DENVER WATER

Lessons from 2016 Rate Structure ChangeAngela Bricmont, CFO

Balance conflicting goals of rate structure study

• Improve revenue stability• Encourage conservation

at all consumption levels• Keep bills affordable

2

Affordability

Conservation

Equity

Revenuestability

Declining water use – planned

3

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

GallonsperCapitaperDay

223

142Source:2013AnnualReport

Increasing revenue variability due to weather – not planned

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40

50

60

70

80

90

2008 2009 2010 2011 2012 2013

BilledWaterUse(milliongallons)

2008-2013Average

$20 million revenuedecrease from 2008 to

2009 despite a 2009 rate increase

$41 million revenuedecrease from 2012 to

2013 despite a 2013 rate increase

Rating agencies concerned about low % of fixed revenue and volatility

5

7%Fixed

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2015RateRevenues

FixedChargeRevenue VolumeChargeRevenue

Keep bills affordable

• While lower income neighborhood may have affordability concerns, Denver Water remains very affordable to majority of residents.

• Will increasing revenue stability negatively impact affordability?

6

Keep conservation message strong

4/18/177

Research before changing structure• National and regional trends in rate structures• Customer understanding and preferences• Affordability

8381472482543544544572573595637638658666668678706756779

9231,027

1,379

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400

PuebloBroomfield

ArvadaDenverWaterInsideCity2016

FortCollinsBoulder

DenverWaterInsideCity2017HighlandsRanch

LouisvilleDenverWaterTotalService2016

NorthglennGolden

WestminsterThornton

DenverWaterTotalService2017BrightonParkerAurora

ErieColoradoSprings

Arapahoe

2017SingleFamilyResidentialMetroSurvey115,000gallonsperyear

Engage key stakeholders• Mayor, Council and Board of Water Commissioners• Distributors and Citizens Advisory Committee• Rate Structure Advisory Committee:

9

JessicaAcostaHispanicChamberofCommerce

AnthonyE.GravesOfficeofMayorMichaelB.Hancock

DeniseHaasCommunityAssociationInstitute

AlexBrownCherryHillsVillageCityCouncil

BethanyGravellDWCitizens AdvisoryCommittee

BrianJacksonEnvironmentalDefenseFund

NancyBurkeApartmentAssociationofMetroDenver

JenniferGremmertEnergyOutreachColorado

GennyKlineAidetoDenverCouncilwomanSusman

HunterCauseyColoradoRiverDistrict

IanPhilips(alternate)ColoradoRiverDistrict

MariamMasidCO Housing&FinancingAuth.

TimothyJ.FlynnDistributor TechnicalAdvisoryCommittee

MitchellTerryDistributorForum

ChuckWardDenverMetroChamberofCommerce

Changes to residential class*

10

OldStructure(2015) NewStructure(2016)

Monthly Service Charge $6.74 $8.79 Monthly Service

Charge*

Monthly Consumption

(Gallons)

Rate per1,000 Gallons

Block/ Tier

Rate per1,000 Gallons

Monthly Consumption

(Gallons)

0,000 - 11,000 $2.75 1 $2.60 0 - AWC

12,000 - 30,000 $5.50 2 $4.68 AWC + 15,000

31,000-40,000 $8.25 3 $6.24 > AWC + 15,000

Over 40,000 $11.00 4 - -

*RateStructureCommitteerecommended3-yearphaseinfrom7%to20%fixedrevenue

Communication strategy• Educate elected officials AND employees

– Call center needs special attention

• Media stories on new structure and rate increase

• Focus groups to refine customer messages

• Bill stuffers

• Website devoted to rate structure study/changes– FAQs and talking points– Bill impacts – Reports and presentations

11

QUESTIONS

angela.bricmont@denverwater.org