Structure* 3 2 5 5 1 1 2

Revenue stability* 8 5 3 3

Minimize impact on Low Income 1 2 3 5 3 3 1

Minimize impact on Fixed Income 1 3 2 3 3 4 1 1

Ease of understanding* 1 6 3 3 1 3 2

Billing system capability/ease of administration 1 1 2 3 1 2 1 2 5 1

Alignment between nature of cost and recovery of those costs 1 2 4 3 1 1 2 3 1

Sustainable system reinvestment 7 2 2 1 1 2 1 1 1

Support specific utility needs 2 2 1 2 1 1 2 4 1

Conservation 3 1 1

Consistency of structure regardless of changes 1

Fair and Reasonable 1

Affordability 1

Public Pressure 1

Doesn't punish conservation 1

Providing an appropriate level of service to customers

*These were part of the priorities of the Bi‐County Infrastructure Working Group

Ranking ‐ # of people ranking objective as priority #1, #2, etc.

Washington Suburban Sanitary Commission

Comprehensive Cost of Service Analysis and Rate Study

Rate Structure Objectives and Ranking

0% 20% 40% 60% 80% 100%

Alignment Between Nature of Cost and Recoveryof those Costs

Sustainable System Reinvestment

Ease of Understanding

Defensibility of Rate Structure

Revenue Stability

Priority 1 Priority 2 Priority 3 Priority 4 Priority 5


BLACK & VEATCH | Rate Structure Alternatives 18

7 Rate Structure Alternatives Aspreviouslydiscussed,boththeBi‐CountyWorkingGroupandSRGdiscussedseveralratestructurealternativesduringthecourseoftheirdeliberation.Followingisasummaryoftheassumptionsusedindevelopingratestructureoptions,andtherangeofalternativesdiscussedbyeachgroup.

7.1 BI‐COUNTY WORKING GROUP TheBi‐CountyWorkingGroupdiscussedseveralpotentialratestructures,includingbothalternativestofixedchargesandvolumetriccharges.ThroughouttheBi‐CountyWorkingGroupratestructuredeliberations,alternativeswereevaluatedbasedonthefollowingassumptions:

AlternativeRateStructuresbedevelopedusingFY2015customerandbillingdata;

AllalternativeswouldgeneratethesamerevenueascalculatedusingFY2015billingdatainsuchamannerastoproducethesamerevenueastheexistingratestructure(i.e.,revenueneutral);

Alternativesbasedona“tiered”volumebillingapproachwouldbebasedonthecommonlyusedapproachwithintheindustry,wherebyvolumeisbilled“through”thetiers,versusallvolumebeingbilledatthetoptierreachedasundertheexistingratestructure;and

Totheextentpossible,developratestructurestoproducethesamerevenuebycustomergroupasundertheexistingratestructure.

Forallalternatives,WSSCandtherateconsultantplacedconsiderableemphasisonthefactthattheratespresented,andresultingimpactsonvariouscustomertypes,wereforillustrativepurposesonly,astheyreflectrevenueneutralityforFY2017,andinaddition,donotreflectanycostofservicebasedadjustmentstospecificratesundereachscenariotoimproveequitybetweencustomergroups.AspartofPhaseIIoftheStudy,specificrates,basedonthe“bestfit”structuresidentifiedthroughPhaseI,willbedevelopedsuchastomeetFY2019revenueneedsandachievedesiredgoalsandobjectives.Inaddition,itisanticipatedthataPhase‐inplanwillbedevelopedtomovetowardthedesiredratestructureinamannerthatmitigatesimpactsonspecificcustomergroupswhilealsograduallyenhancingequityofcostrecovery.

7.1.1 Initial Structures Evaluated

Duringinitialworkshops,theBi‐CountyWorkingGroupdiscussedseveralpreviously‐developedratestructurealternativesasexamples.Thesealternativesincludedpotentialchangestoboththefixedchargesandvolumetricchargeratecomponents.Potentialchangestofixedchargesincludedconsiderationofsuchoptionsasrecoveryofadditionalfixedcostsofboththewaterandsewerutilities,includingpotentiallycertainoperatingandcapitalcostsorinclusionofaminimumallowanceintheReady‐to‐ServeCharge.Alternativevolumechargeratestructuresevaluatedincludedauniformvolumetriccharge,alternativetieredratestructures,andseasonalvolumetriccharges.

Basedonareviewofinitialstructures,theBi‐CountyWorkingGroupprovidedfeedbackanddirectionregardingthedevelopmentofadditionalalternativesforconsideration.TheBi‐CountyWorkingGroupidentifiedsixvolumetricchargeratestructureoptionsandtwofixedchargestructureoptions.Inaddition,membersdiscussedinclusionofpotentialratestructuresbasedon



customerclass(e.g.,residentialandnon‐residential),recognizingpotentiallimitationstosuchstructuresabsentrevisedlegislationallowingclassbasedrates.

TheBi‐CountyWorkingGroupofferedthefollowingoptionsforfurtherdiscussion:

Uniformchargeforallcustomers

3Tierratestructureforallcustomers

● 3TierforallcustomersbilledthroughtierswiththeadditionofanadditionalIIFcomponenttorecoveradditionalfixedcosts

● 3Tierforallcustomersbilledthroughtierswithminimumallowance

● 3Tierforallcustomersbyoff‐peak/peakbilledthroughtiers

● 3TierforSFRbilledthroughtiersanduniformchargeforallothercustomers

4Tierforallcustomersbilledthroughtiers

● 4TierforallcustomersbilledthroughtierswiththeadditionofanadditionalIIFcomponenttorecoveradditionalfixedcosts

● 4Tierforallcustomersbilledthroughtierswithminimumallowance

● 4Tierforallcustomersbyoff‐peak/peakbilledthroughtiers

TheBi‐CountyWorkingGroup’sdeliberationincludedconsiderationofthebenefitsandchallengesofeachstructure,theabilitytoachievestatedobjectivesandpriorities,andpotentialimpactoncustomers.

7.1.2 Selected Options for SRG Review

TheBi‐CountyWorkingGroupwasaskedtoselectfourratestructuresforpresentationtotheSRG.BecauseReady‐to‐Servechargeshadrecentlybeenenhanced,andtheIIFisfixedthroughFY2020,themembersconsideredonlyvolumetricchargeratestructureoptionsforfurtherdiscussionandanalysis.TheBi‐CountyWorkingGroupselectedthefollowingfouroptionsforinitialpresentationtotheSRG,whichthemembersfeltrepresentedagoodrangeofpossiblealternatives:

Option#1‐UniformVolumeRateStructure,NoCustomerClasses

Option#2–FourtieredVolumeRateStructure,NoCustomerClasses

Option#3–UniformVolumeRateStructure,SeparateratesforResidentialandNon‐Residential

Option#4–FourtieredResidentialVolumeRateStructure;UniformNon‐ResidentialVolumeRateStructure

Examplerates(forillustrativepurposesonly)weredevelopedforeachoftheoptions,asdiscussedinthefollowingsections.

Option #1 – Uniform Volumetric Rate Structure, No Customer Classes

Thefirstoptionisasingle,uniformvolumetricratechargedtoallcustomersforallbilledvolume,regardlessofacustomer’svolumeofusage.Thisapproachhasmanybenefits,including:

Easytounderstandandadminister



Usedinthewater/wastewaterindustrywhenconservationisnotadriver

Providesimprovedrevenuestabilityoverthecurrentratestructure

Eliminatesperceivedpenaltytolargevolumecustomers

Possibletoimplementwithintheexistingbillingsystem

Thisratestructure,however,doesalsohavecertainchallenges,including:

Reductioninconservationincentive

Assumesthatallusersplacethesamepeakdailyandhourlydemandonthesystem

Animmediateshifttothisratestructurewouldsignificantlyimpactsmallvolumecustomers

Mitigatingimpactsoncertaincustomersisdifficultwithoutslowlyphasingoutthecurrentratestructure

Table4presentsthecalculateduniformvolumetricchargerequiredtoproducethesamerevenueasthecurrentratestructure.

Table 4 Option #1 – Uniform Volumetric Rate Structure, No Customer Classes

ThefollowingtablesprovideacomparisonoftypicalbillsunderOption#1,basedonaveragevolumeforeachmetersize,comparedtothecurrentratestructure.TypicalbillsrepresentthetotalofbothWSSC’scurrentAMFandIIFchargesplustheOption#1VolumetricChargeStructure.Itdoesnotincludeotherfees/charges,suchastheBayRestorationFee.Asexpected,replacementofthecurrentratestructurewithauniformvolumetricchargewouldresultinashiftinrevenuerecoveryfromlargevolumeuserstosmallvolumeusers.

Table5presentsthetypicalbillimpactformonthlycustomers.Table6presentsthetypicalbillimpactforquarterlycustomers.Table7presentsamoredetailedanalysisoftypicalbillimpactforquarterlycustomerswitha¾inchmeter,basedonarangeofbilledvolume.

Option #1

All Volume 13.06$

Option #1 (Water & Sewer)



Table 5 Option #1 – Typical Bill Impact, Monthly Customers, Based on Average Volume by Meter Size

Table 6 Option #1 – Typical Bill Impact, Quarterly Customers, Based on Average Volume by Meter Size

Average Typical Bill Impact ‐ Monthly

Monthly

Volume Current Option 1

Small Meters gpd kgal

5/8" 99 3 $35.43 $48.17 $12.74 36.0%

3/4" 132 4 $49.45 $61.56 $12.11 24.5%

1" 132 4 $50.12 $62.23 $12.11 24.2%

Large Meters

1‐1/2" 1,282 39 $723.29 $544.56 ($178.74) ‐24.7%

2" 2,170 66 $1,234.91 $932.43 ($302.48) ‐24.5%

3" 5,293 161 $3,121.44 $2,319.18 ($802.26) ‐25.7%

4" 7,529 229 $4,509.03 $3,308.39 ($1,200.65) ‐26.6%

6" 11,638 354 $7,096.34 $5,095.18 ($2,001.16) ‐28.2%

8" 32,121 977 $19,294.67 $13,771.69 ($5,522.98) ‐28.6%

10" 44,975 1,368 $27,152.28 $19,418.97 ($7,733.31) ‐28.5%

12" 93,699 2,850 $54,880.50 $38,769.45 ($16,111.05) ‐29.4%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %

Average Typical Bill Impact ‐ Quarterly

Quarterly



5/8" 99 9 $106.29 $144.51 $38.22 36.0%

3/4" 132 12 $148.36 $184.68 $36.32 24.5%

1" 132 12 $150.36 $186.68 $36.32 24.2%

Large Meters

1‐1/2" 1,282 117 $2,169.88 $1,633.67 ($536.21) ‐24.7%

2" 2,170 198 $3,704.72 $2,797.29 ($907.43) ‐24.5%

3" 5,293 483 $9,364.32 $6,957.53 ($2,406.79) ‐25.7%

4" 7,529 687 $13,527.10 $9,925.16 ($3,601.94) ‐26.6%

6" 11,638 1,062 $21,289.02 $15,285.53 ($6,003.49) ‐28.2%

8" 32,121 2,931 $57,884.01 $41,315.06 ($16,568.95) ‐28.6%

10" 44,975 4,104 $81,456.84 $58,256.92 ($23,199.92) ‐28.5%

12" 93,699 8,550 $164,641.50 $116,308.34 ($48,333.16) ‐29.4%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %



Table 7 Option #1 – Typical Bill Impact, ¾ Inch Quarterly Customers

Option #2 – 4 Tier Volumetric Rate Structure, No Customer Classes

Thesecondoptionisa4‐tierratestructuretodeterminethevolumetricchargeforallcustomers.Underthisratestructure,volumewouldbebilledincrementallywithineachblock,ratherthanallvolumebeingbilledatthehighesttierreached.

Thisratestructurehasmanybenefits,including:

Alignswithcommonlyusedindustrypractice

Reducesrevenuevolatilitycomparedtoexistingratestructure

Reducescustomerbillvolatility

Increasesrevenuestabilitybybillingmorerevenuethroughlowertiers

Bybilling“through”tiers,fewertierswillbenecessary(lessimpacttocustomersmovingtonexttier)

Abilitytomitigatesomeimpactonsmallcustomersbyphasinginchangestodifferentialsbetweentiers


Morecomplexcalculationroutineneededinthebillingsystem

Impactonsmallvolumecustomersmayrequireadditionalevaluationofactualratesateachtier(Phase‐inplan)

Customerwillneedtierlevelusagedisplayedonthebill(tobeabletocalculatethevolumecharge)

Typical Bill Impact ‐ Quarterly

Current Option 1

gpd kgal

33 3 $51.04 $67.17 $16.13 31.6%

66 6 $80.86 $106.34 $25.48 31.5%

99 9 $107.29 $145.51 $38.22 35.6%

132 12 $148.36 $184.68 $36.32 24.5%

164 15 $199.45 $223.85 $24.40 12.2%

197 18 $233.74 $263.03 $29.29 12.5%

274 25 $375.25 $354.42 ($20.83) ‐5.5%

329 30 $471.10 $419.71 ($51.39) ‐10.9%

384 35 $568.75 $484.99 ($83.76) ‐14.7%

438 40 $664.00 $550.28 ($113.72) ‐17.1%

548 50 $863.00 $680.85 ($182.15) ‐21.1%

658 60 $1,030.00 $811.42 ($218.58) ‐21.2%

822 75 $1,309.00 $1,007.27 ($301.73) ‐23.1%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %

Residential 3/4" Meter

Average Quarterly Volume



Indevelopingthisexample,certainassumptionsweremaderegardingtier“breaks”aswellasmultipliersbetweentheratesforeachtier.Inestablishingthetiers,existingtier“breaks”wereutilizedinordertominimizeconfusionandimpactoncustomers.Thefirsttierwasestablishedwitha1.0multiplier,withtiers2,3and4increasingincrementallyby0.25xTier1(e.g.,Tier2=1.25xTier1,Tier3=1.50xTier1,Tier4=1.75xTier1).Additionally,theTier4ratewassetatapproximatelythesamelevelastheexistingtoptierrate.

Table8providesasummaryofthetotalvolumebilledwithineachOption#2tiercomparedwiththatchargedunderthecurrentratestructure.Asshown,thechangeinmethodologytobillvolumeincrementally“through”thetiersratherthanallvolumeatthetoptierresultsinsignificantlymorevolumebilledatthelowertiers.Thisshiftinbilledvolumeimpactsratedesign,requiringahigherrateforthefirsttierinordertoremainrevenueneutralcomparedtothecurrentratestructure,asshowninTable9.Table9alsopresentsasummaryoftheestimatednumberofbills,percentageofvolumechargedwithineachtier,andthepercentageofvolumechargerevenuerecoveredfromeachtier.

Table 8 Option #2 – Comparison of Billed Volume by Tier, Current Rate Structure vs. Option #2

Table 9 Option #2 – 4 Tier Volumetric Rate Structure, No Customer Classes

ThefollowingtablesprovideacomparisonoftypicalbillsunderOption#2,basedonaveragevolumeforeachmetersize,comparedtothecurrentratestructure.TypicalbillsrepresentthetotalofbothWSSC’scurrentAMFandIIFchargesplustheOption#2VolumetricChargeStructure.Itdoesnotincludeotherfees/charges,suchastheBayRestorationFee.TheimpactonsmallvolumecustomersunderOption#2issignificantlylessthanthatindicatedforOption#1;however,asexpected,smallvolumecustomerscouldseeanincreaseintheirbill,whilelargevolumecustomerswouldseeadecrease.Table10presentsthetypicalbillimpactformonthlycustomers.Table11presentsthetypicalbillimpactforquarterlycustomers.Table12presentsamoredetailedanalysis

Current Rates

0‐99 7,093,499 23,000,518

100‐249 21,272,063 10,789,274

250‐8,999 11,015,605 7,807,158

>=9,000 8,467,046 6,251,268

Billed Volume (1,000 gal)

Tier

(gallons/day) Option 2 Rates

Tier (gallons/day)

Total

Volumetric

Charge

Tier

Multiplier

Approx. % of

Bills ‐ M

Approx. % of

Bills ‐ Q

Approx. %

Volume

% of

Volumetric

Charge

Revenue

0 ‐ 99 10.67$ 1.00 31% 54% 49% 41%

100 ‐ 249 13.34$ 1.25 11% 38% 23% 23%

250 ‐ 8,999 16.01$ 1.50 46% 8% 16% 19%

9,000 & Greater 18.67$ 1.75 12% 0% 12% 17%




oftypicalbillimpactforquarterlycustomerswitha¾inchmeter,basedonarangeofbilledvolume.




Monthly



5/8" 99 3 $35.43 $41.01 $5.58 15.8%

3/4" 132 4 $49.45 $54.68 $5.23 10.6%

1" 132 4 $50.12 $55.35 $5.23 10.4%

Large Meters

1‐1/2" 1,282 39 $723.29 $631.30 ($91.99) ‐12.7%

2" 2,170 66 $1,234.91 $1,098.80 ($136.10) ‐11.0%

3" 5,293 161 $3,121.44 $2,765.73 ($355.71) ‐11.4%

4" 7,529 229 $4,509.03 $3,955.49 ($553.54) ‐12.3%

6" 11,638 354 $7,096.34 $6,325.16 ($771.18) ‐10.9%

8" 32,121 977 $19,294.67 $18,501.05 ($793.62) ‐4.1%

10" 44,975 1,368 $27,152.28 $26,344.58 ($807.70) ‐3.0%

12" 93,699 2,850 $54,880.50 $54,019.42 ($861.08) ‐1.6%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %


Quarterly



5/8" 99 9 $106.29 $123.04 $16.75 15.8%

3/4" 132 12 $148.36 $164.05 $15.69 10.6%

1" 132 12 $150.36 $166.05 $15.69 10.4%

Large Meters

1‐1/2" 1,282 117 $2,169.88 $1,893.90 ($275.98) ‐12.7%

2" 2,170 198 $3,704.72 $3,296.41 ($408.31) ‐11.0%

3" 5,293 483 $9,364.32 $8,297.20 ($1,067.12) ‐11.4%

4" 7,529 687 $13,527.10 $11,866.47 ($1,660.63) ‐12.3%

6" 11,638 1,062 $21,289.02 $18,975.48 ($2,313.54) ‐10.9%

8" 32,121 2,931 $57,884.01 $55,503.15 ($2,380.86) ‐4.1%

10" 44,975 4,104 $81,456.84 $79,033.73 ($2,423.11) ‐3.0%

12" 93,699 8,550 $164,641.50 $162,058.26 ($2,583.24) ‐1.6%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %




Option #3 – Uniform Volumetric Rate Structure, Separate rates for Residential and Non‐Residential

Option#3isauniformvolumetricratestructure,withseparatechargesforResidential(includingMulti‐family)andNon‐Residentialcustomerclasses.Foreachcustomerclass,asinglevolumechargewouldbeassessedasinglerateforallbilledvolume.Thisapproachhasmanybenefits,including:



Allowsimprovedequitybetweencustomerclasses

Allowssomeopportunityfor“phase‐in”ofratestohelpmitigateimpact


Wouldrequiremodificationincalculationroutinesinthebillingsystem

COSstudyrequiredtoaligncustomerclasscostofserviceandassociatedvolumerate

Wouldrequirechangeinlegislationtoallowdifferentratesbycustomerclass

Table13presentsthecalculateduniformvolumetricchargethatwouldberequiredtoproducethesamerevenueasthecurrentratestructure.Theexampleratesshownalsogeneratethesamerevenuebycustomerclassasthecurrentratestructure.Table13alsopresentsasummaryofthepercentageofvolumechargedbyclass,andthepercentageofvolumechargerevenuerecoveredfromeachclass.


Current Option 2

gpd kgal

33 3 $51.04 $60.01 $8.97 17.6%

66 6 $80.86 $90.96 $10.10 12.5%

99 9 $107.29 122.97 $15.68 14.6%

132 12 $148.36 $162.99 $14.63 9.9%

164 15 $199.45 $201.67 $2.22 1.1%

197 18 $233.74 $240.35 $6.61 2.8%

274 25 $375.25 $339.86 ($35.39) ‐9.4%

329 30 $471.10 $418.29 ($52.81) ‐11.2%

384 35 $568.75 $498.32 ($70.43) ‐12.4%

438 40 $664.00 $575.15 ($88.85) ‐13.4%

548 50 $863.00 $733.61 ($129.39) ‐15.0%

658 60 $1,030.00 $892.07 ($137.93) ‐13.4%

822 75 $1,309.00 $1,128.96 ($180.04) ‐13.8%

Average Quarterly Volume

Residential 3/4" Meter Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %



Table 13 Option #3 – Uniform Volumetric Rate Structure, Separate rates for Residential and Non‐Residential

ThefollowingtablesprovideacomparisonoftypicalbillsunderOption#3,basedonaveragevolumeforeachmetersize,comparedtothecurrentratestructure.TypicalbillsrepresentthetotalofbothWSSC’scurrentAMFandIIFchargesplustheOption#3VolumetricChargeStructure.Itdoesnotincludeotherfees/charges,suchastheBayRestorationFee.Thisratestructure,giventheexamplebasedonrecoveringthesamerevenuebyclassasthecurrentratestructure,reducestheshiftincostsbetweensmallvolumeandlargevolumecustomers.

However,fornon‐residentialcustomers,largevolumecustomerswouldseeaslightdecreaseinbillingcomparedtolowvolumenon‐residentialcustomers,whowouldseeanincreasedbill.Forlowvolumeresidentialcustomers,replacementofthecurrentratestructurewithauniformvolumetricchargewouldresultinsignificantbillincreases,whilehighvolumeresidentialcustomerswouldseebilldecreases.Table14presentsthetypicalbillimpactformonthlycustomers.Table15presentsthetypicalbillimpactforquarterlycustomers.Table16presentsamoredetailedanalysisoftypicalbillimpactforquarterlycustomerswitha¾inchmeter,basedonarangeofbilledvolume.


Tier (gallons/day)

Total

Volumetric

Charge

Approx. % of

Bills

Approx. %

Volume

% of

Volumetric

Charge

Revenue

Residential 11.45$ 92% 75% 66%

Non‐Residential 17.98$ 8% 25% 34%



Monthly



5/8" 99 3 $35.43 $43.34 $7.91 22.3%

3/4" 132 4 $49.45 $55.12 $5.66 11.5%

1" 132 4 $50.12 $55.78 $5.66 11.3%

Large Meters

1‐1/2" 1,282 39 $723.29 $736.69 $13.39 1.9%

2" 2,170 66 $1,234.91 $1,257.57 $22.67 1.8%

3" 5,293 161 $3,121.44 $3,112.33 ($9.11) ‐0.3%

4" 7,529 229 $4,509.03 $4,436.54 ($72.50) ‐1.6%

6" 11,638 354 $7,096.34 $6,839.13 ($257.21) ‐3.6%

8" 32,121 977 $19,294.67 $18,584.81 ($709.86) ‐3.7%

10" 44,975 1,368 $27,152.28 $26,158.33 ($993.95) ‐3.7%

12" 93,699 2,850 $54,880.50 $52,809.77 ($2,070.73) ‐3.8%

Increase

(Decrease) ‐ %

Increase

(Decrease) ‐ $





Option #4 – 4 Tier Residential Volumetric Rate Structure, Uniform Non‐Residential Volumetric Rate Structure

ThefinaloptiontheBi‐CountyWorkingGroupselectedtopresenttotheSRGisa4tierratestructureapplicabletoallResidentialcustomers(includingMulti‐family).Underthisratestructure,volumewouldbebilledincrementallywithineachblock,ratherthanallvolumebeingbilledatthe


Quarterly



5/8" 99 9 $106.29 $130.01 $23.72 22.3%

3/4" 132 12 $148.36 $165.35 $16.99 11.5%

1" 132 12 $150.36 $167.35 $16.99 11.3%

Large Meters

1‐1/2" 1,282 117 $2,169.88 $2,210.06 $40.18 1.9%

2" 2,170 198 $3,704.72 $3,772.72 $68.00 1.8%

3" 5,293 483 $9,364.32 $9,337.00 ($27.32) ‐0.3%

4" 7,529 687 $13,527.10 $13,309.61 ($217.49) ‐1.6%

6" 11,638 1,062 $21,289.02 $20,517.40 ($771.62) ‐3.6%

8" 32,121 2,931 $57,884.01 $55,754.43 ($2,129.58) ‐3.7%

10" 44,975 4,104 $81,456.84 $78,474.99 ($2,981.85) ‐3.7%

12" 93,699 8,550 $164,641.50 $158,429.31 ($6,212.19) ‐3.8%

Increase

(Decrease) ‐ %

Increase

(Decrease) ‐ $


Current Option 3

gpd kgal

33 3 $51.04 $62.34 $11.30 22.1%

66 6 $80.86 $96.67 $15.81 19.6%

99 9 $107.29 $131.01 $23.72 22.1%

132 12 $148.36 $165.35 $16.99 11.5%

164 15 $199.45 $199.69 $0.24 0.1%

197 18 $233.74 $234.02 $0.28 0.1%

274 25 $375.25 $314.14 ($61.11) ‐16.3%

329 30 $471.10 $371.37 ($99.73) ‐21.2%

384 35 $568.75 $428.60 ($140.15) ‐24.6%

438 40 $664.00 $485.83 ($178.17) ‐26.8%

548 50 $863.00 $600.29 ($262.71) ‐30.4%

658 60 $1,030.00 $714.75 ($315.25) ‐30.6%

822 75 $1,309.00 $886.43 ($422.57) ‐32.3%

Increase

(Decrease) ‐ %Average Quarterly Volume


(Decrease) ‐ $



highesttierreached.ForNon‐Residentialcustomers,allvolumewouldbebilledbasedonasinglevolumetriccharge.

Thisratestructurehasmanybenefits,including:



IncreasesResidentialconservationincentive

Improvesequitybetweencustomerclasses


MorecomplexbillingcalculationroutinesneededintheBillingsystem

COSstudyrequiredtoproperlysetratesbetweencustomerclasses

Mayrequirechangeinlegislationtoallowdifferentratesbycustomerclass

Indevelopingthisexample,certainassumptionsfortheResidentialratestructureweremaderegardingtier“breaks”aswellasmultipliersbetweentheratesforeachtier.InestablishingtheResidentialtiers,existingtier“breaks”wereutilizedinordertominimizeconfusionandimpactoncustomers.Thefirsttierwasestablishedwitha1.0multiplier,withtiers2,3and4increasingincrementallyby0.25xTier1(e.g.,Tier2=1.25xTier1,Tier3=1.50xTier1,Tier4=1.75xTier1).Becausethisstructureisforresidentialcustomers,the“breaks”betweenthetiersweresetatlowerintervalsthanunderOption#2.

Table17presentstheratesunderthisoptionthatwouldberequiredtoproducethesamerevenueasthecurrentratestructure.Theexampleratesshownalsogeneratethesamerevenuebycustomerclassasthecurrentratestructure.Table17alsopresentsasummaryofthepercentageofbills,percentageofvolumechargedwithineachtierfortheResidentialclass,andtotalvolumefortheNon‐Residentialclass,andthepercentageofvolumetricchargerevenuerecoveredfromeachtierandcustomerclass.

Table 17 Option #4 – 4 Tier Residential Volumetric Rate Structure; Uniform Non‐Residential Volumetric Rate Structure

ThefollowingtablesprovideacomparisonoftypicalbillsunderOption#4,basedonaveragevolumeforeachmetersize,comparedtothecurrentratestructure.Typicalbillsrepresentthetotal

Tier (gallons/day) Resid. Charge

Resid. Tier

Multiplier

Non Resid.

Charge

Approx. % of

Bills

Approx. %

Volume

% of

Volumetric

Charge

Revenue

0 ‐ 99 10.25$ 1.00 49% 48% 38%

100 ‐ 249 12.81$ 1.25 36% 22% 21%

250 ‐ 399 15.38$ 1.50 5% 2% 3%

400 & Greater 17.94$ 1.75 2% 3% 4%

Non‐Resid. 17.98$ 8% 25% 34%




ofbothWSSC’scurrentAMFandIIFchargesplustheOption#4VolumetricChargeStructure.Itdoesnotincludeotherfees/charges,suchastheBayRestorationFee.Table18presentsthetypicalbillimpactformonthlycustomers.Table19presentsthetypicalbillimpactforquarterlycustomers.Table20presentsamoredetailedanalysisoftypicalbillimpactforquarterlycustomerswitha¾inchmeter,basedonarangeofbilledvolume.

Underthisoption,establishingatieredratestructurespecificallyforresidentialcustomersallowstierratestobesetinamannerthathelpsmitigateimpactsoncustomers,althoughasshowninthetables,thisexampledoesresultinimpacttocustomerswithvariousvolumes.Fornon‐residentialcustomers,impactoncustomersisreducedcomparedtosomeoftheotherexamplespresented.




Monthly



5/8" 99 3 $35.43 $39.75 $4.32 12.2%

3/4" 132 4 $49.45 $52.90 $3.45 7.0%

1" 132 4 $50.12 $53.57 $3.45 6.9%

Large Meters

1‐1/2" 1,282 39 $723.29 $736.69 $13.39 1.9%

2" 2,170 66 $1,234.91 $1,257.57 $22.67 1.8%

3" 5,293 161 $3,121.44 $3,112.33 ($9.11) ‐0.3%

4" 7,529 229 $4,509.03 $4,436.54 ($72.50) ‐1.6%

6" 11,638 354 $7,096.34 $6,839.13 ($257.21) ‐3.6%

8" 32,121 977 $19,294.67 $18,584.81 ($709.86) ‐3.7%

10" 44,975 1,368 $27,152.28 $26,158.33 ($993.95) ‐3.7%

12" 93,699 2,850 $54,880.50 $52,809.77 ($2,070.73) ‐3.8%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %


Quarterly



5/8" 99 9 $106.29 $119.26 $12.97 12.2%

3/4" 132 12 $148.36 $158.71 $10.35 7.0%

1" 132 12 $150.36 $160.71 $10.35 6.9%

Large Meters

1‐1/2" 1,282 117 $2,169.88 $2,210.06 $40.18 1.9%

2" 2,170 198 $3,704.72 $3,772.72 $68.00 1.8%

3" 5,293 483 $9,364.32 $9,337.00 ($27.32) ‐0.3%

4" 7,529 687 $13,527.10 $13,309.61 ($217.49) ‐1.6%

6" 11,638 1,062 $21,289.02 $20,517.40 ($771.62) ‐3.6%

8" 32,121 2,931 $57,884.01 $55,754.43 ($2,129.58) ‐3.7%

10" 44,975 4,104 $81,456.84 $78,474.99 ($2,981.85) ‐3.7%

12" 93,699 8,550 $164,641.50 $158,429.31 ($6,212.19) ‐3.8%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %




7.2 STAKEHOLDER REPRESENTATIVES GROUP TheStakeholderRepresentativesGroup(SRG)participatedinthreeworkshops.

Duringthefirstworkshop,theSRGgainedanunderstandingofWSSC–thewaterandsewersystems,customersservedandtheservicesprovidedbyWSSC.Inaddition,therateconsultantprovidedtheSRGwithanoverviewoftheratesettingprocess,industryacceptedratedesignprinciplesandobjectives,andBi‐CountyWorkingGroupgoalsandobjectives.Thepresentationalsoincludedanoverviewofarangeofratestructurescommonlyusedwithintheindustry.

Duringthesecondworkshop,theSRGdiscussedthefouroptionsdevelopedbytheBi‐CountyWorkingGroup,aspresentedintheprevioussection.TherateconsultantprovidedtheSRGaseriesof“givens”tokeepinmindastheydiscussedalternativestructures,asfollows:

AlloptionsaredesignedtoberevenueneutralcomparedtoprojectedFY2017revenues

AnalysisbasedonFY2015detailedbillingdata

FinalratescheduleswillbebasedonFY2019revenueneedsandpossiblyCOSresults

Certainoptionsproposeestablishmentofmultiplecustomerclasses,whichwouldrequirechangestolegislation

RetaintheMeter‐sizedbased“FixedCharge”componentsasundercurrentrates

Retainthe“VolumeCharge”componentasundercurrentrates

Forall“tiered”rateoptions,usagevolumewillbeincrementallycharged“throughtherateblocks”versuschargingallvolumeatthetoptierasunderthecurrentratestructure


Current Option 4

gpd kgal

33 3 $51.04 $58.75 $7.71 15.1%

66 6 $80.86 $88.48 $7.62 9.4%

99 9 $107.29 $119.24 $11.95 11.1%

132 12 $148.36 $157.68 $9.32 6.3%

164 15 $199.45 $194.85 ($4.60) ‐2.3%

197 18 $233.74 $232.01 ($1.73) ‐0.7%

274 25 $375.25 $327.60 ($47.65) ‐12.7%

329 30 $471.10 $402.95 ($68.15) ‐14.5%

384 35 $568.75 $479.84 ($88.91) ‐15.6%

438 40 $664.00 $562.62 ($101.38) ‐15.3%

548 50 $863.00 $740.23 ($122.77) ‐14.2%

658 60 $1,030.00 $917.84 ($112.16) ‐10.9%

822 75 $1,309.00 $1,183.36 ($125.64) ‐9.6%


(Decrease) ‐ $

Increase




Finalrateoptions,completedaspartofthePhaseIIstudywill:

● Managenear‐termbillimpactoncustomers

● ThroughbalancingFixedandVolumecharges;and

● Providefora“Phase‐in”ofselectedstructurewherepossible

AswiththediscussionswiththeBi‐CountyWorkingGroup,theSRGwasinformedthatforallalternatives,theexampleratespresented,andresultingimpactsonvariouscustomertypes,wereforillustrativepurposesonly,astheyreflectrevenueneutralityforFY2017,andinaddition,donotreflectanyadjustmentstospecificratesundereachscenariotoimproveequitybetweencustomergroups.AspartofPhaseIIoftheStudy,specificrates,basedonthe“bestfit”structuresidentifiedthroughPhaseI,willbedevelopedsuchastomeetFY2019revenueneedsandachievedesiredgoalsandobjectives.Inaddition,itisanticipatedthataPhase‐inplanwillbedevelopedtomovetowardthedesiredratestructureinamannerthatmitigatesimpactsonspecificcustomergroups.

7.2.1 SRG Response to Bi‐County Working Group Options

TheSRGengagedinadetaileddiscussionoftheoptionspresented,andexpressedtheirlikes,dislikes,andideasforfurtheranalysis,bothduringtheworkshop,aswellasfollowingtheworkshopviaemail.Followingisasummaryofthefeedbackprovided.Asthelistindicatessomeoftheopinionshadinherentcontradictions:

Rate Structure Discussion

Ratesbyclassarenotpossibleundercurrentlegislation,whyevaluate?

Notinfavorofsettingratesbyclass

An8‐tierratestructureshouldbeevaluated

Option2bestofthe4ratestructuredalternativespresented–Tier2shouldstartatahighervolume;toptiershouldhavehighermultiplier

Option2bestoptiontorefinefurther

Option2isnotacceptable–constitutessocialengineering

RecommendmodifiedOption4–uniformresidential;4tiernon‐residential(settierssosmallnon‐res.customersseelittleimpact).

Revenuestabilityandbillstabilitygoals–supportedbyusingOption2

Newratestructureshouldberevenueneutralbymetersize,orlimitto5%

Ratebymetersizeshouldnotpenalize¾”meterversus5/8”meter

Alternativetoabove,revenueneutralitybetweensmallmetersandlargemeters

Newoption–tiersbasedonmetersize

Ashighvolumecustomer,preferOption1

Okwithanyoptionthatisatieredstructure.

Option3acceptableifnon‐residentialrateisconsiderablylowerthanpresentedinexample.



Related Discussion

Anychangesshouldoccurovermultipleyears

SRGwouldliketomakedecisionswithmoreinformationregardingcustomerdemands,COSanalysisandfinancialplan

Notenoughinformationtomakeeducateddecisiononoptions–delayandallowdiscussionofbothvolumeandfixedcharges

PlanforincreasingfixedchargespostFY2020

Increaserevenuestospendmoreonassetreplacement

ProvideCAPcustomersdiscountoffvolume,notjustfixedcharges

Manageimpactonsmallnon‐residentialcustomersifratesbyclassareconsidered

7.2.2 SRG Additional Options

BasedonSRGfeedbackatthesecondworkshop,threeadditionaloptionsweredevelopedtoillustratethepotentialimpactoncustomersforrevisedoptionsrequested.Thethreeoptionspresentedatthethirdworkshopwere:

Option#5–4TierVolumetricRateStructure:Option2WithDifferentTier“Multipliers,”NoCustomerClasses

Option#6–4TierVolumetricRateStructure:Option2WithDifferentTier“Breaks,”NoCustomerClasses

Option#7–8TierVolumetricRateStructure,NoCustomerClasses

Option #5 – 4 Tier Volumetric Rate Structure: Option 2 with Different Tier “Multipliers,” No Customer Classes

Option#5wasdevelopedtoaddresstheconcernthatthemultipliers,orincrementalchangeintheratescalculatedforeachtierinOption#2,ledtosignificantshiftincostrecoverybycustomerclass.

Indevelopingthisexample,thebreaksbetweenthetierswerekeptthesameasunderOption#2,however,thedifferentialbetweeneachtierwasincreasedfrom0.25xTier1inOption#2to0.50xTier1.ForOption#5,thefirsttierwasestablishedwitha1.0multiplier,withtiers2,3and4increasingincrementallyby0.50xTier1(e.g.,Tier2=1.50xTier1,Tier3=2.00Tier1,Tier4=2.50xTier1).Incalculatingratessuchthatrevenuegeneratedisrevenueneutralcomparedtoexistingrates,thefirsttierwassetlowerthanunderOption#2.Duetothemultipliersbetweentiers,therateforTier4ishigherthanunderOption#2.

Table21providesasummaryoftheratescalculatedforOption#5,aswellastheestimatedbillsstoppingwithineachtier,percentageofvolumechargedwithineachtier,andthepercentageofvolumechargerevenuerecoveredfromeachtier.Asshown,Option#5resultsinlessrevenuerecoveredinTier1comparedtoOption#2,withmorecostsshiftedtotheuppertiers.



Table 21 Option #5 – 4 Tier Volumetric Rate Structure: Option 2 with Different Tier “Multipliers,” No Customer Classes

ThefollowingtablesprovideacomparisonoftypicalbillsunderOption#5,basedonaveragevolumeforeachmetersize,comparedtothecurrentratestructure.TypicalbillsrepresentthetotalofbothWSSC’scurrentAMFandIIFchargesplustheOption#5VolumetricChargeStructure.Itdoesnotincludeotherfees/charges,suchastheBayRestorationFee.

TheimpactonsmallvolumecustomersunderOption#5islessthanthatindicatedforOption#2,withlargevolumecustomersanticipatedtoexperienceasignificantincreaseinbillscomparedtoexistingratesandOption#2rates.Table22presentsthetypicalbillimpactformonthlycustomers.Table23presentsthetypicalbillimpactforquarterlycustomers.Table24presentsamoredetailedanalysisoftypicalbillimpactforquarterlycustomerswitha¾inchmeter,basedonarangeofbilledvolume.

Table 22 Option #5– Typical Bill Impact, Monthly Customers, Based on Average Volume by Meter Size

Tier (gallons/day)

Total

Volumetric

Charge

Tier

Multiplier

Approx. % of

Bills ‐ M

Approx. % of

Bills ‐ Q

Approx. %

Volume

% of

Volumetric

Charge

Revenue

0 ‐ 99 9.02$ 1.00 31% 54% 49% 34%

100 ‐ 249 13.53$ 1.50 11% 38% 23% 24%

250 ‐ 8,999 18.05$ 2.00 46% 8% 16% 22%

9,000 & Greater 22.56$ 2.50 12% 0% 12% 20%



Monthly



5/8" 99 3 $35.43 $36.07 $0.64 1.8%

3/4" 132 4 $49.45 $49.94 $0.48 1.0%

1" 132 4 $50.12 $50.60 $0.48 1.0%

Large Meters

1‐1/2" 1,282 39 $723.29 $691.29 ($32.00) ‐4.4%

2" 2,170 66 $1,234.91 $1,213.86 ($21.04) ‐1.7%

3" 5,293 161 $3,121.44 $3,074.54 ($46.90) ‐1.5%

4" 7,529 229 $4,509.03 $4,402.98 ($106.06) ‐2.4%

6" 11,638 354 $7,096.34 $7,175.62 $79.28 1.1%

8" 32,121 977 $19,294.67 $21,770.71 $2,476.04 12.8%

10" 44,975 1,368 $27,152.28 $31,132.55 $3,980.27 14.7%

12" 93,699 2,850 $54,880.50 $64,562.20 $9,681.70 17.6%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %





Option #6 – 4 Tier Volumetric Rate Structure: Option 2 with Different Tier “Breaks,” No Customer Classes

Option#6wasdevelopedtoaddresstheconcernthatthevolumeincludedinthefirsttwotiersinOption#2wastoolow,resultinginmostresidentialcustomersbeingimpactedbytheincreasedratesintiersbeyondTier1.


Quarterly



5/8" 99 9 $106.29 $108.21 $1.92 1.8%

3/4" 132 12 $148.36 $149.81 $1.45 1.0%

1" 132 12 $150.36 $151.81 $1.45 1.0%

Large Meters

1‐1/2" 1,282 117 $2,169.88 $2,073.88 ($96.00) ‐4.4%

2" 2,170 198 $3,704.72 $3,641.59 ($63.13) ‐1.7%

3" 5,293 483 $9,364.32 $9,223.61 ($140.71) ‐1.5%

4" 7,529 687 $13,527.10 $13,208.93 ($318.17) ‐2.4%

6" 11,638 1,062 $21,289.02 $21,526.87 $237.85 1.1%

8" 32,121 2,931 $57,884.01 $65,312.14 $7,428.13 12.8%

10" 44,975 4,104 $81,456.84 $93,397.64 $11,940.80 14.7%

12" 93,699 8,550 $164,641.50 $193,686.61 $29,045.11 17.6%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %


Current Option 5

gpd kgal

33 3 $51.04 $55.07 $4.03 7.9%

66 6 $80.86 $81.23 $0.37 0.5%

99 9 $107.29 $108.30 $1.01 0.9%

132 12 $148.36 $148.91 $0.55 0.4%

164 15 $199.45 $188.16 ($11.29) ‐5.7%

197 18 $233.74 $227.40 ($6.34) ‐2.7%

274 25 $375.25 $332.52 ($42.73) ‐11.4%

329 30 $471.10 $420.95 ($50.15) ‐10.6%

384 35 $568.75 $511.17 ($57.58) ‐10.1%

438 40 $664.00 $597.79 ($66.21) ‐10.0%

548 50 $863.00 $776.45 ($86.55) ‐10.0%

658 60 $1,030.00 $955.10 ($74.90) ‐7.3%

822 75 $1,309.00 $1,222.17 ($86.83) ‐6.6%


(Decrease) ‐ $

Increase




Indevelopingthisexample,thetiersweresettoaccountformorevolumeinbothtiers1and2.Tier4remainedthesameasunderOptions#2and#5.The“multipliers”betweentiersforthepurposeofsettingrateswaskeptthesameasunderOption#2.Inordertocalculaterevenuesufficienttoremainrevenueneutralcomparedtoexistingrates,theTier1ratewassethigherthanthatindicatedforOption#2,asmorevolumeisbilledwithinthetier.Table25providesasummaryoftheratescalculatedforOption#6,aswellasthepercentageofvolumechargedwithineachtier,andthepercentageofvolumetricchargerevenuerecoveredfromeachtier.

Table 25 Option #6 – 4 Tier Volumetric Rate Structure: Option 2 with Different Tier “Multipliers,” No Customer Classes

ThefollowingtablesprovideacomparisonoftypicalbillsunderOption#6,basedonaveragevolumeforeachmetersize,comparedtothecurrentratestructure.TypicalbillsrepresentthetotalofbothWSSC’scurrentAMFandIIFchargesplustheOption#6VolumetricChargeStructure.Itdoesnotincludeotherfees/charges,suchastheBayRestorationFee.TheimpactonsmallvolumecustomersunderOption#6issignificantlymorethanthatindicatedforOption#2,withverylargevolumecustomersalsoanticipatedtoexperienceanincreaseinbillscomparedtocurrentratesandOption#2rates.Table26presentsthetypicalbillimpactformonthlycustomers.Table27presentsthetypicalbillimpactforquarterlycustomers.Table28presentsamoredetailedanalysisoftypicalbillimpactforquarterlycustomerswitha¾inchmeter,basedonarangeofbilledvolume.


Tier (gallons/day)

Total

Volumetric

Charge

Tier

Multiplier

Approx. % of

Bills ‐ M

Approx. % of

Bills ‐ Q

Approx. %

Volume

% of

Volumetric

Charge

Revenue

0 ‐ 240 11.30$ 1.00 41% 91% 72% 62%

241 ‐ 600 14.13$ 1.25 12% 8% 5% 6%

601 ‐ 9,000 16.95$ 1.50 35% 1% 11% 14%

9,001 & Greater 19.78$ 1.75 12% 0% 12% 18%

10 people x 60 gpd

Match previous top tier


Rationale For Tier "Breaks"

4 people x 60 gpd


Monthly



5/8" 99 3 $35.43 $42.90 $7.47 21.1%

3/4" 132 4 $49.45 $54.54 $5.08 10.3%

1" 132 4 $50.12 $55.20 $5.08 10.1%

Large Meters

1‐1/2" 1,282 39 $723.29 $658.00 ($65.29) ‐9.0%

2" 2,170 66 $1,234.91 $1,151.01 ($83.90) ‐6.8%

3" 5,293 161 $3,121.44 $2,907.69 ($213.75) ‐6.8%

4" 7,529 229 $4,509.03 $4,161.69 ($347.34) ‐7.7%

6" 11,638 354 $7,096.34 $6,662.10 ($434.24) ‐6.1%

8" 32,121 977 $19,294.67 $19,524.65 $229.98 1.2%

10" 44,975 1,368 $27,152.28 $27,799.14 $646.86 2.4%

12" 93,699 2,850 $54,880.50 $57,107.43 $2,226.93 4.1%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %





Option #7 – 8 Tier Volumetric Rate Structure, No Customer Classes

Option#7wasdevelopedtoaddresstheconcernthatchangingfromthecurrent16tierratestructuretoa4tierratestructure,inadditiontothechangeinmethodofbillingfrombillingallvolumeatthetoptierreachedtobillingincrementallythroughthetiers,wouldcausetoomuchimpacttodifferentcustomergroups.ForOption#7,tier“breaks”weredevelopedinamannerthatwouldcontinuetoprovidesomeconservationincentivetoresidentialandothersmallvolume


Quarterly



5/8" 99 9 $106.29 $128.71 $22.42 21.1%

3/4" 132 12 $148.36 $163.61 $15.25 10.3%

1" 132 12 $150.36 $165.61 $15.25 10.1%

Large Meters

1‐1/2" 1,282 117 $2,169.88 $1,974.00 ($195.88) ‐9.0%

2" 2,170 198 $3,704.72 $3,453.03 ($251.69) ‐6.8%

3" 5,293 483 $9,364.32 $8,723.07 ($641.25) ‐6.8%

4" 7,529 687 $13,527.10 $12,485.08 ($1,042.02) ‐7.7%

6" 11,638 1,062 $21,289.02 $19,986.29 ($1,302.73) ‐6.1%

8" 32,121 2,931 $57,884.01 $58,573.96 $689.95 1.2%

10" 44,975 4,104 $81,456.84 $83,397.41 $1,940.57 2.4%

12" 93,699 8,550 $164,641.50 $171,322.29 $6,680.79 4.1%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %


Current Option 6

gpd kgal

33 3 $51.04 $61.90 $10.86 21.3%

66 6 $80.86 $94.67 $13.81 17.1%

99 9 $107.29 128.58 $21.29 19.8%

132 12 $148.36 $162.48 $14.12 9.5%

164 15 $199.45 $199.21 ($0.24) ‐0.1%

197 18 $233.74 $240.17 $6.43 2.8%

274 25 $375.25 $339.05 ($36.20) ‐9.6%

329 30 $471.10 $415.90 ($55.20) ‐11.7%

384 35 $568.75 $500.65 ($68.10) ‐12.0%

438 40 $664.00 $582.02 ($81.98) ‐12.3%

548 50 $863.00 $749.83 ($113.17) ‐13.1%

658 60 $1,030.00 $917.65 ($112.35) ‐10.9%

822 75 $1,309.00 $1,168.52 ($140.48) ‐10.7%


(Decrease) ‐ $

Increase




customersbysettingthefirsttierswithintherangeofvolumeexperiencedbyresidentialcustomers.Inaddition,thefirsttierratewassetataratebetweenthefirsttwotiersoftheexistingratestructure,providingalowrateforverylowvolume.Multipliersbetweenthetiersweresetat0.25xTier1,resultinginamultiplierforthetoptierat2.75xTier1.

Table29providesasummaryoftheratescalculatedforOption#7,aswellasthepercentageofbillsstoppingineachtier,percentageofvolumechargedwithineachtier,andthepercentageofvolumechargerevenuerecoveredfromeachtier.

Table 29 Option #7 – 8 Tier Volumetric Rate Structure, No Customer Classes

ThefollowingtablesprovideacomparisonoftypicalbillsunderOption#7,basedonaveragevolumeforeachmetersize,comparedtothecurrentratestructure.TypicalbillsrepresentthetotalofbothWSSC’scurrentAMFandIIFchargesplustheOption#7VolumeChargeStructure.Itdoesnotincludeotherfees/charges,suchastheBayRestorationFee.Underthisscenario,bothverysmallvolumecustomersandlargevolumecustomerswouldseeincreasedbills,wheremoderatevolumecustomerswouldseeadecreasedbill.Table30presentsthetypicalbillimpactformonthlycustomers.Table31presentsthetypicalbillimpactforquarterlycustomers.Table32presentsamoredetailedanalysisoftypicalbillimpactforquarterlycustomerswitha¾inchmeter,basedonarangeofbilledvolume.

Tier (gallons/day)

Total

Volumetric

Charge

Tier

Multiplier

Approx. % of

Bills ‐ M

Approx. % of

Bills ‐ Q

Approx. %

Volume

% of

Volumetric

Charge

Revenue

0 ‐ 60 8.62$ 1.00 28% 33% 33% 22%

61 ‐ 120 10.78$ 1.25 7% 30% 23% 19%

121 ‐ 240 12.93$ 1.50 6% 28% 16% 16%

241 ‐ 600 15.09$ 1.75 12% 8% 6% 6%

601 ‐ 1,800 17.24$ 2.00 15% 1% 4% 5%

1,801 ‐ 4,200 19.40$ 2.25 12% 0% 3% 5%

4,200 ‐ 9,000 21.55$ 2.50 8% 0% 3% 6%

9,001 & Greater 23.71$ 2.75 12% 0% 12% 21%


1 person x 60 gpd

2 people x 60 gpd

4 people x 60 gpd

10 people x 60 gpd

Even distr of vol in tiers 5‐7



Match previous top tier

Rationale For Tier "Breaks"






Monthly



5/8" 99 3 $35.43 $38.09 $2.66 7.5%

3/4" 132 4 $49.45 $49.20 ($0.25) ‐0.5%

1" 132 4 $50.12 $49.87 ($0.25) ‐0.5%

Large Meters

1‐1/2" 1,282 39 $723.29 $638.12 ($85.18) ‐11.8%

2" 2,170 66 $1,234.91 $1,197.14 ($37.76) ‐3.1%

3" 5,293 161 $3,121.44 $3,366.05 $244.61 7.8%

4" 7,529 229 $4,509.03 $4,932.85 $423.82 9.4%

6" 11,638 354 $7,096.34 $7,954.46 $858.12 12.1%

8" 32,121 977 $19,294.67 $23,265.43 $3,970.76 20.6%

10" 44,975 1,368 $27,152.28 $33,076.55 $5,924.27 21.8%

12" 93,699 2,850 $54,880.50 $68,209.14 $13,328.64 24.3%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %


Quarterly



5/8" 99 9 $106.29 $114.28 $7.99 7.5%

3/4" 132 12 $148.36 $147.61 ($0.75) ‐0.5%

1" 132 12 $150.36 $149.61 ($0.75) ‐0.5%

Large Meters

1‐1/2" 1,282 117 $2,169.88 $1,914.35 ($255.53) ‐11.8%

2" 2,170 198 $3,704.72 $3,591.43 ($113.29) ‐3.1%

3" 5,293 483 $9,364.32 $10,098.14 $733.82 7.8%

4" 7,529 687 $13,527.10 $14,798.56 $1,271.46 9.4%

6" 11,638 1,062 $21,289.02 $23,863.39 $2,574.37 12.1%

8" 32,121 2,931 $57,884.01 $69,796.28 $11,912.27 20.6%

10" 44,975 4,104 $81,456.84 $99,229.66 $17,772.82 21.8%

12" 93,699 8,550 $164,641.50 $204,627.43 $39,985.93 24.3%

Increase

(Decrease) ‐ $

Increase

(Decrease) ‐ %




7.2.3 SRG Response to All Options Presented

WhiletheSRG’srolewasnottoprovideaconsensusdecisionononeormorerateoptionsforWSSCtomoveforwardwithinPhaseII,theywereaskedtoprovidedetailedfeedbackonalloftheinformationprovidedtothemduringthethreeworkshops.Asindicated,theSRG’sinputafterWorkshop#2ledtothedevelopmentofthreeadditionaloptionstoevaluatethepotentialimpactofchangestheyhaddiscussed.

DuringWorkshop#3,theSRGdiscussedeachoptionasajointgroup,andalsosplitoutintothreesmallerworkinggroupstodiscusstheoptionspresentedaswellasoverallconsiderationstheywouldliketheBi‐CountyWorkingGroupandWSSCconsideras“bestfit”optionsaredevelopedforanalysisinPhaseII.

WhiletherewasnotaconsensusamongalltheSRGmembersoneachofthefollowingdiscussionpoints,thesepointswereprofferedbyvariousSRGmembersassufficientsupporttodirecttheBi‐CountyWorkingGroupandWSSCtoconsiderthree“bestfit”options.

Overall Discussion

Existingmethodologyofbillingallvolumeatthetoptiershouldbeeliminated.

EnhanceCAPassistanceforlowincomecustomerstoincludenotonlythefixedcharges,butalsosomelevelofvolumecharges,ratherthandevelopingaratestructurethattriestoprovidereliefintheformofalifelinerateforsmallvolumecustomers

Generateappropriatelevelsoffixedchargerevenuebasedoncostofservice,increasingthepercentageofrevenuerecoveredfromfixedcharges


Current Option 7

gpd kgal

33 3 $51.04 $53.86 $2.82 5.5%

66 6 $80.86 $82.09 $1.23 1.5%

99 9 $107.29 114.42 $7.13 6.6%

132 12 $148.36 $146.75 ($1.61) ‐1.1%

164 15 $199.45 $181.01 ($18.44) ‐9.2%

197 18 $233.74 $218.51 ($15.23) ‐6.5%

274 25 $375.25 $309.03 ($66.22) ‐17.6%

329 30 $471.10 $378.21 ($92.89) ‐19.7%

384 35 $568.75 $453.63 ($115.12) ‐20.2%

438 40 $664.00 $526.05 ($137.95) ‐20.8%

548 50 $863.00 $675.39 ($187.61) ‐21.7%

658 60 $1,030.00 $836.17 ($193.83) ‐18.8%

822 75 $1,309.00 $1,091.33 ($217.67) ‐16.6%


(Decrease) ‐ $

Increase




Ratesshouldbeaffordableforresidentialcustomers,butbusinessesaswell

Highervolumecustomersshouldnotsubsidizelowervolumecustomers

Phase‐inplantodesiredratestructureandequitablecostrecoverynecessarytomanageimpactsoncustomers

Rate Structure Discussion

Singlestructureforallcustomers,givencurrentlegislation

Somesupportformultiplecustomerclassesiflegislationapproved;othersopposedtoratesbyclass

HybridbetweenOptions#5and#6–neitherperfect,butfavorabletootheroptions.Considerpotential5thtier

Toptiershouldbehighertominimizeimpactonmoderatesizedbusinesses

ConsidertierssettocaptureResidential(Tier1),Business(Tier2),andverylargeusers(Tier3)

Uniformvolumerateforallcustomersnotpreferred

Onememberpreferredtokeeptheexistingratestructure

SomesupportforOption#2


BLACK & VEATCH | Bi‐County Working Group and WSSC Direction for Phase II 41

8 Bi‐County Working Group and WSSC Direction for Phase II BasedontheinputreceivedattheSRGworkshops,andgiventhelikelihoodthatlegislationwillnotbepassedintimetoconsiderratesbycustomerclassforFY2019,theBi‐CountyWorkingGroupmettodiscussthevariousoptionsandprioritiesforratescheduledevelopment,andtoprovidedirectiontotherateconsultantforPhaseIIdevelopment.Thefollowingpotentialratestructureswillbeconsideredduringthecostofserviceanalysisphaseoftheratestudy:

Singleratestructureforallcustomers

Bill“through”tiersratherthancurrentratestructuremethodologyofbillingallvolumeattoptierreached

4tierratestructure

● moretiersbecomeuncommonwithinindustry

● fewertierslimitabilitytodevelopoptionstohelpmitigateimpactondifferentgroupsofcustomers

● Toptiersetatahigherlevelthanforpreviousoptions,designedtoreflecttopusersonly

Three‐yearphase‐inplantoreachcostofservicebycustomerclass(orreasonablyclose,givenlimitationsofasingleratestructure)

GiventhedirectionfromtheBi‐CountyWorkingGroup,therateconsultantandWSSCmanagementdeterminedthefollowingthreeratealternativesfordevelopmentinPhaseIIofthestudy:

Alternative#1–Option#2tierbreaks;revise“multipliers”asappropriate

Alternative#2–Option#6tierbreaks;revise“multipliers”asappropriate

Alternative#3–developmentofasecondscenarioforeitherAlternative#1or#2.DevelopmentwillbedeterminedbasedontheoutcomeofAlternatives#1and#2.

Inaddition,whileauniformvolumerateisnotrecommendedforimplementation,itwillbecalculatedforeachfiscalyearforcomparisontothealternativeratestructures.

Cost‐of‐servicebasedrateswillbedevelopedforeachalternative.Anticipatingthatimplementationofcost‐of‐servicebasedrateswillnotbefeasibleduetotheimpactsuchachangewouldcausetocustomers,athree‐yearphaseinplanwillbedevelopedinordertominimizeFY2019impactoncustomers.RatesforFY2020andFY2021(years2and3ofaphase‐inprogram)wouldbesettomovetowardcostofservicerecovery.


BLACK & VEATCH | Appendix A – Bi‐County Working Group Charter 42

Appendix A – Bi‐County Working Group Charter

Washington Suburban Sanitary Commission (WSSC) Bi-County Rate Structure Working Group

Charter

Purpose: The Bi-County Rate Structure Working Group provides a structure for key stakeholders, subject matter experts, and management to identify viable rate structure alternatives to meet revenue requirements needed to properly operate, maintain, and upgrade the WSSC water and wastewater system. Approach: The Bi-County Working Group approach is to undertake a structured strategic review of:

1. Existing WSSC financial instruments and funding methods, e.g. rates, variable rate structure, fixed fees and rate stabilization

2. Existing operating and capital program requirements, including exogenous factors such as conservation and affordability;

3. Existing statutory and annual budget and financial policy parameters established by the State of Maryland, Prince George’s and Montgomery Counties, and the WSSC Commissioners;

4. A structured environmental scan of alternative rate structures; 5. Potential impediments to the implementation of proposed actions and strategies.

Goals: The Bi-County Working Group goals are as follows:

Provide a short list of viable alternative rate structures for presentation to the Stakeholder Representative Group

After considering stakeholder and public feedback, provide a rate structure recommendation to the WSSC General Manager/CEO and to the WSSC Commissioners

Provide strategic guidance and support in the implementation of Bi-County Working Group recommendation that is adopted by the General Manager/CEO and/or the WSSC Commissioners.

Organization: The Bi-County Working Group will be convened by the WSSC General Manager/CEO, and it will be comprised of the WSSC General Manager/CEO, a representative of the Montgomery County Council, a representative of the Prince George’s County Council, a representative of the Montgomery County Executive and a representative of the Prince George’s County Executive. WSSC staff and external subject matter experts will participate as appropriate.


BLACK & VEATCH | Appendix B – Peer Utility Rate Structure Comparison 43

Appendix B – Peer Utility Rate Structure Comparison

www.bv.com

12 September 2016

To: Mr. Joseph F. Beach, Chief Financial Officer, Washington Suburban Sanitary Commission

From: Pam Lemoine

Reviewed: Ann Bui/Prabha Kumar

RE: Water/Sewer Rate Structure Comparison

Per your request, Black & Veatch has prepared the enclosed technical memorandum on a comparative analysis of water and sewer rate structures (“peer utility comparison”) for selected utilities across the United States. This comparison supplements the discussion and presentation materials prepared for Workshops #1 and #2 of the Bi-County Rate Structure Working Group, and has been prepared in response to a request by the Bi-County Rate Structure Working Group.

This peer utility comparison evaluates the rate structures of the water and sewer utilities serving 12 metropolitan areas that are approximately the same size as that served by Washington Suburban Sanitary Commission (WSSC).

The following metropolitan areas were included as part of this study:

Atlanta, Georgia Baltimore, Maryland Boston, Massachusetts Chicago, Illinois Cleveland, Ohio Columbus, Ohio Denver, Colorado Indianapolis, Indiana Louisville, Kentucky New York City, New York Seattle, Washington Washington, D.C.

The information used in this study was obtained from water and sewer rate schedules provided by utilities available online.

In addition, this technical memorandum presents a broader comparison of rate structures utilized by water and sewer utilities across the United States, as analyzed by industry organizations.

12 SEPTEMBER 2016 | PAGE 2

INDUSTRY COMPARISON OF WATER AND SEWER RATE STRUCTURES The American Water Works Association (AWWA) publishes a comparison of water and sewer rate structures via a biennial rate survey of water utilities in the United States. The AWWA 2014 Water and Wastewater Rate Survey (AWWA 2014 Survey) compared the rate structures of 318 water utilities and 231 wastewater utilities across 44 states and the District of Columbia. Surveyed utilities serve populations as small as 1,000 to 9 million customers (population).

As presented in AWWA’s 2014 Survey, Table III-18, Residential Water Rates Structures, the survey participants indicated having one of five types of rate structures. Table 1 presents a summary of those results.

Table 1 Types of Residential Rate Structures (AWWA 2014 Survey)

TYPES OF RATE STRUCTURE WATER WASTEWATER

Flat charge 1% 13%

Uniform Rates 29% 66%

Decreasing block rates 16% 6%

Increasing block rates 50% 14%

Increasing/decreasing block rates 4% 0%

Responses 296 214

Overview of the Types of Rate Structure a. Flat Charge: Customers are charged a single flat fee regardless of the volume of water used.

b. Uniform Rates: Customers are charged based on the volume of water used, and all usage is charged based on a single volume rate.

c. Decreasing Block Rates: Customers are charge based on the volume of water used. However, the volume rate used in calculating the charges declines with each successive usage block.

d. Increasing Block Rates: Customers are charge based on the volume of water used. However, the volume rate used in calculating the charges increases with each successive usage block.

e. Increasing/Decreasing Block Rates: Customers are charge based on the volume of water used.

Water utilities with increasing block rates most commonly utilize 3-5 blocks (3 blocks=33%, 4 blocks=25%, 5 blocks=17%). Water utilities with decreasing block rates most commonly utilize 2-4 blocks (2 blocks=19%, 3 blocks=38%, four blocks=19%). Wastewater utilities with inclining block rates most commonly utilize 2-4 blocks (2 blocks=52%, 3 blocks=19%, and 4 blocks=10%). Wastewater utilizing declining block rate structures most commonly use 2-3 blocks (2 blocks=46%, 3 blocks=31%).


The AWWA survey indicates, as compared with previous AWWA surveys, that there is a trend away from declining block rate structures, and an increase in inclining block rate structures, as shown in Figure 1.

Figure 1 Volume Rate Structure Trend

PEER UTILITY COMPARISON Black & Veatch has prepared a comparison of the rate structures in place for 12 regional water and sewer utilities serving metropolitan areas that are approximately the same size as that served by WSSC. Table 2 presents the cities included in this peer utility comparison, along with the utilities serving each city/metropolitan area.

Table 2 – Peer Utility Information

CITY ESTIMATED POPULATION* SERVED BY:

Atlanta, Georgia 463,878 City utilities

Baltimore, Maryland

621,849 City utilities

Boston, Massachusetts

667,137 Boston Water & Sewer Commission

Chicago, Illinois 2,720,546 City utilities

Cleveland, Ohio 388,072 City Utility (water, sewer collection system); Northeast Ohio Regional Sewer District (sewer conveyance/treatment)

Columbus, Ohio 850,106 City utilities

Denver, Colorado 682,545 Denver Water and Denver Department of Wastewater Management

Indianapolis, Indiana

853,173 Citizens Energy Group

0%10%20%30%40%50%60%70%80%90%

100%

1998 2000 2002 2004 2006 2008 2010 2012 2014

Uniform

Inclining

Declining


CITY ESTIMATED POPULATION* SERVED BY:

Louisville, Kentucky

615,366 Louisville Water Company and Louisville & Jefferson County Metropolitan Sewer District

New York City, New York

8,550,405 City utilities

Seattle, Washington

684,451 Seattle Public Utilities (sewer conveyance/ treatment provided by King County Wastewater and Southwest Suburban Sewer District, cost included in SPU rates)

Washington, D.C. 672,228 DC Water

* 2015 estimated population (U.S. Census). Population of primary city. Population of service area for most utilities is larger, serving customers in metropolitan area and in some cases, beyond.

The cities chosen for this comparison represent large, regional water and sewer systems throughout the country. While the environment, topography, water source(s), and demographics vary, these utilities are facing many of the same issues that WSSC is facing, including declining volume and large capital programs driving the need for increasing revenues. Some of these utilities are also focused on driving conservation, while others have sufficient water supply and are not as concerned with reducing water use demand.

Tables 3 and 4 provide a summary of water and sewer rate structures and related billing information for each city. The results from Black & Veatch’s peer utility comparison is consistent with AWWA’s 2014 survey results that are based on a much larger sample, discussed in the previous section of this memorandum.

Fixed Charges While most utilities have in place a service charge to recover certain fixed costs (at a minimum billing-related costs), not all utilities have such a fee in place. For instance, Baltimore does not have a fixed service charge; however it does have a minimum bill based on the volume charge and a minimum volume that serves to ensure a portion of costs are recovered through fixed revenue. New York charges either a minimum of $0.49 per day per meter or a bill based on actual water use, whichever is greater, which also provides for some fixed revenue. Boston and Chicago are the only utility within the peer comparison that does not have any fixed charge revenue component.

Volume Charge Structures As shown, most of the water utilities included in this peer utility comparison charge customers based on an inclining block rate structure, with the number of blocks ranging from two to six. In some cases, the block rate is in place only in the peak season (e.g., Seattle), or are based on individual customer winter usage (e.g., Denver).


Many of the peer utilities evaluated have rate structures that vary depending upon whether the customer is residential or non-residential. As shown in Tables 3 and 4, inclining block rate structures are less common for non-residential customers than for residential customers. This is consistent with the information and discussion Black & Veatch has provided during previous Bi-County Rate Structure Working Group workshops. While most of the utilities included in this comparison have inclining block structures, some have maintained uniform block, or even declining block structures for non-residential customers. In addition, other considerations, such as elevation and distance from treatment plants are a consideration for Cleveland Water and Louisville Water Company.

Our peer utility comparison also indicates that in most cities sewer rate structures are not identical to water rate structures. This may be due to the fact that different utilities provide the water and sewer service, and therefore establish rate structures that best meet the individual utility’s needs. Alternatively, sewer rate structures may have been established to reflect specific sewer system/service requirements rather than overall service area considerations (e.g., conservation is not normally a driver for sewer utilities, but is often an important consideration for water utilities).

As shown in Tables 3 and 4, most of the utilities included in this peer utility comparison base sewer bills on actual water use, while two calculate sewer bills based on a winter period or make an adjustment to reflect water not entering the sewer system.

Billing Frequency The majority of the peer utilities included in this comparison currently bill customers on a monthly basis, or is planning on moving to monthly billing within the next 1-2 years. Monthly billing provides customers with the ability to better budget for water/sewer bills by paying on a monthly basis, rather than paying a much larger bill every three months. In addition, monthly billing helps support conservation goals by providing more frequent information to the customer regarding water use, and to all allow earlier identification of leaks.

CONCLUSION As indicated, large, regional water and sewer utilities throughout the United States utilize a range of rate structures to help them meet their utility-specific goals and objectives. While not discussed within this memorandum, Black & Veatch has presented to the Bi-County Rate Structure Working Group a range of policies and objectives that utilities consider in establishing rate structures for their service area. It is important for WSSC and the Working Group to continue to be mindful of WSSC’s prioritized goals and objectives as it continues to consider alternative rate structures for implementation in Fiscal Year 2019 and beyond.


Table 3 – Comparison of Water Rate Structures

Atla

nta

(1)

Balti

mor

e (2

)

Bost

on (3

)

Chic

ago

(4)

Clev

elan

d (5

)

Colu

mbu

s (6)

Denv

er (7

)

Indi

anap

olis

(8)

Loui

svill

e (9

)

New

Yor

k (1

0)

Seat

tle (1

1)

Was

hing

ton

DC (1

2)

Service Charge

Varies by meter size? No Yes Yes Yes Yes Yes Yes YesMinimum Allowance * *Volume Charge

Uniform

Tiered

# Tiers 3 3 6 2 2/6 3 5 3/4 1/3 2 Declining?

Inclining?

Other * * *Other Fees/Charges

Billing Frequency (13) M Q M M (14) Q (15) Q (16) M M M Q (17) M M

Ccf = hundred cubic feet. 1 cubic foot = 7.48 gallons.

* See footnote.

(1) Inclining block rate structure (0-3 Ccf, 3-6 Ccf, >6 Ccf)

(4) Uniform volume charge.

(10) Minimum charge for water service is $0.49 per day per water meter within a billing period.

(12) Service charge includes customer metering fee and water system replacement fee. Volume charges vary by customer class. Residential is a 2 tier structure. Multifamily and Non-Residential accounts are billed based on a uniform volume charge.

(17) Monthly billing available for those who choose online/electronic billing.

(13) M=Monthly; Q=Quarterly

(16) Majority of customers are billed quarterly; however Columbus does bill some customers on a monthly basis

(15) Cleveland Water and NEORSD is moving to monthly billing in 2017.

(8) Residential is billed based on a uniform volume charge. Non-residential, including multi-family, is billed based on a declining block rate structure that varies by customer class.

(9) Residential billed on 3 tier inclining rate structure. Non-residential billed on 4 tier declining rate structure. Elevation surcharge ($/1,000 gallons) applied to customers meeting certain service location and elevation thresholds.

(11) Residential customers pay a uniform volume charge in off-peak season, and a 3 tier inclining rate structure in peak season: 0-5 Ccf, 6-18 Ccf, >18 Ccf). General service (non-residential) customers pay a uniform volume charge that varies between peak and off-peak seasons.

Comparison of Water Utility Rate Structures

Utility Name:

(2) Minimum charge based on meter size - allowance varies based on meter size (allowance times first tier rate).

(3) Tiered volume charge based on cubic feet per day.

(5) Tiered rate structure also varies by Water Zone (distance and elevation from treatment plant).

(6) Volume Charges - Residential: Two tier inclining volume rate structure (0-5 Ccf/month, over 5 Ccf/month); Non-residential: 6 tier declining rate structure.

(7) Tiers based on increase over average winter quarter volume for each customer (Single Family Residential: minimum 5,000 gallons; maximum 15,000 gallons). Irrigation rate varies by season.

(14) Chicago bills either monthly or bi-monthly, depending on service type.


Table 4 – Comparison of Sewer Rate Structures

Atla

nta

(1)

Balti

mor

e (2

)

Bost

on (3

)

Chic

ago

(4)

Clev

elan

d (5

)

Colu

mbu

s (6)

Denv

er (7

)

Indi

anap

olis

(8)

Loui

svill

e (9

)

New

Yor

k (1

0)

Seat

tle (1

1)

Was

hing

ton

DC (1

2)

Service Charge

Varies by meter size? No Yes No Yes No Yes NoMinimum Allowance

Volume Charge * *

Uniform

Tiered

# Tiers 3 6 2 Declining

Inclining

Other Fees/Charges

Basis for Billing (13) A A A * A A W (18) W A (19) * A ABilling Frequency (14) M Q M M (15) Q (16) Q (17) M M M Q (20) M M

Ccf = hundred cubic feet. 1 cubic foot = 7.48 gallons.

* See footnote.

(20) Monthly billing available for those who choose online/electronic billing.

(15) Chicago bills either monthly or bi-monthly, depending on service type.

(4) Sewer bill is 100% of water bill.

(18) Winter consumption based on February bill.

(19) Actual water use less % adjustment year round to recognize water not entering sewer system (Residential=15%, Commercial/Institutional=10%, Industrial=5%).

(10) Sewer bill is 159% of water bill.

(11) Uniform volume charge; minimum bill = 1 Ccf.

(13) A=Actual water use; W=Winter quarter average.

(14) M=Monthly; Q=Quarterly

(16) Cleveland Water and NEORSD is moving to monthly billing in 2017.

(17) Majority of customers are billed quarterly; however Columbus does bill some customers on a monthly basis

(5) Sewer bill includes both fixed quarterly charge by Cleveland Water Pollution Control for maintaining collection system, and NEORSD charges for conveyance and treatment of wastewater. NEORSD rates include a service charge and uniform volumetric charge. WPC Fee varies by meter size. NEORSD Service Charge uniform for all meter sizes.

(6) Portion of sewer costs recovered through an impervious area charge referred to as Clean River Fee.

(12) Volume charges vary by customer class. A portion of wastewater costs recovered through an impervious area charge (Clean Rivers Charge).

(7) Service Charge is actually a minimum charge based on meter size. Once calculated bill exceeds minimum, actual bill based on volume charge is assessed. Volume charge is uniform based on winter quarter volume.

(8) Minimum charge in place (3,000 gallons).

(9) Uniform volume charge by customer class. EPA Consent Decree Surcharge ($/month, by customer class) also assessed to all customers.

(1) A portion of wastewater costs recovered through a dedicated sales tax (MOST).

(2) Minimum charge based on meter size - allowance varies based on meter size (allowance times volume charge).

(3) Tiered volume charge based on cubic feet per day.

Comparison of Sewer Utility Rate Structures

Utility Name:

Documents

COMPREHENSIVE WATER AND WASTEWATER COST OF …...FINAL REPORT COMPREHENSIVE WATER AND WASTEWATER COST OF SERVICE AND RATE STUDY Phase 1 Report ‐ Stakeholder Engagement BLACK & VEATCH