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Commission gives utility advice on name for proposed ‘sustainability fee

Friday, August 12, 2011 by Elizabeth Pagano

Members of the Water and Wastewater Commission reacted this week to the Austin Water Utility’s proposed “sustainability fee,” particularly criticizing the terminology for a $6 per month charge the utility says it needs in order to make up for lost revenues due, in part, to conservation.


The fee question dominated the commission’s conversation about AWU’s proposed budget.


The commission ultimately voted 6-1 to approve the budget, with Commissioner Sarah Faust voting against. They included a recommendation that the fee be renamed a “rate stabilization fee.” Although the City Council has already received the proposed budget, the utility is free to rename the fee before making a presentation to Council later this month.


Austin Water Utility expects to recover about $23 million from the fee alone. This $23 million will be used to cover costs of conservation operations, wildlife operations, debt service on wildlands, the reclaimed water system and conservation revenue loss – all of which currently total $40.9 million.


Of that, $18.9 million is attributed to conservation revenue loss. Commissioner Mickey Fishbeck found the inclusion of this cost troubling.


“It’s not really a line item cost. It’s just what happens,” said Fishbeck. “So to me, putting that particular cost in there, first of all it’s not really a cost, it’s more of a charge for not using water, which I think is not going to go over really well, but it would be hard to defend as well. Not only legally, if you were challenged, but just in the public sphere of things. You know, ‘You’re doing well with conservation, so here’s your charge for not paying us enough money’.”


“It gives, to me, a conflicting policy message. One where we are trying to conserve, and yet we are charging people sort of a penalty for doing it,” said Fishbeck.


The problem, as explained by Austin Water Utility Director Greg Meszaros, is that while about 80 percent of the utility’s fees are fixed, 88 percent of the revenue is currently variable. The $6 fee would change the variable revenue to 79 percent, making the revenue structure less volatile, and more predictable, rain or shine.


Sharp revenue swings have increased in recent years due to weather, and due to the success of conservation measures. The amount of water used per capita per day in Austin has been steadily decreasing each year, regardless of drought or rain. A deal struck with the LCRA in 1999 for prepayment means that Austin isn’t seeing immediate monetary benefits from conservation measures, and won’t until about 2025.


The commission resoundingly warned that Austin Water Utility was walking a perilous path with the current name and justification of the fee.


The proposed fee is now $6 per five-eighths-inch meter (which would apply to about 86 percent of accounts) and will be instituted in addition to a proposed 3.5 percent hike in water rates.


“The rate increase for water would have been close to 15 percent had we not had any change, like a water sustainability fee. But by us implementing that $6 fee, it brought it down to 3.5 percent,” said Austin Water Utility’s Dave Anders, “$30.5 million is going to be either $23.4 million in sustainability fee, and the rest in volume, or it’s going to be some mix, but the amount that we are going to collect is $30.5 regardless.”


Commissioner Gwen Webb agreed, “I think this is Austin and we need to be, as Commissioner Fishback said, concerned about what kind of reactions people will say if we refer to conservation as revenue loss.”


“This is a recommendation to begin to adapt our business model,” said Meszaros. “As we look into the future, it’s a little murkier. There’s variable weather, there’s a lot of conservation that’s going to occur, and throughout all of that, the utility has to remain a viable financial enterprise. That’s an important thing for our community.”


“We can call it a rose, it would still smell as sweet… or not,” said Meszaros. “The goal we’re after is this business model adaptation. If you don’t like the name, we’ll change the name… We thought the word sustainability was good because, if you think about the rawest definition of sustainability it includes the triple bottom line: financial sustainability, sustainability of how you use your resources, and sustainability in terms of community values.” Meszaros explained that the fee was designed to support all three of these goals.

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