Most Ratepayers Will Pay More Under Bartle-Wells Rate Structure – For a moment, forget about the larger issue of whether or not you support the surface water project. Last night the Davis City Council, by a 4-0 vote with Brett Lee abstaining, decided to pull the Loge-Williams model off the table and look at one of two possible Bartle-Wells fixed rate models – one with a uniform block rate and one with an inclining block rate.
The problem is not only did council override the advice of rate consultant Doug Dove of Bartle Wells Associates and staff, they made a hasty political calculus that in the end may well politically backfire.
Doug Dove, who has more than two decades of experience in water rate consulting, told the council that he believed they could educate the public on the rates.
He told the Vanguard on Tuesday morning, “We’ve also made every effort to simplify the rate structure so Davis ratepayers and voters will be able to understand it.”
“I’m now confident that the refined rate structure will be easily understood by the average ratepayer in Davis,” he added. “Since the new rate structure is essentially 2/3rds traditional and 1/3rd new and it’s been thoroughly vetted by BWA, City staff and attorneys, I feel confident that it will not affect the strong credit quality of the City’s debt for the surface water project.”
The problem with the current rate structure, and indeed the problem with the Bartle Well models, is that the fixed rate component is too high.
Doug Dove explained that, because of the size of the project, a lot of the costs need to go into the fixed category because a lot of the costs will be fixed – in other words, the city will have to pay the costs, regardless of consumption.
However, by setting a high fixed charge and a low variable charge, “that really hurts the low user because they’re going to see a very high charge, so that’s not ideal.”
So they proposed about a 50-50 scenario, where the fixed charged recovers half of the costs and the variable charges recovers the other half.
“With the consumption based fixed, there’s a third element here that’s somewhat in between fully fixed and fully variable,” he said. He argued, “That really helps model the revenues and expenses much better than with just the two elements.”
As Alan Pryor, who backed the political calculus of abandoning CBFR, noted, “It is clear that the small volume water users are subsidizing extravagant use and waste by the largest residential water users in town.”
However, Alan Pryor also very succinctly summed up the political problem.
Despite his earlier praise of the Loge-Williams model, Mr. Pryor acknowledged that it was a new system and complicated, “and given the current controversy over the water project, we should offer a more conventional tiered water rate structure even if it’s not optimal.”
The council ultimately followed that path. After all, this was the tried and true system.
The problem with the other rate systems is that the low-end users end up taking on more of the fixed costs. The result is that the typical rate user in this Loge-Williams rate structure will not only pay less than they would have under either Bartle-Wells model proposed by Mayor Pro Tem Dan Wolk, they will pay less than what they are paying right now in year one.
In five years, while the rates will double, the bottom 75% percent of rate payers will pay less, in some cases SUBSTANTIALLY less than they will now under the decision made by council.
So why did they make a decision like this, that could have disastrous political ramifications?
First, they got spooked by the argument of complexity and did not listen to their rate consultant Doug Dove, who believed he could explain the structure to the voters.
Second, the issue of family size has been raised. Back in November, Bob Dunning articulated this concern, noting, “For my money, any rate structure that doesn’t take into account household size is dead on arrival.”
He continued, “Each citizen in our town should have the right to a basic amount of water for everyday needs before moving into a punitive ‘tier,’ where the cost of the same gallon of water spikes dramatically … higher tiers should be reserved for those who clearly waste water.”
“Large families, or those who have taken in mom and dad or uncle Charlie in their later years, should not be punished … the current system does exactly that …,” Mr. Dunning wrote.
However, Doug Dove effectively alleviated some of this concern. He noted that a family of four would consume, on average, about 10 ccf a month for indoor use.
With the tier structure set at 18 ccf per month, that would give a family of 8 to 10 the ability to meet their indoor usage without ending up at a higher tier.
Three-quarters of all water users fall into that category.
For most families, therefore, an 18 ccf cut-off point for the tier should be able to provide them with plenty of water for indoor usage. Where families may run into more difficult is irrigation.
The irrigation problem is largely independent, however, of family size. The tiered structure provides the typical user with the incentive to conserve water, either with more water-friendly vegetation or other conservation practices.
The third development that led to the shift was the discomfort of Alf Brandt, a member of the WAC who serves as the California Assembly’s expert on water resource law and policy. He has worked closely with Senator Lois Wolk over the years on one of her critical issues, Delta Preservation.
Mr. Brandt told the council on Tuesday night that, while he supported the Loge-Williams rate structure in the 8-2 vote, he became increasingly uncomfortable for moving forward with it after having spoken with a number of water community leaders who live in Davis.
“I just want to come back after talking to a lot of my colleagues in the water community, how important it is for voter support that the water rate be kept as simple as possible, and tried and true, proven, so that when you go before a judge and go before voters, you can say everyone else in California has something similar,” he said.
He seemed to bring with him a number of these leaders who spoke out – concerned that the rate structure would harm the city’s bond rating and concerned it would confuse the voters.
Given Mr. Brandt’s ties with Senator Wolk, it is perhaps no coincidence that it was Mayor Pro Tem Dan Wolk who carried the water, so to speak, for changing the rate structure from Loge-Williams to the more conventional Bartle-Wells approach.
All of these factors led the council to tenuously abandon the Loge-Williams proposal, even though Joe Krovoza and Brett Lee appeared to strongly support such a model.
There is a critical concern that both Councilmember Lee and Mayor Krovoza acknowledged.
As Councilmember Lee said, “I am a little concerned that with the Consumption Based Fixed Rate, that we’re planning on setting the middle portion, that roughly 50% of the fixed costs, the CBFR portion, based upon a time that has gone by.”
It would be based on the summer of 2012, a rate that Councilmember Lee argued has been set without the ability for people to reduce their usage in advance.
This is, indeed, a concern that has been brought up in the local columns. The problem is that the council overreacted to the rhetoric and underreacted to the actual numbers that show that for the typical user – completely fair or not – they will be advantaged by the consumption-based approach.
As Michael Harrington, one of the leaders against Measure I put it, “They made a political decision rather than one that could have chosen a better rate model blessed by every consultant and staff member in the room.”
Mr. Harrington is correct here. According to Matt Williams’ figures, over 9000 households with over 23,000 residents will end up with higher rates as the result of the council vote.
The council may well have avoided some confusion that probably could have been countered by strong messaging, and instead ended up socking half to three quarters of ratepayers with higher rates.
Is that a good political move? We will see how this plays out.
—David M. Greenwald reporting
Since the election in March will not include rates, we will see if the voter who ‘can’t understand’ will connect the dots between the election and the rates. I would think the no folks would make hay out of this decision!
Right here on the Vanguard I am addressing the CC, I hope you are reading this. I am totally against overdrafting our aquifer and ready to vote yes on a fair rate structure for a good water project. But I will not hesitate to vote no if you are going to screw me, a big conserver, on the rate structure.
I fully understand there needs to be a fixed component, but the variable component needs to address use, gallon for gallon. The citizenry of Davis is not stupid and quite capable of understanding a logical rate structure with some complexities so it is logical and fair. Oversimplification for the sake of simplification is unfair and illogical. In fact the fairest way of all would be take whatever we owe on the project each month, which will be a specific amount, divide it by the number of gallons used, and charge by the gallon, whether it be a home, apartment complex etc..just like PG&E does for kwh and therms. Although the rates will not be on the ballot, we better know where they are headed by then, or I’ll vote no due to that too. Please get your act together. Yea, I’m angry.
i second donna’s comments. i would add, i was leaning towards supporting the project but looking at the rate differential, there’s no way i can support this under these conditions.
Let me see if I got this right. WAC makes a recommendation based on a year of work. City staff, rate consultants, even the city’s financial adviser are behind it. And council overrides it?
And they wonder why the community wanted a binding vote??
It was really Dan’s game last night.
So it’s good the community will get a binding vote, at least as it stands now.
Except for Koppers plan the variation is about $20/month which ever way they go. Maybe some of you protest too much.
Maybe you don’t protest enough or have money to burn.
[i]With the tier structure set at 18 ccf per month, that would give a family of 8 to 10 the ability to meet their indoor usage without ending up at a higher tier.[/i]
Not when there are teenagers in the house. Those life forms take frequent and long showers.
I still don’t get the usage tiers argument. Is this a form of progressive water taxation? The variable expense for pumping water to meet higher demand will be very tiny compared to the overall fixed-cost expense to pay for the waterworks project. So, why the punative rate measures for higher use?
Because 1) The fact is that one is using more and 2) the project had to be this big to accommodate those with habits of using more. A good compromise might be, OK, you feel you need frequent showers, at least make it quick. Is it punative to pay for more electricity or gas or food or anything else if you use more?
Paying more for using more is fine, but paying usage-based tiered rates is social engineering… it has no connection with the actual cost allocation.
Power tiered rates are difference because the utility needs to purchase power over-capacity at a higher rate. But water capacity in this system will be primarily a fixed-cost nut, so tiers do not make sense unless we want to punish people that use more water for any reason.
I think usually the purpose is to incentivize conservation by the higher water users.
Mr. Toad: Your comment tells me you really don’t understand the numbers. So in five years, if we adopt Bartle wells, someone who uses almost no water, 5 ccf, is going to pay $60. That’s $12 per ccf. At 8 ccf, it’s only $8 more. That’s a horrible inequity.
Aren’t most households familiar with a tiered rate structure? My PGE electrical rates are tiered based on usage tiers. I pay the lowest rate for the “base amount” and progressively more as I use more. And I don’t remember that PGE provides a “break” to those families with lots of children or big houses or those that are simply cold natured and want to run the AC 24 hrs a day in the summer.
I see that but under another scheme you would only pay $15 more for those 3 ccf. My point is that there are many ways to skin this cat but that the differences between them are not that big and that those differences don’t warrant the dramatic remarks some people have made here today.
What are you referring to? The two Bartle Wells proposals are charging $60 and $68 for just 5 ccf. Those are the only two being considered now.
[i]I think usually the purpose is to incentivize conservation by the higher water users[/i]
I am incentivized to conserve gas and it is not tiered. I am incentivized to conserve food and it is not tiered. Why the extra punitive measure for water?
dlemongello says that the scale of the project is required because of high usage customers and so it makes sense that these customers pay a higher tiered rate. I don’t think I have read that we have a choice for a different solution if only we could force everyone to conserve water to some baseline.
Again, if the variable costs inflate with higher volume usage, it would make sense to implement tiered rates. Otherwise just keep the variable rate the same and high usage customers will still pay more and still be incentivized to conserve.
This tiered rate thing is just some form of weird Davis environmental classism. Get rid of the tiers. Use more, pay more… but at the same variable rate. I agree with Dunning. Now, I also agree that we need to have a fixed component to help mitigate the risk for fee revenue falling below what is needed from conservation… but I don’t see the rational for tiered rates.
“This tiered rate thing is just some form of weird Davis environmental classism.”
Fairly sure that tiered rates are pretty common.
The CC had a tough one last night. I understand Dan wanting to call the question, but I agree with Brett wanting to give the WAC more flexibility on choices.
Also, I saw extreme fatigue in the faces of several CC members towards the end near midnight. Been there, so know it when I see it.
I don’t envy the WAC or the CC on this one.
And I can’t remember a time when the CC turned away from a unified front by all staff to go with a big policy. That’s what happened, and it was a shocker to witness.
Elaine M was frustrated from uncertainty, and Matt Williams calmly took it in watching a year of work crash and burn. But he didn’t throw his ever-present laptop at the dais, demonstrating his iron control and all-around good cheer.
Lucas is the swing on this one, next meeting. Congrats, or something.
Jeff: I cannot make heads or tails of the L-W system, can you ? Maybe someone can give us a briefing for water idiots.
Reminds me of being 15 y/o and rebuilding the 52 HP engine on my family VW. Microbus. Usd the famous the VW Repair for Idiots, with the hippy drawings. I think we need one for water projects and rates. Is the Flatlander artist still I town??
We don’t have to reinvent this. The Pacific Institute has compiled a survey of how water districts price water: [url]http://www.pacinst.org/reports/water_rates/index.htm[/url]
Members of the Association of California Water Agencies ([url]http://www.acwa.com/[/url]) can get the report. I believe WDCWA is a member, and can probably provide the information to the WAC.
When I spent some time in 2011 looking at how different agencies price water, I found a wide range of practices. I can verify that tiered pricing is very common.
David, the Bill Comparisons table you provided is incorrect/misleading. It shows rates staying flat under the “current rate structure” until 2018. That’s absurd. Rates are going up no matter what, even in the absence of a surface water project. The city will have to replace a number of the existing wells, drill deeper wells, and likely begin paying regulatory fines in 2016. The council has already stated they’re going to raise rates 15% in 2013 to cover this contingency and who knows how much in the following years.
The opponents, such as Dunning, who frame the issue as one of doing nothing vs. proceeding with the surface water project are doing the commmunity a great disservice. Doing nothing is not an option and rates staying flat is absurd.
-Michael Bisch
Frustrated and a bit tired…
But how about this: The UN estimates that for basic needs: drinking, sanitation and hygiene, humans need about 13.5 gallons of water per day. That is what we need. That would be about 405 gallons per person per month. A family of 10 would need 4,050 gallons per month. That is just under 5.5 ccf per month.
So let’s cut every single household (apartment or single family dwelling) a break and assume that each of them has 10 people living in the household. And let’s allow every dwelling to have, at an agreed upon (low) rate, the first 5.5 ccf. Using the table above, let’s use the cheapest rate per ccf from the table–around $2/ccf and charge that. Then, let’s figure out how much it will cost, to fund our water system given current winter consumption rates (everyone is so concerned about using summer rates) subtracting first the amount we will earn by charging the base rate of $2/ccf. Take the resulting amount of money required to fund our system and divide it by the number of ccf used in the city and charge THAT amount per ccf for every ccf used above 5.5 per month.
This is equitable and easy for the clearly not-too-bright residents of Davis to grasp. It is equitable because everyone in the city is assured the basic amount of water required for survival (padded in most cases). It is easy because if you use over that amount you know exactly how much you will pay per ccf and everyone will pay exactly the same (as everyone seems to want). The city fulfills its responsibility to assure the survival of everyone in town and a secondary “black market” that will stimulate the local economy will emerge as small households sell their excess water to larger ones (of course they will have to figure out how to transport it to the larger households–further stimulating a local water delivery service).
It is time to get simple and equitable and stimulate the ingenuity that we know exists in Davis.
Michael:
“the Bill Comparisons table you provided is incorrect/misleading”
I guess you better tell that to Diana Jensen, they are hers.
“It shows rates staying flat under the “current rate structure” until 2018.”
That’s not what it is showing. What it is showing is year 1 and year 5, it’s not showing the intervening years of gradual increase. There is nothing misleading about it.
“Rates are going up no matter what, even in the absence of a surface water project”
That is correct. The question at least for the purposes of this issue is which is the best and fairest way for the rates to go up. To me the answer is quite obvious, just look at 2018 and the two lowest percentiles.
Maybe there’s something wrong with my monitor. On my pc, the 2013 current rate structure reads: $19.00/$23.50/$29.50/$38.50/$51.80 depending on usage. The 2018 current rates are identical. How’s that not flat?
-Michael Bisch
The L-W system should be applauded for attempting to tackle the full range of competing interests and money challenges:
The interest to encourage and reward conservation.
The interest for the rate structure to be fair.
The problem relying on variable fees covering the city’s fixed nut of debt service and operational expense.
I think setting fee-rates based on the actual revenue and expenses for the prior year is brilliant from a pure financial management perspective. As a lender I like solutions that reduce risks for unpaid bills.
I agree with Rob’s comment [i]”It is time to get simple and equitable and stimulate the ingenuity that we know exists in Davis.”[/i]
I’m just not sure I have seen that simple solution yet.
I think a tier-less rate system might help with that simplification and bring on more supporters.
However, I think the L-W solution may be too complicated for some voters to grasp, and too easy a target for others bent on just blocking the project in general.
I do see now that tiered water rates are pretty common (although not without controversy and conflict).
Hit this link ([url]https://davisvanguard.org/images/stories/bill-comparisons.png[/url])
Ah, David, the 2013 and 2018 rates under the Current Rate Structure are still identical.
-Michael Bisch
I can’t wrap my brain around the comments of those who would support the surface water project, but aren’t going to support it because of the rate structure. The decision tree starts with the question, “Do we NEED the surface water project?” If the answer is “yes”, then you have no choice but to proceed. How the rates are structured is of secondary importance. Can you imagine the parents of a child in “need” of a life saving surgical procedure choosing not to proceed because they can’t decide on the optimal cost sharing? The life saving surgical procedure is a “need” not a “want”.
That’s why Dunning’s argument going back to the summer 2011 of not being able to “afford” the project is illogical. That’s like saying we can’t “afford” oxygen or we can’t “afford” the life saving procedure. Either you “need” it or you don’t. And if you “need” it, you do whatever you have to do to “get” it.
Now, if you’re not convinced we “need” the project, by all means, vote against it. But it wouldn’t be because of the rate structure. You’d be voting “no” because it’s not a “need”. If you are convinced we “need” the project, but vote “no” because of the rate structure, you’re undermining your own wellbeing. It’s worse than cutting off your nose to spite your face. It’s akin to committing suicide to spite your face.
-Michael Bisch (Provocateur)
I see what you are seeing, looking below the line, “current rates” – the rate plans are not identical.
David, you’re missing my point. The “current rates” are misleading because they show NO rate increases between 2013 and 2018. That is NOT one of the possible scenarios, hence, it is not a choice for the voters. The rates are going to increase dramatically no matter what. The choice before the voters is whether the dramatic rate increases are going to pay for: 1) a surface water project; 2) well replacement, legal fees, and regulatory fines; 3) a combination of #1 and #2.
-Michael Bisch
I understand, that’s not the real point of comparison. To me the value is comparing BW in 2018 to LW in 2018.
Honestly, the pundits have spent the last year confusing the crap out of the voters. Process this, process that. Binding this, binding that. Public outreach this, public outreach that. As if complaining about any of the foregoing can prevent the rates from going up dramatically. Do I wish the process had been better? Yes I do. Does that change anything substantively in the end? No it doesn’t. The rates are going to go up, up, up.
-Michael Bisch
The two rate structures will result in very little real world difference for the consumer so I don’t know why anyone is wringing their hands over it. We are talking about an increased that is less than the cost of your daily Latte.
The real question is will we secure our water needs for the foreseeable future, or will we spend the same amount to maintain the current inadequate system (while continuing to pollute the Delta).
A daily latte here (the school measure proponents threw that one at us already), a daily latte there (now being used for the water cost raises)and pretty soon we’re talking a whole pot of latte’s.
rusty, all the alternatives require you to incure the equivalent cost of a daily latte. Or do you have a realistic alternative that the rest of us are unaware of? If so, why keep the details secret? Let’s hear them.
-Michael Bisch
Michael, my point is people in this town always try to soften the blow of rising costs by saying “it’s only a latte”. Well after a while all those lattes add up to people giving up a Hell of a lot more than just their daily lattes.
Well, if that’s what’s winding your crank, Rusty, then you should be jumping all over Dunning. Talk about softening the blow of rising costs. He’s the one pretending to be the Pied Piper, playing his magical flute, hoping to lead lead Davisites into no rate increases never, never land. It’s ridiculous.
-Michael Bisch
You are going to pay the costs regardless Rusty. Your choice is what will you get for your money.
Michael, I do understand what you are saying, however, do we just roll over and put ourselves at the mercy of the deciders of the rate structure or do we use our ability to vote as leverage? They need to offer rates that reflect better logic and fairness so people do not feel taken advantage of in order to vote yes.
This table is rates per month of use, remember it will be double this amount on the bimonthly bill, which is what we are all used to seeing. Looking at my bill this looks right, I just got a bill for the $23.00 base rate and $9.00 for 6 ccf for 2 months=$32 so just under double what the chart shows I’d have paid for 10 ccf for 2 months X$19=$38.00. So in 2018 under LW that would be $81 and under BWIBR $122 for 2 months. I’d like to see the breakdown for what is base and what is the per ccf charges in the different scenarios.
Clearly Starbucks needs to worry bigtime.
Ya. No more lattes for Rusty once He gets hit with the water bill increases
Michael and dlemongello, Mr. Bisch shouldn’t be worried that we’re all going to have to give up our lattes. Being president of the DDBA he should be more concerned that with all the new school taxes, state taxes and now the even bigger hit we’re all going to absorb with the water rates that we’re going to be giving up some trips to the theater, dining out less, shopping less, etc.
Get the picture Mr. Bisch, I’ll bet that winds your crank.
Rusty, I concern myself with those things over which I have some influence, not with those things I can do nothing about (for example, what’s the point to railing over the weather?). All the things on your list are outside my influence except perhaps school taxes. But with school taxes, the benefits outweigh the cost in my judgement. As for the water rates, you avoided the question I asked you. Please enlighten us as to how you propose to avoid significant water rate increases.
-Michael Bisch
Mr. Bisch, did I ever say I had a plan? I was just pointing out that trying to downplay the huge rates by saying it’s just the cost of a daily latte is really understating the costs that we’re all going to be faced with and there are going to be much greater reprucussions than just giving up coffee. Somehow you choose to turn it into much more than what was said. Relax a little, have a latte while you can still afford to do so.
Dunning likes this more recent alternative rate structure:
Bob Dunning: We’re much closer to workable plan ([url]http://www.davisenterprise.com/local-news/dunning/bob-dunning-were-much-closer-to-workable-plan/[/url])
Does anyone know how it came to be that one or more City of Sacramento employees came to speak to the Davis City Council about Davis water rates? It just didn’t feel right.
Barbara: they were all Davis residents. But the answer is Alf Brandt recruited them.
we are not much closer to a workable plan. the reality is that dunning only cares about his own very narrow situation and not about the fact that 9000 households and 23,000 residents will pay more under this arrangement than under l-w