I had hoped to fade back into the woodwork after the City Council election, but I first sent my thoughts about water rate structures to Council Members and to the Utility Rates Advisory Committee (URAC) so they might be considered in upcoming water rates discussions after voter approval of Measure P. This would have been the end of it for me if my suggestions for use of a simple, volumetric approach to paying for water had not been misrepresented in the June 13, 2014, Davis Enterprise news report about the URAC meeting. Since either the Committee or the Enterprise didn’t get it right, I want to explain it myself.
Starting with the bigger picture, things to pay attention to in all rate structure proposals are (1) differences in rates between classes (single-family, multi-family, commercial, and irrigation), which determine what different classes are paying toward total system cost. And (2) differences between classes in tier volumes and tier costs that determine who is paying what toward overall system cost within the class. The more complicated this gets, the more room there is for confusion, winners, losers, and game playing in the rate setting process.
I proposed that we use a single unit volume charge for water, so that everyone would be paying the same per unit volume of water. This rate would be calculated simply by dividing the expected, city-wide total water cost by the expected city-wide total water use (measured in gallons, ccf, or any other unit of volume). I have since learned that a small fixed charge should be included for expenses, such as fire hydrants, providing benefits that are not proportional to water use. This rate system would be simple, have no prior-year charges, eliminate the use of meter size in rate calculations, eliminate differences between user classes, not require tiers, and distribute costs proportionately among those using different amounts of water. As a result, ratepayers using less water would pay less of the water system’s finance and production costs, and ratepayers using more water would pay more of these costs. This is how we buy most other products, and seems fair to me. So I hoped that, at a minimum, it could be compared with other rate structures.
According to the Enterprise article, “Members determined it to be too expensive for each measurement of water.” I don’t know what this means since we already measure water use with meters, and total costs are the same regardless of the type of rate structure.
The Enterprise goes on to report that revenue could vary widely because there is no [separate] fixed rate. This is true as far as it goes, but it is also an incomplete description of the proposal. Concerns about revenue going down when users conserve are easily overcome by applying a realistic estimate of, or even overestimating, conservation when determining city-wide total water use. My proposal also adds a per unit volume charge to build up a reserve in case use drops unexpectedly, with the size of the reserve capped and rates adjusted up or down to keep the reserve within set limits. This approach would be both easier to administer and easier to understand than systems with different rates applied to multiple tiers and different user classes, which would also require rate adjustments to account for unexpected drops in water use.
The final objection listed in The Enterprise is that “it would be hard for the market to finance such a structure at a good interest rate.” This would be true when the recommended rate setting procedure and reserve are ignored. In fact, however, it is the presence of an adequate reserve and procedures to maintain it that provide the lower risk needed to get financing at lower rates.
This single cost per unit volume approach may actually be too simple for proponents of forcing more conservation by use of tiers and other penalties. But conservation should not be a problem, because the large financing cost required to pay for the surface water project will make water so expensive that all users, and especially larger users, will be looking for ways to cut back.
These objections are just the latest examples of scare tactics coming out of City Hall throughout the history of the surface water project. First, we were told that Davis can’t meet selenium discharge limits when using groundwater from our current wells – but it turns out that we can, and water from the new deep aquifer wells has even lower selenium concentrations. Then there wasn’t enough deep aquifer water to sustain the City’s needs (without bothering to account for less use after conservation), except that we haven’t done the studies to know that this is true while available information indicates substantial recharge capability. Next, just before the Measure I election, there were headlines about a well being taken off-line because of high manganese concentrations, but this was later found to be a “mistake” and the well was quietly brought back into service. We were also told that the surface water source was reliable. Now we know that this isn’t true either, and we are very fortunate to still have our groundwater system while surface water use is greatly restricted. More recently, City staff told us that Measure P would prevent Davis from getting a low interest state loan for the surface water project. Then after Measure P passed, City staff says that we can still get a low interest state loan – but only if we have new rates in place by October. Meanwhile, state law still makes the surface water project ineligible for low interest state financing because of privatized operations. At some point, we need to recognize that the City cannot be trusted to provide accurate or objective information.
All I was hoping for was an honest look at a simple, volumetric based rate system that could be compared to other rate structures. But this idea is being dismissed without serious discussion, and it appears that getting an honest evaluation will require more effort by many more ratepayers.