I have been asked several times about the rationale for "mock water bills". The simple answer is that the RDOS needs to collect some baseline data on water usage on the West Bench before it rolls out a meter-based billing system. Development of a metered pricing scheme is more complicated than many people seem to appreciate (more on this below). A secondary reason is to give our Public Works Department time to debug the system. There may be leaks in the new pipes; the water meters might not be working properly. A phased implementation allows RDOS staff to fix these problems before sending out completely off-the-wall water bills.
A metered pricing scheme
Some West Bench residents support a fully metered scheme. For this we would take the total operating cost of the West Bench Water System (approximately $350K/year), divide it by total water usage (say 500 m3) and charge all West Bench residents $0.70 per m3 of water.
There are a couple of problems with this. First, a large part of any water system's cost is non-capital fixed. For example, the water system has to pay water operators, a portion of some trucks, a portion of our engineers' salaries, financial administration costs, insurance, and so on. A functioning water system needs to pay these costs even if consumption is driven to zero. Our variable costs, in contrast, are the fee to Penticton, pumping costs, and maybe some chlorine. The ratio of fixed to variable costs is roughly two-to-one. Does it make sense to recoup large fixed costs using fees based on variable usage? A West Bench property that uses zero water (due to, say, the residents spending a year abroad) still benefits from its connection to functioning water system.
At the other extreme we could recoup our variable water costs only with a variable charge. This would mean charging at least $0.22/m3 (the wholesale cost we pay to the City of Penticton) plus a bit more for pumping, chlorination, and so on. Let's say our bottom-level charge is $0.30/m3.
Which is the correct approach?
The next question is whether the per-unit cost should rise with consumption (a so-called conservation rate). Kelowna's rate structure is as follows:
First 60 cubic metres $0.40
Next 100 cubic metres $0.54
Next 90 cubic metres $0.82
Balance of cubic metres $1.65
Finally there is the issue of the purpose of water consumption. Some jurisdictions provide discounts for "working water"--that is, water that is used for economic benefit rather than domestic indoor and outdoor. We could, for example, have a reduced rate for bone fide agricultural users, golf courses, and so on. Such differential rates serve to subsidize (and therefore encourage) socially beneficial behaviors, such as farming.
So to summarize, there are at least three questions we need to answer before coming up with a metered billing system for the West Bench
- The precise split between variable and fixed charges to recoup operations costs.
- Whether to implement a flat or blocked rate for the variable charge
- Whether to create differential rate classes depending on water use.
We are certainly open to feedback and discussion on these topics. In the coming year we will be meeting with residents, running surveys, and getting a sense for what people want from their billing system. Perhaps conservation is a core objective. Perhaps others are more interested in "fairness". We will find out.