Sewer Rate EvaluationWareham, Massachusetts

January 14, 2014

Michael J. Schrader, P.E.

Project Goals

Make an informed decision relative to:

1. What should the basis of the sewer rate be:

EDU’s or Gallons?

2. What should the rate itself be?

WE WANTFAIR

RATES

Ratemaking Goal No. 1

To ensure that the utility has revenue sufficient to

- Operate the utility (pay the bills)

- Maintain all facilities in working order (upkeep)

- Replace/upgrade equipment as required (capital)

- Repay debt (sustainability)

What do Rates Cover?

Expenses:

Direct & Indirect Payroll & BenefitsElectricityUtilitiesChemicals

CapitalDebt ServiceCapital Outlay

59%

41%

What do Rates Cover?

Fixed vs. Variable costs:

Fixed (independent of flow)Payroll & BenefitsCapitalDebt

Variable (Flow dependent)ChemicalsElectricitySludge

50%

50%

Ratemaking Goal No. 2

To allocate or distribute those costs back to users fairly and proportionally

What does fairly and proportionally mean?It means that bills reflect cost to treat

What does THAT mean?

Variables effecting cost

Flow: It costs more money to treat more gallons, but is each gallon equal?

No. High strength waste costs more to treat.

Why?

It’s all about the bugs

Wastewater is food for the bugs.

More food = more bugs More bugs = more air

more sludge more chemicals

more cost

Ratemaking Goal No. 3

To predict the need for future rate changes by planning ahead.

Costs will generally go up

Capital planning will impact debt and rates

The Importance of Capital Planning

Wastewater infrastructure is replaced due to:■ Service condition: Equipment is subject to harsh operating

conditions and 24/7 operation. A 20 year service life is generally assumed and often optimistic.

The Importance of Capital Planning

Wastewater infrastructure is replaced due to:

■ Obsolescence – equipment design changes over time.

■ New requirements – Increasingly stringent permit requirements can require new equipment.

■ Failure

The Importance of Capital Planning

■ Failure is always more expensive than planned replacement

The Importance of Capital Planning

The Town is planning to complete a Capital Improvement Program (CIP) to help identify future needs based upon

■ Likelihood of failure (Condition)

■ Consequence of failure

Projecting the Town’s capital needs over the next 20 years will bring an additional degree of predictability to rates and reduce chance of failure.

Ideal Rates

The idealized rate would incorporate volume and strength, but that is not realistic: Instead…

■ Town’s charge per gallon and set limits on wastewater strength (non residential users only)

– Some stuff costs more to treat so you pay more

– Some stuff is toxic and you just can’t discharge it

■ How does this compare to what we’re doing now?

Current Rate Structure

The EDU or “Equivalent Dwelling Unit” is commonly used to develop wastewater projectionsPro’s and Con’s of using EDU’s

Pro’s– Convenient

– Steady revenue

Con’s– May not be equitable

– Hard to defend

1 EDU

Flow based Rate Structure

Each user would be billed for sewage discharged using water use as a surrogate measurement.Pro’s and Con’s to using water usage for sewer

Pro’s– Accurate– Fair and equitable

Con’s– Increased complexity, added parties– High Strength waste is not addressed– Susceptible to loss of big users / weather/ usage

What do other Town’s do?

■ Rate Structure

56%32%

11%1%

Flat rate

Ascending Rate

Flat Fee

Other

Wareham, Progress to date

■ Step one – Data gathering

■ Wastewater Plant– Expenses: last three years, budget and Actual

– Debt schedule

– Operating costs

■ Water System(s)- Water usage

- Annual statistical reports

Who has what?

■ To evaluate going to water consumption based rates we need to understand how many customers have water and sewer.

■ To do this we compared lists… lots of lists■ And we made mapsThis is what we found:

Who has what?

59% of Town is sewered

6,150

(59%)

8,744

(42%)

Total Parcels: 14,894

3,400 (55%)

Onset Water2,215 (36%)

535 (9%)

Wareham FD

91% have both water and sewer, 9% are on wells

Who has what?

Trends

2006 2007 2008 2009 20100

50

100

150

200

250

300

350

400

450

500

f(x) = − 6.6 x + 435.8R² = 0.294722598105548

f(x) = 2.5 x + 37.1Con

sum

ptio

n (m

illio

n ga

llons

per

yea

r)Residential water use is decreasingCommercial / Industrial water use is increasing

Wareham Fire District

Trends

Residential water use is decreasingCommercial / Industrial water use is increasing

Onset Water District

2009 2010 2011 20120

20

40

60

80

100

120

140

160

f(x) = − 4.537 x + 142.29

f(x) = 0.889 x + 18.37

Distribution of Users

■ Wareham Fire District– 10% of usage comes from top 20 users (0.3% of total)– 50% of usage comes from top 1121 user (16% of total)

■ Onset Water District– 10% of usage comes from top 10 users– 50% of usage comes from top 563 users (9%)

10%

90%

0.28%

99.72%

Next Steps

Decide which option best suits Wareham:■ Keep EDU based system■ Adopt usage based system with

- one rate- one rate with a minimum charge- ascending rate- separate rate for residential and commercial