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Page 4 of 13 104 The following chart depicts the percentage of single-fa mily homes that fall into each water rate category 105 based on current usage and the proposed 3-tiered rate structure. 106 107 PROPOSED Water Rate Tier % of SF Homes: Winter % of SF Homes: Summer 0 – 16,000 gallons per quarter 70 % 60 % 16,000 – 24,000 gallons per quarter or more 15 % 20 % Over 24,000 gallons per quarter 15 % 20 % Total 100 % 100 % 108 Under the proposed 3-tiered ra te structure, approximately 30-40% of single-family homes will be impacted 109 by the higher tier rates, compared to 10-15% today. Under this scenario, approximately 2,100 homes will 110 pay more for water services than they currently do as a direct result of the change in rate structure. 111 112 As noted above, the PWET Commission has advocated th at the new 3-tiered rate structure be revenue 113 neutral. Under the current 2-tiered structure the lowest tier is set at an amount that is commensurate with 114 the cost to purchase water from the City of St. Paul. This ensures that in the event ALL homes fell into the 115 lowest tier, the City would not be financially jeopardi zed. Therefore, any incremental revenue derived from 116 the higher tier is set aside for contingency purposes and to promote long-term stability of the rates. 117 118 If on the other hand we move to a revenue neutral rate structure, the premium charged for usage at Tiers 2 119 and 3 will allow the lowest tier rate to decline. As a result, 60-70% of single-family homes would pay less 120 than they currently do. In effect, homes with lower usage will be subsidized by those with higher usage. 121 This is in sharp contrast to the current philosophy wh ere all homes pay the same pass-through cost of water 122 purchased from St. Paul. 123 124 It should be noted that many of these same low usag e homes that would benefit from this new approach 125 already receive a subsidy through the senior discount program. 126 127 Another consideration on whether to move to a 3-tiered ra te structure is whether su ch an approach actually 128 promotes water conservation. We have observed that wa ter usage has declined in the past couple of years 129 despite most households never reaching the threshold fo r the higher tier. One could argue that education 130 and awareness has been the leading factor in discour aging homeowners from excessive water use, rather 131 than the financial incentive (penalty) that accompanies higher tiers. 132 133 One can assume that each household has a threshold fo r which a financial incentive would cause them to 134 modify their water use behavior. Arguably however, it would take more than just a few dollars per month 135 which is the case under both the current and proposed water rate tier structure. 136 137 A final point for discussion involves the fairness that tiered water rates can have on larger families. For 138 example, let’s assume that the per-person water usage for someone that follows moderate water 139 conservation measures is 5,000 gallons per quarter . A 3-person household w ould use 15,000 gallons per 140 quarter and would not hit the higher tier. Howe ver, a 4-person household would use 20,000 gallons per 141 quarter and hit the higher tier simply because there ar e more people living in the house. On an individual 142 basis the 4-person household is just as conservative in their water use, but they pay a higher rate 143 nonetheless. 144 145 146