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Water/Wastewater recommends rate changes, again

Friday, November 14, 2014 by Tyler Whitson

The Water and Wastewater Commission has recommended that Council amend Austin Water Utility’s residential rates for 2015 in a way that staff says will cut an average user’s rates while raising them for more intensive users.

Austin Water Assistant Director David Anders said the amendment would lower the impact of the 2015 rate increases for low usage customers by about half, compared to what Council adopted in its September budget. He estimated a low usage customer as someone who uses an average of 6,000 or fewer gallons per month, while the average user consumes about 7,000.

Commissioners voted unanimously at Wednesday’s meeting to support the recommendations. They include implementing a monthly tiered minimum fee that increases based on usage and decreasing the basic five-eighths-inch meter monthly minimum fee by 45 cents for all tiers.

Commissioner Mickey Fishbeck, who is also a member of the Joint Committee on Austin Water Utility Financial Plan, told the Monitor that the changes fit with the recommendations that the joint committee made for the rate structure, though it speeds up the implementation of a progressive monthly tiered minimum fee.

“We had recommended that, we just didn’t recommend that until next year,” Fishbeck said. “It was consistent with our general methodology, and it does give some rate relief to low-use customers, so we were supportive of it.”

Fishbeck said after Council adopted its budget that average users who do not change their water consumption habits this year will see their monthly bills increase by 22 percent.

The joint committee is charged with making recommendations for short and long-term financial plans for Austin Water. Council adopted staff and the joint committee’s recommended rate structure during its budget meetings and those rates went into effect Nov. 1.

During budget deliberations, however, Council also opted to reconvene the joint committee to recommend alternatives to the structure that is now in place. Council will hear a briefing from staff, hold a public hearing and consider taking action on the amendments at its Nov. 20 meeting.

During budget deliberations, Council Member Kathie Tovo proposed that Austin Water adjust its volume charges so that smaller users pay less proportionally than larger users. The joint committee reconvened on Oct. 16 and considered this option, but recommended the tiered fee approach instead.

Anders said that the alternative would have about the same effect while being safer for the utility. “The results for either of those two options are really that lower volume users get a break on this current year’s rate increase so that it’s not as high as what they had approved,” he said, “but higher volume users would get a higher rate.”

Fishbeck agreed with staff’s assertion that the fee approach is also less financially volatile than the volume approach. “You get more revenue in a more secure manner,” she said. “The more you charge for water in the volumetric rate, the more unstable it is, as people conserve more and more.”

She noted that daily usage decreased to 125 gallons per capita this past year — likely due to the current drought. “It’s a huge drop and it’s a wonderful drop in terms of our water supply, but in terms of our revenues, it’s a very significant drop,” she said.

Fishbeck added that about 80 percent of Austin Water’s costs are fixed. “That’s what we’re trying to deal with to stabilize our revenue flow,” she said.

Anders pointed out that Austin Water recovers 20 percent of its revenues from fixed fees, and that they are planning to raise that to 25 percent over the next four years.

Austin Water calculates the monthly tiered minimum fee based on water usage, which is divided into five tiers. Tier one ranges from no usage to 2,000 gallons per month and tier five includes anything above 20,001 gallons. This means that a customer who uses 100 gallons in a month will pay the same tiered fee as one who uses 2,000, thereby reducing volatility.

The average user falls within tier three, which ranges from 6,001 to 11,000 gallons. Austin Water expects the proposed amendment to drop a 7,000-gallon-per-month user’s monthly bill from $46.95 to $45.76 — a $1.19 or 2.5 percent decrease from the adopted rates.

Austin Water projects that customers who decrease their usage will get a greater benefit. For example, if a customer’s usage falls within tier two, which ranges from 2,001 to 6,000 gallons, Austin Water will reduce their bill by $2.15.

Customers who use more water will see increases in their fees. For example, if a customer’s usage falls within tier four, which ranges from 11,001 to 20,000 gallons, Austin Water will increase their bill by $10.60.

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