HomeMy WebLinkAbout13 Metering Residential Water Services Agenda Item # 13
Public Utdity District
WORKSHOP
To: Board of Directors
From: Neil Kaufman
Date: July 16, 2008
Subject: Additional Information Regarding Metering of Residential Water
Services
1. WHY THIS MATTER IS BEFORE THE BOARD
AB 2572 requires the District to begin reading all water meters and billing on a volumetric
basis. Implementation of residential meter reading will require a number of Board actions and
will have a financial impact on the District.
2. HISTORY
In 1991, the Water Measurement Law (SB 229) was enacted. This law required that water
meters be installed on all new commercial and residential water connections as of January 1,
1992. SB 229 did not require the retrofit of meters onto previously existing customers. SB
229 does not require that the water meters be read and does not require billing of customers
on a volumetric basis. The District has been installing water meters on all new connections
since 1992 and is in compliance with this law.
On September 29, 2004, AB 2572 was signed into law. AB 2572 requires that the District
begin reading the water meters installed since 1992 and commence billing on a volumetric
basis by January 1, 2010. AB 2572 also requires that all connections be equipped with water
meters and billed on a volumetric basis by January 1, 2025.
On April 16, June 18 and July 2, 2008, workshops were held to discuss the metering of water
services. A three phase approach has been identified to cover the implementation of
metering and volumetric billing:
• Phase 1 is a pilot program to be completed by November 2008
• Phase 2 will achieve compliance with the 2010 deadline of AB 2572
• Phase 3 will achieve compliance with the 2025 deadline of AB 2572
There is no flexibility in the scheduling of Phase 1 and Phase 2 since the deadline to begin
meter reading is January 1, 2010. Three options have been identified regarding the
implementation of Phase 3. They are:
• Delayed Start - Begin installing meters in 2020. Anticipated completion by 2023
• Gradual - Begin installing meters in 2010. Install approximately 500 meters per year
for 12 vears. Anticipated completion by 2021
• Expedited - Begin installing meters in 2010. Install approximately 2,000 meters per
year for three years. Anticipated completion by 2012
3. NEW INFORMATION
At the July 2 workshop, the Board requested additional information regarding the following
items:
1) Are there any potential savings that resulting from decreased water consumption
and decreased well production ?
2) How will incurring additional debt affect the District's debt coverage ratios ?
Potential Savings
A number of studies have been conducted regarding the impact of water metering upon water
consumption. These studies typically cite a reduction in water consumption of 10% - 20%. It
is assumed that a 10% reduction in water consumption can be achieved through the
implementation of metering along with other water conservation programs that will be
implemented by the District in the future.
Total water production for 2007 was about 2,433 million gallons with a corresponding electric
cost of $1.55 million covering all wells and pump stations. These totals result in an average
cost of $0.00064 per gallon of water produced. For 2008, water production through the end of
May has been lower than 2007. However, the Water Department cannot ensure that this will
trend will continue for the remainder of the year. Therefore, it is assumed that 2.433 million
gallons will be produced in 2008 as well.
Assuming that water production grows at 1% annually due to customer growth, and that
electric costs increase at 3.5%due to inflation, four cases were considered:
1) No reduction in water production
2) Delayed Implementation - 4% reduction in water production by 2010 with 6% by
2022, 8% by 2023 and 10% by 2024
3) Gradual Implementation - 4% reduction in water production by 2010, increasing by
0.4% annually with 10% reduction by 2025
4) Expedited Implementation - 4% reduction in water production by 2010, increasing
by 2% annually with 10% reduction by 2013
The projected electric cost was then totaled for each case for the period of 2008 to 2025.
These totals are given in Table 1 in current dollars.
Table 1. Projected Total Electric Cost for 2008-2025
Case Projected 17-Year Cost
No Reduction in Production $43,389,815
Delayed Implementation $41,198,908
Gradual Implementation $40,433,209
Expedited Implementation $39,597,872
As expected, the Expedited Implementation shows the lowest overall cost since the full 10%
reduction in water production is achieved by 2013. The Gradual Implementation case was the
next cheapest with the Delayed Implementation as the most expensive.
It should be noted that this analysis is very rudimentary and there are a number of factors
beyond electricity that will impact the Water Department's operational costs into the future.
Debt Coverage Ratios
The FY 2008 budget shows the Water Department's debt service payments to be $1,963,096,
which is 21%of General Fund revenue.
Under the Expedited Implementation, an external loan is required. For a $9.6 million, 15-year
loan at 5.46% interest, the debt service payment is $6.33 per customer per month. If the
District collects $5.88, as proposed, the debt service goal will be negatively affected by about
$68,000 (0.7% of water revenue). Should the Board desire that the debt service ratio remain
unaffected by the water meter financing, then the District would need to collect $6.33 per
customer per month.
It should be noted that the $0.45 difference between the $6.33 estimated cost and the $5.88
estimated surcharge is due to interest income on excess funds. Interest income is not
included in debt coverage calculations.
4. FISCAL IMPACT
The fiscal impact of fully implementing residential water metering is significant and may
approach $10,000,000.
The Water Department's FY 2008 budget includes $265,823 for the Phase 1 Pilot Program.
The budget anticipated that this cost would be paid from the cash balance in the Reserve for
Future Water Meters Fund.
5. RECOMMENDATION
Review this report and provide direction to staff regarding the preparation of an Action Plan.
Ed Taylor Michael D. Holley
Water Utility Manager General Manager