Editor’s Note: Matt Williams made the decision, rather than simply allow Bob Dunning to have the field to himself at this time, that he would respond to Mr. Dunning’s Sunday column. In what follows, “POINT ” is from Bob Dunning’s column and “COUNTERPOINT ” is Matt Williams response.
POINT – Every mom and dad living in America in the past 50 years knows about Johnson and Johnson’s “No More Tears” shampoo.
And now it’s time for our City Fathers (and Mother) to come up with a No More Tiers solution for the one essential ingredient of a good shampoo – water.
In a couple of days’ time, our esteemed City Council will meet to wrestle with the complicated water rate formula it has been handed by our hard-working Water Advisory Committee, a formula that even this town’s rocket scientists are having trouble understanding.
COUNTERPOINT – Bob must be talking to a different group of rocket scientists. The ones I ‘ve talked to have been able to sum up the complicated rate structure in three words . . . Distribution – Supply – Use.
POINT – The dramatically increased fees required to pay Davis’ $113 million share of our joint water project with our new best friend, the city of Woodland, will go into effect May 1. That is, if the project is approved by voters on March 5.
COUNTERPOINT – Bob is right when he says that the new fees will go into effect May 1st, but “dramatically increased” is an interesting description for what will be a 15-20% increase in water system revenue in 2013 over what we have paid in 2012 and 2011 and the last half of 2010. The last water price increase actually took effect on August 1, 2010, So the 15-20% increase in May 2013 means an 8% per year average increase over the past three years, and in that time the City has doubled its inventory of deep aquifer wells.
POINT – The catch is that a large portion of a whole year’s worth of water rates apparently will be based upon your water usage from the summer of 2012, before you were even aware that every drop of water you used that summer was going to be held against you presumably until May of 2014, nearly two years later. If the phrase “lack of fair warning” comes to mind, you are not alone.
COUNTERPOINT – The portion of the rate structure that Bob is describing is the Supply portion in which each rate payer in essence “subscribes” for the amount of water they expect to use during the period that the rate is in effect. Bob will be pleased to know that everyone’s price for the amount of water they subscribe for is exactly the same price per gallon. The question I have for Bob is, “What is the best way for each rate payer to decide how much water to subscribe for over the next 8 months?”
POINT – Those council members I’ve questioned on this have been unable to give me a definitive answer, but since the new rates would go into effect on May 1, the only “previous summer’s usage” they could be based on would be 2012.
COUNTERPOINT – “Only” is such an absolute word. The fact is that because 2012 has been a very dry year, the water usage year-to-date is 8.5% higher than it was in 2011. Using 2012 consumption would drive everyone’s water bill up significantly, so the City will use the 2011 Summer consumption and effectively give everyone a 8.5% discount on the Supply portion of the bill.
POINT – Simple fairness would dictate that everyone be given advance warning that beginning on such and such a date in the future, your water use will be used to calculate your actual charges.
COUNTERPOINT – Under the provisions of California Constitution Article XIII each rate payer has to pay their fair proportion of the costs of the system. Adding up everyone’s past use is the method that the engineers used to determine how much supply the system needed. Isn’t adding up everyone’s past use therefore the best way to determine everyone’s fair share of the cost for that supply?
POINT – In criminal law, they call that “ex post facto,” where you can’t be charged for a crime that wasn’t a crime when you committed it. In civil law, they just call it misguided.
COUNTERPOINT – Guidance. That is what we all need. Where is the first place each of us will turn for guidance if we are asked to determine how may gallons of water we want to subscribe for? Historical usage perhaps? It may be “ex post facto” but it is also a historical pattern to build an informed decision. The City has just saved each of us the trouble of searching for our old bills .
POINT – Maybe you had an especially bad summer in 2012 and have since replaced that thirsty expanse of lawn with wood chips and prickly pear cactus. No matter. For most of the next two years, you’ll be paying for that lawn, over and over and over again.
COUNTERPOINT – If Bob stopped to do just a teeny tiny bit of homework he would see that the first period of the new rate structure will last only 8 months not two years. Dunning hyperbole is always a wonder to behold.
POINT – Maybe you had an especially bad summer in 2012 and have since replaced that thirsty expanse of lawn with wood chips and prickly pear cactus. No matter. For most of the next two years, you’ll be paying for that lawn, over and over and over again.
COUNTERPOINT – The rate structure has built in costs for providing incentive payments for achieving water conservation. The is how water saving toilets and fixtures are handled now. The City wants to reward water-saving behavior. Just ask the NRC.
POINT – Maybe your financial situation was superb in the summer of 2012, but now you’ve lost your job and that water bill you used to ignore as insignificant is now demanding your attention. Tough luck. You’ll be stuck with that 2012 usage for the foreseeable future.
COUNTERPOINT – The situation you describe is exactly why the Use portion of the bill will continue to be based on your usage during the current month. Cut back on the water you use and your bill will go down, just like it does now.
POINT – Then again, maybe you spent the summer of 2012 in Saskatoon and forgot to set your sprinklers before you left, so your water bill was nonexistent. Consider yourself lucky. At least until May of 2014.
COUNTERPOINT – Considering all the costs incurred by replacing all those dead plants and dead grass, forgetting to set sprinklers before going to Saskatoon is about as likely to happen as the Pope approving birth control use.
POINT – And remember, the more you conserve, the more the city will have to charge you for a gallon of water. That $113 million is a fixed cost and someone will have to pay the bill. If our water usage drops to half the projected consumption, the city will have no choice but to double our rates.
COUNTERPOINT – If Bob had attended even one Water Advisory Committee meeting he would know that the whole reason behind the Distribution – Supply – Use rate structure is to eliminate the kind of rate volatility Bob describes. Both the Distribution charge and the Supply charge have been structured so that they are fixed revenue that covers 100% of the fixed costs of the water agency. No more unplanned rate increases will happen.
POINT – That $113 million bill won’t go away because people suddenly started conserving water, just as that $500-a-month car payment won’t go away just because you stopped driving the kids to school.
COUNTERPOINT – Fixed revenue for the agency means predictable fixed fees for the customers. For consumers the nightmare of the swings from low water bills in winter to high water bills in summer due to irrigation will be a thing of the past.
POINT – Speaking of kids, the rate structure the WAC has recommended that the City Council adopt refuses to take into account the number of residents in a household before moving that household into a punitive and substantially more expensive “tier.”
COUNTERPOINT – Actually Bob is 100% wrong in the two POINT s he makes here. First, the WAC recommended rate structure converts over 70% of the current rate structure’s tiered structure to a uniform “everyone pays the exact same $ per gallon” rate. No matter whether you are kid #1 or kid #4 or kid #100 you will be charged the exact same $ per gallon for water in the Supply charge which will make up more than 70% of the bill. Second, the “substantially more expensive” second tier will cost you two hundredths of one cent more per gallon than in tier one. Note: that $0.0002 per gallon translates to 15 cents per ccf .
POINT – What this does is set up a form of class warfare, where your water-wasting neighbor is paying less per gallon for his water than your water-conserving family of four is paying for its water.
COUNTERPOINT – I don’t think even Dick Chaney would be able to fund much warfare on two hundredths of one cent per gallon.
POINT – The long and short of it is that a large family’s higher rates are subsidizing a smaller family’s lower rates
COUNTERPOINT – There you go again. That hyperbole will get you every time.
POINT – Those who have large families or have invited Grandma and Grandpa to live with them in their later years expect that if they use more water than their neighbors, they’ll have a proportionately higher bill. That’s only fair. If your family of six uses six times as much water as your single neighbor, your bill should be six times higher.
COUNTERPOINT – You are making a very powerful argument for the Supply charge in the rate structure, where what you describe is exactly what will happen . . . everyone paying the exact same dollar amount per gallon. See Bob, it isn’t rocket science.
POINT – The problem with tiers in the WAC plan is that at a very low level of water usage you suddenly find yourself in the more expensive Tier II, where you are paying substantially more per gallon than you were in Tier I.
And for many households it will be impossible to avoid the higher per-gallon charges no matter how much they conserve.
COUNTERPOINT – That sounds like an Alfred Hitchcock script, but lets dig down a bit to see just how nefarious the substantially more expensive realities are. If you multiply the difference between the tier 1 and tier 2 rates ($0.0002 per gallon) times the national standard of 55 gallons of indoor water use per person per day, the economic impact is one penny per person per day. Heck Bob, how much will 30 cents a month buy you? I bet you give your kids a higher allowance than that.
POINT – Fortunately, there is a very straightforward, simple and fair way to solve this inequity, an inequity that clearly violates the 14th Amendment’s promise of “equal protection” of the law for all residents.
You simply charge each household, regardless of size, the exact same amount for each gallon of water used. We don’t care if there are 40 people in your household or four people in your household. We don’t care if you’re watering the lawn, filling your swimming pool or giving the kids a bath. It’s 10 cents a gallon (or whatever) for everyone. No exceptions, no questions asked.
Naturally, bigger families will have considerably higher water bills than smaller families. That’s as it should be. But everyone will be paying the same amount per gallon.
COUNTERPOINT – There you go again! You are really are outdoing the rocket scientists once again. You’ve done a perfect job of describing the Supply charge in the WAC recommended rate structure.
What was it that Henry Higgins said? “By George, he’s got it! By George he’s got it!
POINT – It’s also a plan that’s easy to implement and understand. You simply calculate how much money per month the city needs to raise to pay for water delivery and the water project and everything else associated with water and divide it by the number of gallons of water used citywide per month. That gives you your price per gallon.
COUNTERPOINT – Distribution – Supply – Use is really easy to implement and understand as well. It is also incredibly transparent because each rate payer will be able to see in the Supply charge just how much it is personally costing him/her to no longer have mineral build up on the home fixtures, or cloudy mineral build up on drinking glasses, or the expense of paying the Culligan Man bill, or the expense of lugging water jugs down to refill them at Nugget , or the expense of bottled water. Neither the current rate structure nor what you propose will provide that kind of up front transparency.
POINT – And then everyone pays that price for the gallons they consume, just like we do with gasoline, milk, soda pop and beer.
Nugget doesn’t move you into a second tier and charge you a penalty if you show up at the checkout line with six gallons of milk instead of two. Neither should the city.
COUNTERPOINT – The other night I was at Council and Alan Miller got up and made some interesting public comment. Alan works in the transportation industry (rail I believe) and he immediately understood about “peak demand rates” which is what a tiered structure is. Alan explained that peak demand frequently causes transportation companies to purchase additional vehicles that stand idle for the vast majority of each day, and are only used to provide service during the peak hours of demand. Those frequently idle additional vehicles aren’t cheap to purchase, so having “peak rates” for commuters during rush hour is a very common practice. Customers who use significantly above average amounts of water more often than not do so through irrigation, and it is irrigation between the hours of 4:00 and 6:00 in the morning that constitute the water “rush hour” in Davis.
POINT – Rather than billing us through tiers or upon how much water we used 12 months ago, base our bills on how much water we actually used last month.
If you use 100 gallons, you pay 10 bucks. If you use 1,000 gallons, you pay 100 bucks. Or whatever the price per gallon turns out to be.
It’s fair to big families, it’s fair to small families and it’s fair to those who live alone. No more pitting one group of Davisites against another by charging everyone different rates for the same gallon of water.
COUNTERPOINT – There you go again! What a great description of the Supply charge in the new rate structure.
My only criticism is that you really don’t appear to be practicing “equal protection” in your descriptions. Where is your description of the Distribution charge?
Let me jump in and help you. The Distribution part of the rate structure covers the cost of those parts of the system that need to provide reliability regardless of whether any water is used. Fireline is a big portion of that. We all hope that we never have to see water used on our house to put out a fire, but we all want to know that the water will be there if a fire does happen. Similarly, when we go away on vacation to Oregon each summer, we want to know that when we come back home after weeks or moths of no water use at all, water will flow from the tap as soon as we throw the handle. Those Fireline and Readiness To Serve costs are what make up the fixed fee in the current rate structure and will make up the Distribution charge in the new rate structure. Effective May 1st the Distribution charge will actually be about 23% lower than what the fixed fee is currently. The costs for the East Davis storage tank have been moved over into the transparent Supply charge since the tank represents supply costs.
POINT – There is simply no rational basis for charging one family 10 cents for a gallon of water and another family 15 cents for a gallon of water, just because one family has two kids and the other one has three. The city has never explained this discriminatory, anti-child policy because there is no explanation.
COUNTERPOINT – You are absolutely right Bob. The difference isn’t 5 cents per gallon (15 minus 10) it is two one hundredths of one cent per gallon . . . which amounts to one penny per person per day.
POINT – And if you’re worried about encouraging conservation, trust me, when people see the shockingly high bills this project will produce, they’ll conserve.
COUNTERPOINT – Bob, my wife always says that the two words a man should never say are “Trust me” especially if he is saying them to a woman. California Constitution Article X and the many pieces of legislation it has spawned say that we need to be much more responsible about how we use water. In one week alone in 2009 the California Legislature unveiled five (5) new major water bills: three Senate Bills and two Assembly Bills designed to There is a lot in these bills: creation of a new potentially powerful water institution (a Delta Stewardship Council); an effort to strengthen an existing water institution (the State Water Resources Control Board); a requirement that water conservation be pursued more aggressively in both the urban and agricultural areas; a call for evaluating new infrastructure (including, yes, some kind of Peripheral Canal); creation of a Science Board; establishment of a standardized water use data collection and reporting system; establishment of a user fee for Delta water users; a call for monitoring of groundwater levels.
Water is a BIG issue in California, and right now Southern California is saying “trust me” to Northern California. Is that the company you want to keep when you say “trust me”?
POINT – It’s time for the city to stop casting one group of ratepayers against another and instead put us all on equal footing. Declare once and for all that in Davis there will be “No More Tiers.”
Just like the shampoo.
COUNTERPOINT – So I will end this little interchange by saying that reasonable people can agree to disagree reasonably. This appears to be one of those times.
If I didn’t think you were a reasonable man, I would be doing my best imitation of Mary Martin in the shower.
Matt, I don’t care how its spun, basing rates on past summer useage after the fact when everyone was expecting next year’s rates to be based on winter useage is just wrong. Next year’s rates should be based on winter useage and then going forward, once everyone is informed, it can be based on summer useage. What’s so hard about that?
“when everyone was expecting next year’s rates to be based on winter useage is just wrong.”
I think you’re conflating sewer with water here.
Nice article Matt!
Nice facts, nice humor and very respectful!
Let’s hope Bob addresses it. I for one think Bob most often challenges hypocrisy in his columns. Maybe not so much on this topic but usually. And he rarely continues to hammer as he is doing here and with Zipcar. I enjoy his take on most issues whether I agree or not.
I think David is too sensitive about the whole issue of Dunning. We are fortunate to have both David and Bob in our community. They provide valuable and different opportunities to stretch our community involvement.
Matt: Great article. Hope you can get the Enterprise to publish it.
And the city could begin to use it for a frequently asked questions piece.
“I think you’re conflating sewer with water here.”
Being that the sewer rates are based on winter water useage and everyone already knows that’s the time one can conserve to save money why not for the first year also base the May/2013 water rates on that same period? Then once everyone knows the rules the 2014 rates can be determined by one’s 2013 summer useage.
Matt can answer that better than me, but the fixed rate deals with the issue of capacity and that is determined by peak usage. It is an adjustment, but a rather quick adjustment for most people. In fact, for the typical user, the rates may actually go down initially, not up.
rusty, your idea is interesting in concept. Let me do my best to engage it.
What is the difference between winter water use and summer water use? In a word, “irrigation.”
To show the impact of irrigation on the costs of building the Supply portion of the system lets look at a single family condominium and a single family home with a big yard. Both have the same number of residents, lets say 4 in this example. Therefore both of these accounts use 55 gallons per person per day indoors throughout the year. Extending that out you get 8.946 ccf per month for both of these customers throughout the year.
The condominium has no yard and no irrigation. To estimate the amount of irrigation usage for the home with the yard lets use the City’s overall 2011 billed consumption figures. In Jan/Feb it was 406,965 ccf, Mar/Apr it was 406,965 ccf, May/Jun it was 574,151 ccf, Jul/Aug it was 1,187,577 ccf, Sep/Oct it was 1,187,577 ccf, and Nov/Dec it was 513,712. The six winter months represent one third of that total and the six summer months represent two thirds. Using those averages the summer consumption for the condominium would continue to be the 8.946 ccf (call it 9 ccf) and for the home with the yard it would be 18 ccf.
So now lets turn to the engineers who are designing the Supply infrastructure to support these two customers. How many ccf per month of capacity do they design into the system? If they use winter months as you suggest then they would design 18 ccf of capacity (9 plus 9). If they use summer months then they would design 27 ccf of capacity (9 plus 18). In reality they design 36 ccf of capacity to handle the fact that the vast majority of irrigation systems go off between 4:00 and 6:00 in the morning putting a peak “rush hour” load on the system at that time. If they didn’t do that the water pressure around the City would drop just when lots of people are taking their morning shower.
So we have Supply infrastructure costs for 36 ccf. If we use winter months consumption as the proportioning tool, the condominium pays for 18 ccf of that 36 and the home with the lot pays for 18 ccf as well. Why? Because they both use 9 ccf per month in winter.
So your solution means that a condominium that uses 108 ccf per year (9 times 12) would pay for 216 ccf of system capacity. Is that proportiona? Is it fair?
This is the part he’ll focus on in his next column:
COUNTERPOINT -[i] You are absolutely right Bob. The difference isn’t 5 cents per gallon (15 minus 10) it is two one hundredths of one cent per gallon . . . which amounts to one penny per person per day.
[/i]
The fact that there is any difference at all seems to be his issue. I think, though I’m not sure, that Bob is advocating that there be no tier structure whatsoever. It would be worth addressing what the overall impact would be on ratepayers if there were no tiered rates.
Don, the answer to that is very simple and was provided to Jerry Adler by e-mail on 10/27 and then later in WAC testimony when he asked for an analysis of the same solution. Here is what I sent him in the e-mail. As it says at the end, going with a Uniform Block structure increases the financial burden on low water users by $400,000 and reduces the financial burden on high water users by $400,000.
[i]Jerry, after a fair amount of adjusting the model to be sure it complies with Proposition 218 proportionality, I have created a side-by-side comparison of the effect of going with a Uniform Block rate structure in the SFR class vs going with a Three Tiered rate structure like Bartle Wells has proposed. I have sent the actual Excel files off to Doug and Cat at Bartle Wells to have them validate my findings, but wanted to get to you an advance look at what those findings appear to be. Once Doug and Cat complete their validation, the three of us will send a joint report to Dianna for distribution to the WAC as a whole. Please let me know if you want to drill down into the following points at a more detailed level.
— I used the FY 2019/2020 revenue requirement of just under $30 million.
— I set the tiered rates using the “interrelated tiers” concepts that Petrea and Jerry brought up in Thursday night’s WAC meeting.
— That resulted in a Commercial Rate that is equal to the Tier 1 SFR Rate, as well as an Irrigation Rate that is equal to the Tier 3 SFR Rate
In order to get the mathematical balance to work out in the two model scenarios and have proportionality between the scenarios, it turns out that the MFR Rate and the Tier 2 SFR Rate end up being equal as well.
— The ratios between the three tiers in the SFR structure are 100%, 125% and 180%
— The ratios between the Commercial tier, the MFR tier and the Irrigation tier are also 100%, 125% and 180%
— In order to have Prop 218 proportionality equivalency between the Uniform Block and Tiered structures, the single SFR rate in the Uniform Block structure is 117.3% of the Commercial rate. The MFR rate and Irrigation rate continue to be 125% and 180% of the Commercial rate respectively.
— When the results of the two SFR structures are compared, all the 12,003 SFR accounts with per month consumptions of 20.2 ccf or less pay more under the Uniform Block structure than the Tiered structure. In aggregate the amount more that those 12,003 accounts pay is $399,974. All the 2,456 SFR accounts with per month consumptions of 21.2 ccf or more pay less under the Uniform Block structure than the Tiered structure. In aggregate the amount less that those 2,456 accounts pay is $399,974. There is a transition zone of 277 accounts between 20.2 and 21.2 ccf per month consumption that have a mixture of more and less payments because of differences in meter sizes.
Bottom-line, going with a Uniform Block structure increases the financial burden on low water users by $400,000 and reduces the financial burden on high water users by $400,000.
This was a very useful exercise for me, and I look forward to any and all questions you have.
All my best.
Matt [/i]
Hi Matt
For those amongst us who are extremely numerically challenged, would you please use the same metric (either amount per person or “financial burden on low vs high water users”) so that I can get some kind of grasp on the differences between your concept of “fairness” and the concept of “fairness” being put forth by Dunning ? Please, think in terms of explaining this to a third grader…… seriously.
medwoman wrote:
> For those amongst us who are extremely numerically
> challenged, would you please use the same metric
> (either amount per person or “financial burden on
> low vs high water users”) so that I can get some
> kind of grasp on the differences between your concept
> of “fairness” and the concept of “fairness” being put
> forth by Dunning ?
Every time I have looked in to something that has been made “complex” that didn’t have to be it was to hide the fact that it was not “fair” (for example the tax code that has Mitt Romney and his rich friends paying a 15-25% tax rate while a self-employed gardener is paying a 40-50% tax rate).
I have never heard a good reason why we just can’t pay for water that way we pay for gasoline. A widow that does drive much does not use a lot of gas and pays less per gallon than a family with five kids over 16 or a taxi company with a fleet of cabs but everyone pays the same price per gallon when they pull in to the gas station to fill up.
When the widow or family buy gas, they’re mostly paying for the gas, which the vendor paid for by the gallon. When you buy water, you’re mostly paying for the infrastructure, conveyance, financing, and the water rights. The water itself doesn’t have much direct cost. The widow’s house has to have a service line of sufficient size, regardless of what she uses. The water plant has to be kept staffed, and so on.
Bob’s main objection arises from the fact that his family’s usage moves him into a higher tier (I guess). So if you want to make that less likely, make the second tier at a higher usage rate. Which means everyone will pay more. Or eliminate the tiers entirely. Which means the lower-tier customers will pay more.
No matter what you do, you’re just shifting the costs.
One purpose of tiers is to encourage conservation. Eliminating tiers, or shifting them higher, will reduce the conservation that the residents achieve.
SOD
[quote]I have never heard a good reason why we just can’t pay for water that way we pay for gasoline. A widow that does drive much does not use a lot of gas and pays less per gallon than a family with five kids over 16 or a taxi company with a fleet of cabs but everyone pays the same price per gallon when they pull in to the gas station to fill up. [/quote]
Unless you are attempting to confuse me…. I doubt that you meant to write that the widow “pays less per gallon than a family with five kids”. The widow may pay less overall for gas since she uses less, however, you are correct with your latter statement that everyone pays the same price per gallon. However, this does not take in to account some inadequacies with the analogy. For example does she pay the same amount for the infrastructure necessary to get her to the gas station or to get the gas to the gas station for that matter ? That would depend on a number of factors such as, does she live within the same city limits as the family with the five kids ? It would seem to me that there are both fixed costs, and variable costs with the water project that your gas analogy does not address. I am still hoping that Matt, or someone else very knowledgeable in this area will be able to dumb it down adequately for me.
Don wrote:
> The widow’s house has to have a service line of
> sufficient size, regardless of what she uses.
So why not charge every home a flat rate plus extra for the water you use. It does not make sense to me that a big family like Bob’s (or a big house with a lot of grad students) will have to pay more for water than the people next door with less kids (or small house next door with just a few grad students…
medwoman wrote:
> Unless you are attempting to confuse me….
> I doubt that you meant to write that the widow
> “pays less per gallon than a family with five kids”.
Sorry, that was a typo. I meant to write:
“pays less because she buys less gas”
SouthofDavis, that is in essence exactly what is being done.
Each year the [b]Distribution[/b] charge is a [u]flat rate[/u] based on the widow’s contribution to the distribution infrastructure costs of the system (fireline, readiness to serve, and billing administration). And each year the [b]Supply[/b] charge is a [u]flat rate[/u] based on the widow’s contribution to the fixed costs of the supply infrastructure (wells, surface water plant, storage tanks).
Then she is charged the extra [b]Use[/b] charge for the variable operations costs of what she uses.