http://efc.sog.unc.edu

@EFCatUNC

Expanding and Enhancing Customer-Level Billing

Analysis: Non-Residential Customer Sales Profiles and

Resilient Pricing Structures and Modeled

Shadi Eskaf and Jeff Hughes

Environmental Finance Center at UNC School of Government

Presentation to the UWC – September 4, 2015

Two Analyses: One Project

Non-Residential Sales Profile

• OWASA

• Fayetteville PWC

• Greensboro Water

• Town of Cary

Alternative Rate Models for

Residential Customers

• OWASA

• Fayetteville PWC

• Town of Cary

• Charlotte Water

Acknowledgements

3

North Carolina

Urban Water Consortium

Cary, Charlotte Water, Fayetteville PWC, Greensboro, OWASA

NON-RESIDENTIAL* SALES PROFILES * INCLUDING MASTER-METERED MULTI-FAMILY CUSTOMERS

Approach and Outputs

• 4 utilities, individually:

– Meetings and discussions; input into the analysis

– Interactive historical sales profile

– Interactive historical top ten customers profile

– Analysis (and list) of customers that significantly changed LT demands

• Report to the UWC with cross-utility takeaways:

– How do utilities treat non-residential customers differently?

– Why it is important to understand non-residential customers?

– How can utilities better understand their non-residential customers?

Report will also be published by Journal AWWA in January 2016

Utilities can Profile their Non-Residential

Customers by Water Usage Metrics

Demonstration of Utility-Specific “Non-Residential Dynamic Dashboard”

Number of Non-Residential Customer Classes

OWASA: 14 (unique for UNC)

Fayetteville PWC: ~10 (unique for PWC operations)

Cary: >20

Greensboro: 3 (use meter size instead)

Consolidated into fewer rate classes

Non-Residential Customers Use a Lot of Water

(and pay a lot for water)

Big Data Can Assist Efforts in Resource and

Financial Planning and Customer Service

• “Key Accounts”

• Plateau Analysis

• Meter Right-Sizing

Key Accounts: Top 1% of customers pay ~25% of total charges

Interactive “Top Ten” Customers Dashboard

Mete

r num

be

rs (

hid

den

)

Customer Plateau Analysis

While fewer non-residential customers down-plateaued than up-plateaued,

they reduced water use significantly more

Identifying which customers significantly increased LT water demand (up-plateaued) or

significantly decreased LT water demand (down-plateaued)

Meter Right-Sizing

Takeaways for the UWC:

Billing Data – a Gold Mine of Information!

• Mining the customers’ billing data individually can assist

efforts in water resource management, financial planning,

customer service, and outreach

• Identifying and working with key accounts

• Understanding why and how non-residential customers

are changing demand patterns

• Detecting anomalies to investigate billing errors or better-

sizing of meters

Possible Areas of Future Work

• Integration of customer profiling with the billing system

• Development of new considerations for rates analyses

– E.g.: proportions of use and charges by customers with certain water-using behaviors (peakers, hidden irrigators, plateauers, etc.)

• Detailed analysis of specific types of customers

– Cooling towers

– Multi-family residential customers

– Customers that sub-meter and charge beyond the meter

– Down-plateauing non-residential customers

• Analysis of customer types by customer characteristics using NAICS codes, GIS, parcel type, or other supplemental data

ALTERATIVE RATE MODELS FOR

RESIDENTIAL CUSTOMERS

Why New Rate Models?

Because the Status Quo Does Not Work for Everyone

• Traditional rate structures create a paradoxical

relationship between conservation and financial health

• Water utility variability does not match utility cost

variability

• There is a large national infrastructure gap

• Weather is becoming less predictable

• It is much easier to create individualized rates

20

True or False

• Meters are a reliable predictor of the cost impact a

customer has on their utility?

• Costs vary significantly with the amount of water you sell?

• Customers understand their rates?

• You are confident that you understand what drives

customer behavior?

• There are many utilities that rely on historic usage rather

than current monthly usage to determine monthly bill

Research Shows…..

• All residential 5/8” meters are not created equal (Boyle et al, 2011)

• Total bill amount has a bigger impact on customer consumption than billing frequency or rate structure (Wichman, 2015)

• Alternative rate structures are arising in the face of big infrastructure projects (Spang et al, 2015)

• Individualized, tailored rates can provide greater customer equity, more stable revenue, and send more accurate price signals to promote conservation. (Teodoro, 2002)

Research Objectives of Alternative Rate Models

• Increase revenue resiliency in the wake of declining

demands (increase proportion of revenues

obtained from fixed charges)

• Incentivize conservation and peak-shaving

• Address affordability and fairness

Alternative Rate Modeling for Residential

Customers with UWC Members

• Step 1: Conducted Preliminary Analysis of Four Alternative Rate Models

• Step 2: Reviewed Preliminary Analysis with Utility Staff and Select One

• Step 3: Conducted deep dive into one alternative rate model and its impact on utility and customer finances in one year

– Compared existing rates to alternative rates: effects on utility revenues, effects on customer bills, who pays less or more

Benefits and Challenges of Alternative Rate Models

Benefits

• Increased revenue stability

• Targets peaking customers

• Reduces bills for low-

peaking/low-users

• More steady bills for

customers

• Potential integration with AMI

technology

Challenges

• Billing software capability

• Customer understanding and

acceptance

• Detrimental impact of leaks

• Dealing with transient

community

Possible Areas of Future Work

• Research into communication and customer understanding (and acceptance) of alternative rate structures

• Research into current billing feasibility and implementation ease

• Modeling alternative rates with non-residential customers

• Utility pilot programs

• Survey of customers on billing and preferences: how they pay, perceptions, understanding of rates, reactions to financial incentives, their value of water, other utility-selected questions for their customers. Statistically representative.

http://efc.sog.unc.edu

@EFCatUNC

Environmental Finance Center at UNC School of Government

Jeff Hughes: jhughes@sog.unc.edu

Shadi Eskaf: eskaf@sog.unc.edu