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Committee recommends restructuring Austin’s water rates

Friday, June 1, 2012 by Michael Kanin

A citizens’ committee charged with redesigning the Austin Water Utility‘s rate structure overwhelmingly agreed to a set of recommendations, urging the utility to adopt an innovative approach to the fixed charge portion of the utility’s residential bills.


The committee, which met Wednesday night in what is expected to be its final meeting, also agreed on a new set of “rate blocks” and the creation of a revenue stability fund along with a recommendation for how to finance it.


The group’s suggestions were detailed in a five-page document that the commission approved in a 5-1 vote. The lone “no” belonged to Kris Bailey, who is a member of the  Impact Fee Advisory Committee and an ex-City Council candidate. Bailey, who leans to the libertarian end of the political spectrum, said he simply didn’t approve of the fees associated with the proposal.


The committee’s effort seems like something of an improbability: committee members with widely disparate views and backgrounds – ranging from perpetual City of Austin critic Brian Rodgers to Bailey to Environment Texas’ Luke Metzger  worked productively for seven months to reach a (mostly) agreeable solution that is likely to receive a welcome reception both at City Council and in the halls of the Austin Water Utility’s Waller Creek Center.


Committee chair Mickey Fishbeck will present the group’s suggestions to Council members at a work session sometime in June.


Despite a comprehensive process, the members of the committee declined to make any recommendation about two specific financial metrics, one of which is often used by bond ratings agencies to decide on their ratings. Committee members worried that they were too uninformed to provide input on the metrics – Austin Water’s debt-service coverage and the ratio of debt to cash used to make capital purchases.


“I feel like all of the other recommendations that precede this one in the memo, we’ve gone into excruciating detail as to the rate impacts,” committee member Sarah Faust said about a suggestion for the utility’s debt-service coverage. “As far as the affect of this increase of the (debt-service) coverage…I don’t feel like we have studied this at the same level.”


However, committee members recommended that the utility bump its minimum operating cash reserve fund to the equivalent of 60 days of operating expenses from the current 45 days.


The new “Tiered Minimum Water Charge” will replace what had been a roughly $4 fixed water revenue stability fee that is applied evenly to all residential customers. Though the new fee will provide some revenue stability in terms of a guaranteed charge it will no longer come at a set, across-the-board rate.


Instead, the Tiered Minimum Water Charge would assign different monthly charges based on volumetric consumption as additional incentive for water users to conserve. These could fluctuate from month to month with dollar amounts smaller for low water users and higher for higher users. Commissioners recommended starting the minimum charge at roughly $1.50 for first tier and step that up to $10 a month for the highest two tiers.


In addition, the commissioners proposed a redesign to the five tiers of fees that customers are charged each month based on their water usage. They recommended that these rates flex based on city usage patterns, which would further encourage water conservation. These tiers could change year-to-year based on the city’s overall volumetric usage, with a goal of keeping the lowest 10 percent of ratepayers in the lowest tier.


As part of the fixed revenue overhaul, committee members also suggested setting a target of 20 percent for the total amount of revenue delivered by fixed charges on customer bills. Though it would be calculated differently, all classes of Austin Water ratepayers – including wholesale and commercial users – would see a fixed charge on their bills.


Finally, while the committee recommended changes to the minimum water and usage charges, they decided to leave unchanged the current $7.10 charge residential customers pay each month for their water meter, which the utility refers to as a “meter equivalent charge.”

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