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This presentation premiered at WaterSmart Innovations
watersmartinnovations.com
I Conserved - You Raised Rates – Yes But You Pay Less!
Bill HoffmanConsultant to Water Management, Inc.
What We Will Cover• What is happening across the nation with water and wastewater
rates;
• The Texas Example – Conservation, Reuse and Drought Management offer the most water for the least cost;
• A hypothetical case that shows how 10 homes using the exact same amount of water before conservation and paying the exact same in water and wastewater rates will change after conservation – wasters pay more, conservers pay less AND TOTAL REVENUE NEEDS for the utility; and
• The impact on increased efficiency on the expansion of future treatment capacity and the cost reductions inherent to that will be reviewed.
Water & Wastewater Rates
Circle of BlueApril, 2016http://www.circleofblue.org/waterpricing/
Price of Water 2015: Up 5 % in 2016 in 30 Major U.S. Cities;
48 % Since 2010!
Consumer Price Index for Utilitieshttp://www.circleofblue.org/waterpricing/
$4.78 $5.73
$7.94
$9.47
$10.12
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
$11
2001 2005 2010 2013 2016
Dol
lars
per
Tho
usan
d G
allo
ns
Year
Commercial Water and Sewer Rates for 100,000 gallonsfor Nation's 50 Largest Cities
Source: Black & Veatch - 50 Largest Citys Reports
Total Water Sewer
Even in Chicago, the Mayor Wants to Double Water Rates!
“Water is the oil of the 21st
century.”Andrew Liveris, Chief Executive,
Dow Chemical Co., August 2008.
Source:
$0 $5 $10 $15 $20 $25 $30 $35 $40
Denmark
Austria
Germany
France
England
Czech Republic
USA (Black & Veatch)
Dollars per Thousand Gallons
Average Residential Water and Sewer Rates in European Countries Compared to USA in 2013
Sources of Information: Europe -http://www.globalwaterintel.com/archive/12/9/market-profile/global-water-tariffs-continue-upward-trend.html
USA - http://bv.com/docs/mana
9 11 11 12 13 13 14 15 16 17 18 19 20 21 22 24 25 26 28 30 31 33 35 37 39 42 44 47 49
05
101520253035404550
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
Dol
lars
per
Tho
usan
d G
allo
ns
Year
PROJECTED NATIONAL FUTURE WATER AND WASTEWATER COSTS AT CURRENT INFLATION RATE OF
5.85%
Cost to Flush a Toilet at Current Inflation Rate of 5.85%
Gallons per Flush
Cents per Flush in 2014
Cents per Flush in 2034
5 4.9 15.43.5 3.4 10.81.6 1.6 4.9
1.28 1.2 4.0
Bridges have been the Poster Child for Infrastructure Needs!
Buried No Longer: Confronting America's Water Infrastructure
Challenge (American Water Works Association, 2012)+Investment needs for buried drinking water infrastructure total more than $1 trillion nationwide
over the next 25 years.www.awwa.org/Portals/0/files/legreg/documents/BuriedNoLonger.pdf
Water58%
Wastewater42%
EPA Breakdown of Water and Wastewater Infrastructure Dollar Needs
http://www.usmayors.org/urbanwater/documents/LocalGovt%20InvtInMunicipalWaterandSewerInfrastructure.pdf
This graph shows when residential water and sewer bills will exceed energy bills in selected cities (source – Alliance for Water Efficiency)
The Texas Example
Future Capital Cost Through 2070 in Texas
• Total Future Capital Costs for Texas Water/Wastewater Related Resources = $230 to $300 Billion
• 75% to 80% for Water and Wastewater Infrastructure NOT RELATED TO NEW SUPPLY
• New Supply is only about 20% to 25% of Future Capital Costs
• New Supply Costs = $62.6 Billion
Detailed Breakdown of Projected Water Use in Texas by Category
8
9
10
11
12
13
14
2020 2030 2040 2050 2060 2070
Mill
ions
of A
cre-
Feet
per
Yea
r
Year
Future Texas Water Use2017 Texas Water Plan
Agricultural Urban & Industrial
3.24.3
5.26.1
6.88.0
18.419.2 19.7 20.3 20.8
21.6
15.2 14.9 14.5 14.2 14 13.6
0
5
10
15
20
25
2020 2030 2040 2050 2060 2070
Mill
ions
of A
cre
Feet
per
Yea
r
Year
Total Demand, Existing Supply, & Shortfall in TexasHow do we fill the gap in 2070?
Shortfall Demand Exsisting Supply
516487111116
152203226
371631649
811887
1,1001,330
2,584
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800
Other StrategiesConjuncitve Use
Direct Potable ReuseGround Water Desalination
Sea Water DesalinationAquifer Storage & Recovery
Other ConservationDrought Management
Other ReuseGround Water Development
Indirect ReuseMunicipal Conservation
Passive ConservationNew Resevoirs
Irrigation ConservationExisting Surface Water
Thousands of Acre Feet per Year
New Supply in Texas in 2070
Desalinization2% of Supply
Other3%of Supply
New Resevoirs12%
Existing Supply34% of Supply
Conservation, Reuse & Drought Management
49% of Supply
Where Future Water Will Come From And its Capital Cost in Texas in 2070
Conservation, Reuse12% of Cost
49% of Supply
All Other88% of Cost
51% of Supply
Capital Cost of Future Projects in 2017 Texas Water Plan - $62.6 Billion
http://www.twdb.texas.gov/waterplanning/swp/2017/index.asp
$0.00$0.00
$0.45$0.58
$0.87$1.15$1.17
$1.30$1.38$1.44
$1.52$2.19
$2.31$3.48
$3.83$4.39
$0 $1 $2 $3 $4 $5
Passive ConservationDrought Management
Irrigation ConservationOther Conservation
Indirect ReuseMunicipal ConservationExisting Surface Water
Other ReuseAquifer Storage & Recovery
New ResevoirsGround Water Wells & Other
Ground Water DesalinationConjuncitve Use
Direct Potable ReuseOther Strategies
Sea Water Desalination
Dollars per Thousand Gallons - Not Delivered
Texas 2017 Water Plan Cost in Dollars per Thousand Gallons
The Cheapest Water You Will Ever Have Is The Water You
Already Have!
10 Homes in a Hypothetical City
Variable, 20%Fixed, 80%
Typical Utility Water/Wastewater Cost Breakdown
11
10 10
9
8 8
7 7
5 5
0
2
4
6
8
10
12
1 2 3 4 5 6 7 8 9 10
Thou
sand
s of
Gal
lons
per
Mon
th
Household
Hypothetical Household Use for 10 HousesAverage Use - 10Kgal/Month Before - 8 Kgal/Month After
Use Before Conservation Use After Conservation
Analysis of Costs After Conservation• Of the $1,300 collected for the 10 homes, 20% is variable cost.
• Therefore variable cost equal $260 each month.
• The 10 homes reduce total water use to 8,000 gallons a month, down from 10,000 gallons a month, a 20% reduction
• Variable costs are also reduced by 20% or $52 a month that does not have to be recovered to cover operating and fixed costs.
• This means that the Utility still needs to receive $1,248 in revenue to cover its costs each month, down from $1,300.
• The utility must raise rates for the 10 homes by 11.4%
$1,300
$1,100
$1,248
$1,000
$1,050
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
Revenue Before Conservation Revenue After Use Reduction After Adjustment for NuteralRevenue
Dol
lars
per
Mon
thImpact of Conservation on Revenue from 10 Homes
A $52 per Month Savings
Well, Rates DID have to Go Up!
Current Rate Structure Use fees per 1,000 Gallons
Type of Service Water Sewer Total
$/kgal over 2,000 gallons $4.50 $5.50 $10.00
Base fees for first 2,000 gallons $25.00 $25.00 $50.00
New Rate Structure Use fees per 1,000 Gallons
Type of Service Water Sewer Total
$/kgal over 2,000 gallons $5.85 $5.785 $11.635
Base fees for first 2,000 gallons $27.50 $27.50 $55.00
$130 $130 $130 $130 $130 $130 $130 $130 $130 $130
$160$148 $148
$136$125 $125
$113 $113
$90 $90
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
1 2 3 4 5 6 7 8 9 10
Dol
lars
per
Mon
th
Household
Monthly Water & Wastewater Fees Before and After Conservation
Montlhly Cost Before Monthly Cost After
The BoTTom Line!• Those who did not conserve pay more.
• Those who do a good job pay less – some way less.
• Total bills are actually reduced even though rates are higher and total revenue demands WENT DOWN!
• AND THE TOTAL CHARGE FOR WATER SERVICE TO THE 10 HOMES WAS REDUCED BY $52 A MONTH!
The Cheapest Water You Will Ever Have Is The Water You
Already Have!
Water Treatment Capacity Impacts
$0 $5 $10 $15 $20
Conventional Potable Water
Conventional Wastewater
Advanced Wastewater
Sea Water Desalinization
Dollars per Gallon Day of Capacity
Capital Cost of Water and Wastewater Treatment
100
200
300
400
500
600
700
Mill
ions
of G
allo
ns p
er D
ay (M
GD
)
Year
Future Expansions of Water Treatment Capacity if Utility Population Grows at 2.5% a Year
4 expansions no conservation - 2 expansions with conservation
Current Average Rate of Use Current Peak Rate of 1.7 X Avg.Future Average Use @ 20% GPCD Reduction Future Peak Rate at 1.5 and 20% GPCD Reduction
Example CityBefore Conservation
• Now uses 150 MGD• Population Growth – 2.5%/Year• Peak Factor 1.7• Peak Day – 225 MGD• In 40 years will expand to 405
MGD• Peak 604 MGD• Four plant expansions
With Conservation
• Conservation – 20% use reduction
• Peak day down to 1.5• In 40 years average = 322 MGD• Peak 483 MGD• Two plant expansions
That is a $300 Million to $800 Million Dollar Capital Savings by not having to
build 200 MGD of capacity and expanded supply!
Conservation Delays Future Capital Investment Needs
The Bottom Line!
With Conservation & Reuse1. We get more economic expansion on the same
infrastructure;
2. Delay when politically sensitive bond elections must be held;
3. Reduce future costs;
4. Keep rates as low as possible.
The Cheapest Water You Will Ever Have Is The Water You
Already Have!
www.watermgt.com(703) 370-9070
GSA Contract # GS-21F-0038T
I Conserved - Your Raised Rates – Yes But You Pay Less!