The groundwork for a major change in how Red Deer households are charged for water and wastewater could impact the price people pay for these services.
Switching from a fee model with a more stable rate that relied heavily on the fixed charge, the new pricing method aims to charge households for how much water they use.
Paul Goranson, City of Red Deer director of Development Services, said the idea behind the change is to put the onus on users to affect how much water they use.
“This is revenue neutral as far as utilities go,” said Goranson. “It doesn’t change the total amount of revenue the utility is going to collect in any one year, it just shifts it from the fixed monthly to the usage.”
However, the changed fee structure doesn’t add inflationary costs or capital costs to the utility for 2013.
“There are still likely going to be increases that we’ll have to incorporate based on the amount of construction we have in the plants and the cost of power and whatnot,” said Goranson.
Over the past five years, the charges for water in the city have risen by about 59 per cent, with a nine per cent increase from 2011 to 2012.
The city will start progressively, over the next five years, charging more for each cubic metre of water and wastewater used, but charge less on the fixed cost for both wastewater and water.
The progressive switch to a more usage-based fee system began with the 2009 Environmental Master Plan. Goranson said the feedback they received during the plan suggested residents would be interested in having more control over how much their bill is.
In order to make water usage more visible on the bills, the rate of water per cubic metre will increase from 81 cents to 90 cents, effective Jan. 1, 2013, with the rest of the changes.
When the changes were proposed to council, the city put inserts in everyone’s utility bills and Goranson said there were six to 10 calls on it.
“It’s that big rate shock that tends to get people’s attention,” said Goranson. “We still may hear from some that are at the high end of the user group, or at the low end.”
Goranson said it has been the low-end users who have been pushing for the change to take place quickly. Because they don’t use a lot, they want to see a reduction in the fixed costs.
Under the utility rate bylaw, city council approved that the amount of wastewater a household can be charged will be calculated as 90 per cent of water used.
“That 10 per cent is an allowance recognizing that maybe not all the water you’re using is going back into the wastewater system,” said Goranson.
“You don’t meter the wastewater going back out. It makes the assumption the water you’re using is going to be indicative of how much wastewater is going back out.”
The 2009 master plan indicates Red Deer residential water use is about 242 litres per capita per day and commercial use is about 135 litres per capita per day.
Based on the residential use statistics, a family of four would use about 29,040 litres of water a month. This translates to about 29 cubic metres of water, which under the new fee structure would cost the family $45.78 per month. Under the old fee structure, the same amount of water would cost the family $44.88 per month. The new charge represents a two per cent increase.
With the same water usage, the new wastewater bill, previously a $41.32 fixed charge, would cost the family of four
$44.49 per month, a 7.6 per cent increase.
According to the Red Deer Environmental Master Plan, the hope is to reduce the per capita water use by eight per cent by 2015, by 15 per cent by 2020 and by 25 per cent by 2035.
These changes are the start of a trend towards a fee structure based more on usage, decreasing the fixed cost. Currently, 43 per cent of the city’s water-related revenue comes from usage-based charges and the goal of the five-year plan is to increase the share to 63 per cent.
“That’s the transition, this (2013 rates) takes it that one step in that transition from the 43 per cent to the 63 per cent,” said Goranson.
At the same time, Goranson said having a fixed fee is important as well, to maintain revenue to pay for the utility on a consistent basis. The idea is to take into account the fixed costs, which include pipes, plants and staffing, and the variable costs such as power consumption, treatment, chemicals and pumping costs.
“We have a model we use to develop what overall costing should be that determines who should pay for what in the utilities,” said Goranson. “That hadn’t been updated for a number of years.”
Goranson said of roughly 30,000 utility bills that go out every month, about 95 per cent of them have a water meter size of 16 mm. In the new fee structure, the water charge for that size is $19.65, from $21.36 under the old structure, and the wastewater charge is $36.65, down from $41.32 under the old structure.
“What the suggestion is, in utilities you should have some influence over what your bill looks like,” said Goranson. “By moving away from the fixed fees to a more usage-based fee, that gives consumers and users of the utility more influence on what their bill looks like.”
mcrawford@www.reddeeradvocate.com