NE Illinois Water Rates to IISG 2 by PFH5n3

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									   Water Rates and Rate
Structures in Northeastern
          Illinois
         Presented by Margaret Schneemann
              Water Resource Economist
              Illinois-Indiana Sea Grant
            University of Illinois Extension
       Chicago Metropolitan Agency for Planning
    Conservation-oriented Pricing:
Providing Incentives to Reduce Use
 Goal of conservation-oriented pricing is to
  charge the full cost of water service.

 Objectives of full-cost pricing may include:
   Conservation - efficient use of water resources
   Infrastructure investment and economic development
   Bring long-term supply and demand into balance
   Sustainable utilities via revenue recovery and
    stability
   Clear, legal and defensible rates
 Importance of Demand Management
   Strategies in the NE IL Region
 Demand Growth
   NE IL demand may increase up to
     64% by 2050         (Dziegielewski and Chowdhury,
     2008)

 Surface Water Supply Limits
   Lake Michigan Supreme Court Decree
   Inland Surface Water
      Minimum Flow requirements
      Contamination Vulnerability

 Deep Bedrock Aquifer
   Falling water table
   Cannot meet future demand scenarios
     (Illinois State Water Survey, 2009).

 Shallow Aquifer                                        Source: CMAP, 2008

   Contamination vulnerability
   Interference drawdown, including
     stream flow capture
           Water Pricing and Northeastern
            Illinois Water Supply Planning
            NE IL Water Demand Scenarios: 2005 –
             2050                          Real Annual %
                                             Demand
 Scenario                                               Increase in Water
                                             Increase
                                                             Prices
 Most Resource Intensive
                                              64.1%            0%
 (MRI)
 Current Trends (CT)                          35.8%           0.9%
 Less Resource Intensive (LRI)                7.2%            2.5%
 Source: Dziegielewski and Chowdhury, 2008




 Water pricing is a critical demand management
  strategy for meeting increasing regional water
  demands.
   Northeastern Illinois Water Pricing
          Guidelines and Regulations
 Sanitary Districts Act, 1889
 The Rivers, Lakes, and Streams Act, 1911
 The Water Authorities Act, 1951
 Supreme Court Consent Decree, 1967
 Level of Lake Michigan Act, 615 ILCS 50/1 et seq.
 Water Use Act, 1983
 Title 17 IL Administrative Code
 The Great Lakes Compact, 2008
               Northeastern Illinois
      Water/Wastewater Rate Survey
 The 11-county northeastern Illinois regional
  water planning area is served by about 420
  active water supply systems (U.S. EPA SDWIS; CMAP, 2009).
 Systems with service populations less than
  1,000 and ancillary systems not included.
 Rate information is collected from websites,
  local ordinances, and telephone contacts.
 Result is a sample of 290 water supply
  systems.
onservation-oriented Rate Characteristic
  Customer Class Price Differentiation
     Price according to user costs imposed on the system

  Billing Frequency
      More frequent billing sends stronger conservation signal.

  Rate Structure
     AWWA recommends two part tariff, USEPA recommends
       increasing block, CUWCC full cost-based, conservation-oriented
       rates.

  Volumetric Charge
     Increasing Rate, Uniform Rate and Peak Pricing (Seasonal Rates)
       can be designed to encourage conservation.

  Fixed Component of Bill Provide price signal to reduce use
      Fixed charge portion of the bill does not provide a conservation
       message.
    Price Differentiation by Customer
                 Classes
  Price According to User Costs Imposed on the System
Rates differentiated by
        Type of Customer
        Meter Size
        Meter Type
        Location
        Structural Attributes
        Water Source
        Real Estate Tax Status
        Senior Citizen Status

   45% of systems have one rate class for all customers
   Almost 80% of systems have 1 to 4 rate classes
   6% of systems have over 21 customer classes
Residential Billing Frequency by Water
                 Source
More Frequent Billing Sends Stronger Conservation Signal
Rate Structure: Basic Residential
             Charge
 AWWA Recommends Two Part Rate Structure

 Water Rate Structure          Wastewater Rate Structure




Two-part, one block     Total Charge= Base Charge + p1x*
Volumetric, one block   Total Charge = p1x*
Flat                    Total Charge = Base Charge
   Rate Structure: Volumetric Charges
  Price Subsequent Units Consumed Based on Associated
                         Costs

       Water Rate Structure            Wastewater Rate Structure




Uniform Rate:                  Volumetric Charge = p1x*
Increasing Block (2 Blocks):   Volumetric Charge = p1x1+ p2(x* - x1)
where p1 < p2
Decreasing Block (2 Blocks):   Volumetric Charge = p1x1+ p2 (x* - x1)
where p1 > p2
Rate Structure: Volumetric Charges
Increasing Rate, Uniform Rate, and Peak Pricing can
       be Designed to Promote Conservation
    Median Volumetric Charges for 1,000 gallons Water in NE IL,
                 Residential and General Accounts
   Rate Structure: Base Charge and
              Provision
Fixed Charge does not Provide a Conservation Message
Fixed versus Volumetric Share of Water Bill
Base Charge Recommend Maximum 30 percent of Total
                      Bill
  Regional conservation potential of non-price conservation
    programs
     NE IL Average 90 gpcd
     Low Conservation 10 gpcd decrease
     High Conservation 25 gpcd decrease
  Source: Dziegielewski and Chowdhury, 2008; CMAP, 2009


                            Fixed versus Volumetric Share of Water Bill
    Water Rates and Rate Structures in
    Northeastern Illinois - Conclusions

Pricing Characteristics
     Customer Class Price Differentiation
     Billing Frequency
     Rate Structure
     Volumetric Charge
     Fixed Component
   Water Rates and Rate Structures in
   Northeastern Illinois - Conclusions

Regulatory Environment
    Regional Water Authority

Future Research
    Cost Study
    Scarcity Value
    Land Use Connections
   Water Rates and Rate
Structures in Northeastern
          Illinois
         Presented by Margaret Schneemann
              Water Resource Economist
              Illinois-Indiana Sea Grant
            University of Illinois Extension
       Chicago Metropolitan Agency for Planning



   Questions?
     Mschneemann@cmap.illinois.gov
     312.676.7456

								
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