3H, Water Meter Charge Minimum Discussion

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�� EN HILLS MEMORANDUM DATE: TO: FROM: SUBJECT: November 21, 2011 Honorable Mayor and City Council Patrick Klaers, City Administrator Sue Iverson, Director of Finance and Administrative Services Water Meter Charge Minimum Discussion Background: At the August worksession, Council asked staff to look at reducing the minimum gallons included in the Water Meter/Rates. Specifically, Council asked staff to look at a 5,000 gallon minimum. Discussion: In 2008, the City did a comprehensive Utility Rate Study to fulfill the new water conservation rates directed by State Statute and to determine the future needs of the utility funds. The new rates were instituted on January 1, 2009. Staff has done an analysis of the system and the rate structure is performing as projected. Council has asked staff to analyze lowering the base usage that is provided by the current rate structure from 10,000 gallons to 5,000 gallons. Staff has done a number of iterations to determine how to achieve this result, while still maintaining the require conservation rate structure without a complete overhaul of the current rate structure. This has been quite challenging. The meter charges cover the City's "fixed costs" to run the system, while the usage charges cover the "variable costs." The iteration that seems to work and still maintains the conservation rate structure involves increasing the usage charge for the highest tier by 40% in addition to the planned rate increase of 7%. One thing to remember is that the meter charges remain the same, but the base usage minimum is lowering to 5,000. This means that everyone that uses more than 10,000 gallons per quarter will now pay $16.40 more per quarter as a result of having to pay for the additiona15,000 gallons. This is in addition to the planned increase in rates of 7%. This results in an increase to a Low User of 16,000 gallons per quarter of $16.41, an Average User of 25,000 gallons per quarter of $16.41, and a High User of 50,000 gallons per quarter of $48.56. The attached spreadsheet shows the impacts both on the water charge and the total bill.