New rate structure could change water bills

by Andrew Batten

A consultant working for Charlotte-Mecklenburg Utilities has combined several options into a new rate methodology that could raise some portions of customers’ water bills, while lowering others.

Last month, Red Oak Consulting unveiled five options that could affect every type of water user in the county. The consultants returned Wednesday, Nov. 17, and presented how a combination of four of the five options could possibly add more equity to the system while still raising the revenue the department needs to operate.

The rate was presented at a meeting of a citizen panel that includes homeowners as well as developers, the Catawba Riverkeeper and various commercial interests. The department has asked the stakeholders to weigh in on how the department charges customers for water.

For now, the rate structure divides water use into four tiers. As customers use more water, they move up the four tiers, paying more and more per gallon of water.

The utility charges more per gallon to encourage conservation but also to help pay for transporting the water to those fourth-tier users, who are typically irrigating.

The utility also charges customers a $2.40 billing fee each month for both water and sewer as well as a separate sewer service fee – $4.31 per 748 gallons of water, up to 18,000 gallons.

Those rates brought in a little more than $240 million last year, and the consultants looked at variety of options that would bring in that much revenue and how each option would affect equity to all customers and encourage conservation.

Consultants from Red Oak want to change four aspects: add an availability fee, lower the rates for the first and fourth tiers, adjust how the department charges sewer fees and modify the irrigation tiers. The department would combine all the changes into a new rate structure.

The consultants will include the stakeholder group’s comments into a report that will be presented to the city’s Restructuring Government Committee in December.

Adding an Availability Fee

Adding an availability fee would introduce a fixed monthly fee that would vary by meter size. The bigger the meter, the higher the charge.

High-volume users would pay slightly less than they pay now, and lower volume users would pay slightly more. That could help the utility since it would no longer be dependent on high-volume customers using a lot of water to support its bottom line.

Jim Duke, a member of the stakeholder group who also chaired a north Mecklenburg task force that investigated high water bills, said the availability fee would take a fixed cost and spread it over the department’s customer base.

“That’s just good business,” he said.

But George Beckwith, a member of the department’s standing Utility Advisory Committee, said the fee could add $6 to the lowest water users’ bills. That’s too much when those customers are already living on a tight budget, he said.

“Affordability is what I’m having a problem with,” Beckwith said. “The people at the lowest end would see a doubling of their bill.”

Adjusting the Sewer Cap

Under the current rate structure, customers pay for sewer service based on their water use. But the utility caps its sewer charge at 17,952 gallons.

Customers aren’t charged for sewer when they use more than that amount of water. But officials say customers using more than 12,000 gallons are usually irrigating and therefore paying for sewer service on water that never reaches the sewer system.

“Over that amount is usually irrigation which doesn’t go down the sewer. We have customers who aren’t using the sewer but who are paying for it,” Rick Giardina, a Red Oak Consultant said.

Lowering the cap to about 10,500 gallons would more accurately reflect the volume of water discharged into the sewer system, but the utility would need to increase the sewer rate to generate the same amount of revenue as the current structure.

The average customer would see an increase in their bills of less than $2, while the customers who use a lot of water would see their bills decrease.

But Beckwith would like to see the department use customers’ average water use in the winter months to calculate how much to charge for sewer service.

“I think that would make more sense than just another arbitrary number,” he said.

Lower the Lifeline (Tier 1) Rate

Lowering the Tier 1 rate, known as the Lifeline Rate because it is a subsidized rate that provides for basics needs, would help soften the blow from adding the additional availability fee

The utility would increase the rest of the tiers to recover the same amount of revenue as the current structure. While this option would improve affordability for customers who use the least amount of water, it would not change the conservation message or the utility’s financial stability.

But Duke questioned whether the department should subsidize people’s water consumption.

“Is this a business that provides a service or is there a welfare component? Because of the politics I think it’s set in stone that there is always going to be a component that subsidizes water use,” he said.

Modify Tiers for Irrigation

Currently, customers who have a separate irrigation meter are charged a higher rate for that water – starting at the regular third tier, or $2.69 for 6,000 to 17,952 gallons. Under the fourth change the utility could encourage conservation by charging less if those meters have included conservation technology.

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