65B - PROPOSED WATER AND SEWER RATE ADJ

Home Browse Search

56 WATER RATE STUDY I City of Santa Ana, CA Design of Volumetric Charges Any proposed rate structure should provide for full cost recovery. However, in addition to this fundamental requirement, the design of water rate structures should also meet the following objectives: • Mitigate revenue volatility • Promote water conservation • Minimize excessive customer bill impacts Consequently, water rate design must balance financial management, long -range planning, and public policy considerations. Since the City's last rate increase, Southern California has experienced severe drought conditions. As a result, consumer awareness regarding the need to conserve water is very high. Moreover, the increased use of water - efficient devices (toilets, dishwashers, washers, etc.) has helped customers conserve. The proposed tier breakpoints reflect general usage patterns of the City's single - family residential customers as well as rate setting industry standards and AWWA household usage survey data. AWWA survey data indicate that typical indoor residential water consumption is roughly 50 to 60 gallons per person per day. In Santa Ana, the typical residential family size is 4.3 persons per household according to data from the California State Department of Finance (2014). Thus, the approximate monthly residential water use can range from 6,500 gallons per month to 7,700 gallons per month (or 8.6 hcf to 10.3 hcf per month). The US EPA notes that indoor use can vary from 30 to 70 percent of total billed usage. The variance depends on local conditions including lot size, population density, and water scarcity. For the City, examining the peak winter to summer usage data reveals that the indoor /outdoor ratio for the single - family residential is about 40 percent, which corresponds to a monthly usage of about 21.5 hcf. Thus, including an allowance for outdoor irrigation, it is reasonable to maintain the Tier 1 breakpoint at 22 HCF per month. The pricing differentials between tiers are based on factors similar to the maximum day and peak hour peaking factors described earlier in this report as well as local and non -local water supply costs. Non - local water supply costs also include expenses related to distribution and administration costs. In addition, changing the mix of water supplies through the tiers also contributes to the differentials. Black & Veatch has utilized a combination of these factors as well as peak demand considerations in setting the proposed tier pricing. The units of water included in Tier 1 are priced at the lowest rate since it represents the City's least expensive source of water — local supply. As water consumption increases beyond the base tier, water supplies to meet this demand lead to greater investments by the City in alternate sources of supply, yet at much higher costs per acre foot. The use of peaking factors reasonably represents the relationship between higher water consumption and increasing water supply costs. Table 24 illustrates the distribution of base, max day and max hour costs recovered over the tiers. �I M • • [01t•1ri4u11111 lIN