creasing demand on water supply; and c)
decreasing water supply expenditures. And
while many agencies have had recent chal-lenges
with revenue sufficiency, a well-de-signed
conservation rate structure in tandem
with good financial policies can make a rate
structure robust to changes in water con-sumption.
Developing the appropriate rate
structure for your agency is best achieved by
following a three-part process:
1) Determining the goals and objectives of
the agency’s governing body.
2) Evaluating the costs of implementation
and the opportunity for cost savings.
3) Understanding the impact on customers.
Goals and Objectives
Assessment of whether an agency’s goals
and objectives align with implementation of
a conservation rate structure begins with an
evaluation of the agency’s policy objectives
which include, but are not limited to: 1) wa-ter-
use efficiency; 2) water conservation; 3) af-fordability
for essential use; 4) administrative
ease; and 5) ease of customer understanding.
It is also important to understand the differ-ence
between efficiency and conservation. For
example, if there are heightened political con-cerns
among an agency’s constituency about
increasing staff, then administrative ease may
be the primary policy objective of the agen-cy.
This situation would lend itself to a more
simple conservation rate structure such as
seasonal or uniform rates. Alternatively, a pri-mary
policy objective of water-use efficiency
would provide strong rationale for a water
budget rate structure.
Cost of Implementation
The next step is to evaluate the cost of im-plementation
and the opportunity for cost
The two primary costs associated with im-plementing
a conservation rate structure are
staffing hours allocated to administering the
potentially more complex rate structure and
billing system upgrades and data needs. Up-front
costs for a water budget rate structure
include developing accurate information on
customer parameters such as landscape area
and household size to be able to assign in-dividualized
water allotments that promote
efficient water use. These allotments can be
of particular use during drought conditions,
where water is first allocated to efficient use.
Understanding the Impact on
One increasingly important component of
the process of developing and implementing
a conservation rate structure is social out-reach,
including awareness of conservation
principles such as efficiency versus conser-vation
and the societal benefits associated
with an aggregate change in public behavior.
To be successful, customer impacts must also
be considered in evaluating conservation rate
structures. In some cases, while implementa-tion
of a conservation rate structure may yield
significant savings on behalf the implement-ing
agency, individual customers or customer
groups may be affected adversely. A custom-er
bill impact analysis should be conducted,
generally done through a model that esti-mates
the change in bills for each customer.
Based on this information, the utility can be
proactive in educating these customers on the
potential impacts on their bills and how these
customers can mitigate those impacts.
Discussing and implementing a conser-vation
rate structure can bring about societal
benefits in terms of increased public aware-ness
and increased sustainability of water
resources and your agency’s operation while
providing resources to respond to regulatory
guidelines and requirements.
A growing number of agencies are rec-ognizing
the benefits of conservation rates,
and the trend of agencies shifting toward
these structures is apparent. Taking a close
look at your agency’s goals, needs and cur-rent
capacity is a very pertinent first step in
creating a holistic approach to achieving
your agency’s vision. S
1 SBx7-7 requires that, by the end of 2020,
urban water suppliers are to have reduced
per capita consumption by 20 percent. An
incremental goal of 10 percent reduction by
2015 was also set.
2 Gaur, Sanjay et al(2013). California Water
Rate Trends. Journal – American Water
Works Association, Volume 105, pgs
3 2013 figures for breakdown of rate
structures across California and Nevada, per
Raftelis Financial Consultants (2013). 2013
Water Rate Survey.
Figure 1: Type of Conservation Rate Structure for Different Conservation Goals.