Water Rates and Rate Water Rates and Rate Structures in Northeastern Structures in Northeastern

IllinoisIllinoisPresented by Margaret SchneemannPresented by Margaret Schneemann

Water Resource EconomistWater Resource Economist

Illinois-Indiana Sea GrantIllinois-Indiana Sea Grant

University of Illinois ExtensionUniversity of Illinois Extension

Chicago Metropolitan Agency for PlanningChicago Metropolitan Agency for Planning

Conservation-oriented Pricing: Conservation-oriented Pricing: Providing Incentives to Reduce Providing Incentives to Reduce

UseUse

Goal of conservation-oriented pricing is to charge the full cost of water service.

Objectives of full-cost pricing may include:Conservation - efficient use of water resources Infrastructure investment and economic

developmentBring long-term supply and demand into balanceSustainable utilities via revenue recovery and

stabilityClear, legal and defensible rates

Importance of Demand Importance of Demand Management Management

Strategies in the NE IL RegionStrategies in the NE IL Region Demand Growth

NE IL demand may increase up to 64% by 2050 (Dziegielewski and Chowdhury, 2008)

Surface Water Supply Limits Lake Michigan Supreme Court

Decree Inland Surface Water

Minimum Flow requirements Contamination Vulnerability

Deep Bedrock Aquifer Falling water table Cannot meet future demand

scenarios (Illinois State Water Survey, 2009).

Shallow Aquifer Contamination vulnerability Interference drawdown, including

stream flow capture

Source: CMAP, 2008

Water Pricing and Northeastern Water Pricing and Northeastern Illinois Water Supply PlanningIllinois Water Supply Planning

NE IL Water Demand Scenarios: 2005 NE IL Water Demand Scenarios: 2005 – 2050– 2050

Source: Dziegielewski and Chowdhury, 2008

Water pricing is a critical demand management Water pricing is a critical demand management strategy for meeting increasing regional water strategy for meeting increasing regional water demands. demands.

Water pricing is a critical demand management Water pricing is a critical demand management strategy for meeting increasing regional water strategy for meeting increasing regional water demands. demands.

Northeastern Illinois Water PricingNortheastern Illinois Water PricingGuidelines and RegulationsGuidelines and Regulations

Sanitary Districts Act, 1889 Sanitary Districts Act, 1889

The Rivers, Lakes, and Streams Act, 1911 The Rivers, Lakes, and Streams Act, 1911

The Water Authorities Act, 1951The Water Authorities Act, 1951

Supreme Court Consent Decree, 1967 Supreme Court Consent Decree, 1967

Level of Lake Michigan Act, 615 ILCS 50/1 et seq.Level of Lake Michigan Act, 615 ILCS 50/1 et seq.

Water Use Act, 1983 Water Use Act, 1983

Title 17 IL Administrative Code Title 17 IL Administrative Code

The Great Lakes Compact, 2008The Great Lakes Compact, 2008

Northeastern Illinois Northeastern Illinois Water/Wastewater Rate Survey Water/Wastewater Rate Survey

The 11-county northeastern Illinois regional water planning area is served by about 420 active water supply systems (U.S. EPA SDWIS; CMAP, 2009).

Systems with service populations less than 1,000 and ancillary systems not included.

Rate information is collected from websites, local ordinances, and telephone contacts.

Result is a sample of 290 water supply systems.

Conservation-oriented Rate Characteristics Conservation-oriented Rate Characteristics

Customer Class Price DifferentiationCustomer Class Price Differentiation Price according to user costs imposed on the system

Billing FrequencyBilling Frequency More frequent billing sends stronger conservation signal.

Rate Structure Rate Structure AWWA recommends two part tariff, USEPA recommends increasing

block, CUWCC full cost-based, conservation-oriented rates.

Volumetric ChargeVolumetric Charge Increasing Rate, Uniform Rate and Peak Pricing (Seasonal Rates) can

be designed to encourage conservation.

Fixed Component of Bill Fixed Component of Bill Provide price signal to reduce use Fixed charge portion of the bill does not provide a conservation

message. No more than 30% of the total bill should consist of base charges.

Price Differentiation by Customer Price Differentiation by Customer Classes Classes

Price According to User Costs Imposed on the Price According to User Costs Imposed on the SystemSystem

Rates differentiated byRates differentiated byType of Customer Meter Size Meter Type LocationStructural Attributes Water Source Real Estate Tax StatusSenior Citizen Status

45% of systems have one rate class for all customers Almost 80% of systems have 1 to 4 rate classes 6% of systems have over 21 customer classes

Residential Billing Frequency by Water Residential Billing Frequency by Water Source Source

More Frequent Billing Sends Stronger Conservation SignalMore Frequent Billing Sends Stronger Conservation Signal

Rate Structure: Basic Residential Rate Structure: Basic Residential ChargeCharge

AWWA Recommends Two Part Rate Structure AWWA Recommends Two Part Rate Structure

Water Rate StructureWater Rate StructureWastewater Rate Wastewater Rate

StructureStructure

Rate Structure: Volumetric ChargesRate Structure: Volumetric Charges Price Subsequent Units Consumed Based on Price Subsequent Units Consumed Based on

Associated Costs Associated Costs

Water Rate StructureWater Rate StructureWastewater Rate Wastewater Rate

StructureStructure

Uniform Rate: Volumetric Charge = p1x*Increasing Block (2 Blocks): Volumetric Charge = p1x1+ p2(x* - x1) where p1 < p2 Decreasing Block (2 Blocks): Volumetric Charge = p1x1+ p2 (x* - x1) where p1 > p2

Flat: Volumetric Charge = FC

Median Volumetric Charges for 1,000 gallons Water in NE IL, Residential and General Accounts

Rate Structure: Volumetric Rate Structure: Volumetric ChargesCharges

Increasing Rate, Uniform Rate, and Peak Pricing Increasing Rate, Uniform Rate, and Peak Pricing can be Designed to Promote Conservationcan be Designed to Promote Conservation

Rate Structure: Rate Structure: Base Charge and Base Charge and ProvisionProvision

Fixed Charge does not Provide a Conservation Message Fixed Charge does not Provide a Conservation Message

Fixed versus Volumetric Share of Water Fixed versus Volumetric Share of Water BillBill

Base Charge Recommend Maximum 30 percent of Base Charge Recommend Maximum 30 percent of Total Bill Total Bill

Regional conservation potential of non-price conservation programs NE IL Average 90 gpcd Low Conservation 10 gpcd decrease High Conservation 25 gpcd decrease

Source: Dziegielewski and Chowdhury, 2008; CMAP, 2009

Regional conservation potential of non-price conservation programs NE IL Average 90 gpcd Low Conservation 10 gpcd decrease High Conservation 25 gpcd decrease

Source: Dziegielewski and Chowdhury, 2008; CMAP, 2009

Fixed versus Volumetric Share of Water Bill

Pricing CharacteristicsPricing CharacteristicsCustomer Class Price DifferentiationBilling FrequencyRate StructureVolumetric Charge Fixed Component

Water Rates and Rate Structures Water Rates and Rate Structures in Northeastern Illinois - in Northeastern Illinois -

ConclusionsConclusions

Regulatory EnvironmentRegulatory EnvironmentRegional Water Authority

Future ResearchFuture ResearchCost StudyScarcity ValueLand Use Connections

Water Rates and Rate Structures Water Rates and Rate Structures in Northeastern Illinois - in Northeastern Illinois -

ConclusionsConclusions

Water Rates and Rate Water Rates and Rate Structures in Northeastern Structures in Northeastern

IllinoisIllinoisPresented by Margaret SchneemannPresented by Margaret Schneemann

Water Resource EconomistWater Resource Economist

Illinois-Indiana Sea GrantIllinois-Indiana Sea Grant

University of Illinois ExtensionUniversity of Illinois Extension

Chicago Metropolitan Agency for PlanningChicago Metropolitan Agency for Planning

Questions?Questions?Mschneemann@cmap.illinois.gov312.676.7456312.676.7456