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Are rates the answer?
Posted: Tuesday, January 20, 2009 4:07 PM
Joined: 10/17/2008
Posts: 31

Long time listener, first time caller ....

It seems to me that a good and proper rate schedule would realize all of the goals of water conservation without implementing all the projects and programs.  Is it not true that a multiple tier or allocation type rate schedule provides for basic needs while discouraging waste?


Peter Mayer
Posted: Tuesday, January 20, 2009 4:22 PM
Joined: 10/3/2008
Posts: 22

Yes!  You hit the nail on the head.  An allocation (or water budget-based) rate structure is one of the best methods for discouraging waste and encouraging efficiency.  When we studied water budget rate structures for AwwaRF, we found that agencies who implemented these rate structures saw demand reductions on the order of 15 - 25% within the first couple of years.  The agencies all felt that most of these savings were achieved through the elimination of waste.

Bob Ezra
Posted: Tuesday, January 20, 2009 5:58 PM
Joined: 10/17/2008
Posts: 31

Then all these water conservation projects are a a bit daff, no?   Why operate these water conservation projects if a rate schedule eliminates the waste?

Peter Mayer
Posted: Wednesday, January 21, 2009 10:10 AM
Joined: 10/3/2008
Posts: 22

Daft?  Certainly not.  Every utility we studied that implemented a water budget rate structure also had an active water conservation program before, during, and after implementation of the rate structure.  They found that the rate structure aided their conservation program efforts by helping to identify customers who could most benefit from conservation program measures.

It is possible that implementation of a rate structure alone might spur water savings, but such a plan could also be problematic and could lead to public backlash.  Our research suggests that conservation oriented rates are most successful when effectively communicated to the public as part of a coordinated and comprehensive water conservation program.

Posted: Friday, January 23, 2009 7:49 AM
Joined: 1/16/2009
Posts: 1

I am a long time believer in proper rates being a part of any conservation program.  I am also a long time member of the AWWA Rates Committee and have developed close to 400 rate studies in my 40 years of consulting.  I have probably developed more or at least as many conservation rate rates as anyone else.  However, I do not believe that rates can do it on their own or that (only) rates will cause a big decrease in sales. 

I think that many of the reported drop in sales after rate changes are more likely due to (a) weather - more rain, less heat, etc., (b) the economy, (c) publicity ("your rates are going way up, conserve now" headlines), and (d) all of the above and more.  I recall a near 100% increase in a large City that was followed by no change in water sales.

Water is just too cheap to cause such drops in use.  Most people pay about $1 a day for water.  Big deal -- it goes up 50% to $1.50 a day.  It is still less than cell phone service, cable TV, a cup of coffee, or even a tiny bottle of plastic water (don't see those sales dropping!)  It is far less than than a lawn service, a new lawn mower, or bags of fertilizer, weed killer, lime, etc.

I believe the real problem is that water is under priced -- we have done too good a job in making it universally available at absurdly low prices.  The overall cost or price for water needs to increase to more closely reflect its true value.  Government grant programs that subsidize water projects only make this problem worse.  Until water more closely reflects its value, people will just not care about price or about water.

George F.
Posted: Tuesday, February 10, 2009 5:53 PM
Joined: 1/20/2009
Posts: 5

I mentioned somewhere else that Water Budget rates sound good and probably work, but for small utilities and customers that can barely understand block rates, I don't know.

As for water being priced too low, I agree. But, you can't artificailly price water high to foster conservation. Over the course of 400 cases, how many mayors, board presidents, senior citzens, newspaper reporters, legislators, and plain customers did you find that would agree with you? If a rate study is done well, then it reflects the cost of supplying water.

Posted: Tuesday, February 17, 2009 12:24 PM
Joined: 6/2/2008
Posts: 2

Adequately explaining the rate structure to the customers is essential whenever a utility implements new rates.  This is true for inclining block rates, declining block rates, seasonal rates, water budget-based rates, and all the other forms out there. 

In our AwwaRF study, we found a number of small utilities that have successfully implemented water budget-based rates.  The idea can be communicated to customers, that is not a real barrier.  The key is that the utility leadership and staff must understand and support the rate structure.

An option some utilties have taken with water budgets is to start small.  Some agencies just do budgets for dedicated irrigation accounts.  Some just do budgets for their single-family customers.  Some take an interim step like this while they spend time developing budgets for other customer classes.

Communication is a key to the success of any rate structure implementation.

Johannes Buckle
Posted: Tuesday, March 10, 2009 9:03 AM
Joined: 3/3/2009
Posts: 8

Whn I satretd practicing WDM in Windhoek in Namibia we posted a 5 tier rising block tariff as far back as 1994. It worked like a charm.
Posted: Tuesday, July 6, 2010 3:35 PM
Joined: 7/6/2010
Posts: 11

For sure rates work. An op I worked with, United Water New York, implemented a summer/winter differential rate structure and it had a BIG impact on water use. Following up on some of the earlier comments, it is certainly not enough to simply raise rates and hope for the best. Indeed, I believe it is unconscionable to raise rates and not provide customer with good information and tools they can use to manage water use. It may seem obvious to us that there are many things one can do to reduce water use, but it is not obvious to many customers. I firmly believe that a water purveyor needs to use a carrot (info and conservation programs) and stick (rates) approach to be most successful AND to maintain good customer relations in the long run.