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Council Member Ihlan Attachment A. MEMORANDUM TO: MEMBERS OF THE ROSEVILLE CITY COUNCIL FROM: AMY IHLAN SUBJECT: WATER BILLING STRUCTURE AND HOW TO ACHIEVE CONSERVATION RATES DATE: MARCH 4, 2009 Based on the DNR's guidelines and the suggestions from Senator John Marty, I would like to have council discussion and direct staff to formulate amendments to the ciry's water billing structure to comply with state law requiring a billing structure "that encourages conservation." To create a conservation rate structure that meets state law requirements, we need to consider the following amendments to our new utility billing rates: 1. Create additional usage tiers or "blocks" with greater cost increases between blocks. The DNR Conservation Rate guidelines state that: The increase in cost between each block should be significant enough (25% or more and 50% between the last two steps) to encourage conservation. Roseville's residential billing rates include only two usage "blocks", and the increase in cost between them is less than 10%, not significant enough to encourage conservation by the DNR's standards. We should consider creating more usage blocks with significant cost increases between them, so that residents who conserve water and stay within the lower usage tiers will be rewarded by paying significantly less than residents who don't. For example, we could look at rate structures that create additional usage blocks under 30,000 gallons, with the highest rate for usage of more than 30,000 gallons (and increasing by at least 50% over the next highest rate). 2. There are no usage blocks for commercial properties. We should also create a tiered usage block rate structure for commercial properties that meets DNR guidelines. If there is a large dispariry in water use among business, the tiers should reflect the range of usage so that small users pay significantly less than large users do. It's questionable whether a higher summer rate will be any kind of ineaningful incentive to conserve for commercial property owners. Is there any evidence that commercial water usage tends to increase in the summer by the same percentage that residential use increases? 3. We might also want to review the base rates in light of the DNR's statement that: