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68 The following chart depicts the percentage of single - family homes that fall into each water rate category 69 based on current usage and the proposed 3- tiered rate structure. 70 PROPOSED ater Rate Tier % of SF Homes: Winter % of SF Homes: Summer 0 — 16,000 gallons per quarter 70% 60 16,000 — 2ns er uarter or more j 15 % 20 Over 24,00per quarter 15% 20% Total 100% 100% 71 72 Underthe proposed 3- tiered rate structure, approximately 30 -40% of single - family homes will be impacted 76 by the higher tier rates, compared to 10 -15 %today. Under this scenario, approximately 2,100 homes will 74 pay more for water services than they currently do as a direct result of the change in rate structure. 75 76 As noted above, the PWET Commission has advocated that the new 3- tiered rate structure be revenue 77 neutral. Under the current 2- tiered structure the lowest tier is set at an amount that is commensurate with 78 the cost to purchase water from the City of St. Paul. This ensures that in the event ALL homes fell into the 79 lowest tier, the City would not be financially jeopardized. Therefore, any incremental revenue derived from 80 the higher tier is set aside for contingency purposes and to promote long -term stability of the rates. 81 82 If on the other hand we move to a revenue neutral rate structure, the premium charged for usage at Tiers 2 86 and 3 will allow the lowest tier rate to decline. As aresult, 60 -70% of single - family homes would pay less 84 than they currently do. In effect, homes with lower usage will be subsidized by those with higher usage. 85 This is in sharp contrast to the current philosophy where all homes pay the same pass - through cost of water 86 purchased from St. Paul. 87 88 It should be noted that many of these same low usage homes that would benefit from this new approach 89 already receive a subsidy through the senior discount program. 90 91 Another consideration on whether to move to a 3- tiered rate structure is whether such an approach actually 92 promotes water conservation. We have observed that water usage has declined in the past couple of years 96 despite most households never reaching the threshold for the higher tier. One could argue that education 94 and awareness has been the leading factor in discouraging homeowners from excessive water use, rather 95 than the financial incentive (penalty) that accompanies higher tiers. 96 97 One can assume that each household has a threshold for which a financial incentive would cause them to 98 modify their water use behavior. Arguably however, it would take more than just a few dollars per month ss which is the case under both the current and proposed water rate tier structure. 100 1o1 A final point for discussion involves the fairness that tiered water rates can have on larger families. For 102 example, let's assume that the per - person water usage for someone that follows moderate water 1o3 conservation measures is 5,000 gallons per quarter. A 3- person household would use 15,000 gallons per 104 quarter and would not hit the higher tier. However, a 4- person household would use 20,000 gallons per 105 quarter and hit the higher tier simply because there are more people living in the house. On an individual 106 basis the 4- person household is just as conservative in their water use, but they pay a higher rate 107 nonetheless. 108 log Taking this example further, let's assume that the 4- person household is even more conservative and uses 11 o only 4,500 gallons per quarter, per person. This amounts to 18,000 gallons per quarter which once again Page 3 of 3