To: Members of the Castle Rock Water Commission
From:
Anne Glassman, Business Solutions Manager
Mark Marlowe, P.E., Director of Castle Rock Water
Title
Monthly Fixed Base Rate for Renewable Water Resources Charge for Various
Residential Customers
Body
________________________________________________________________________________
Executive Summary
The purpose of this memorandum is to provide Castle Rock Water Commission with a brief explanation of differences in the Renewable Water Resources charge for customers considered to be 0.67 Single Family Equivalents (SFE) versus 1 SFE. A 0.67 Single Family Equivalent (SFE) ordinance was passed in 9-14-11 creating a new residential customer class. The current and past performance of approximately 1,400 active 0.67 SFE accounts has been evaluated. Based on that evaluation, CRW staff recommend changes to the rate structure and three options for recommendation going forward have been identified. This memorandum is not intended to address the system development fees only the monthly fixed renewable water resource charge for existing customers.
Based on the year end 2018 billing data, there were approximately 1,367 active 0.67 SFE accounts or 6% of the total accounts being served by Castle Rock Water. Based on 2018 year-end data, that number does not include the new Water Efficiency Plan (WEP) accounts that can be something other than a 0.67 SFE. Of these 1,367 accounts, only 824 or 60% were meeting the criteria to use 33% less water than a 1 SFE account. As of year-end 2019, there are approximately 1,440 accounts with a 0.67 SFE designation, so the number of accounts increased by 5% from 2018 and continues to rise year over year. Even though these accounts are required to use 33% less water than a 1 SFE, there is currently no consequence to not doing so.
An analysis shows that approximately 30% of the 1 SFE residential customer class would meet the criteria for a 0.67 SFE average monthly consumption, however they do not receive this monthly discount. However only 17% would meet the requirement every month. This creates a financial inequity amongst customers. For 2018, the difference in the monthly fixed service charge is $26.15 for 1 SFE and $17.52 for a 0.67 SFE for a difference of $8.63. All residential accounts use the same meter size of 3/4'” with the same flow rate demand capacity.
The following chart shows the actual average consumption of all 0.67 SFE accounts per year compared to the actual average consumption of all 1 SFE residential accounts and the required consumption needed to meet the criteria for a 0.67 SFE at 67% of the 1 SFE. Given the year over year results of these usage patterns, staff is recommending three options for consideration.
Option 1: Make no changes to the program and continue to set up new accounts going forward with a 0.67 SFE. This continues the account inequities within this customer class as well as is counterintuitive to the conservation efforts of Castle Rock Water.
Option 2: Reset the fixed monthly renewable water resource service charge every year much like the Average Winter Monthly Consumption (AWMC) reset for water and wastewater. Staff would analyze the consumption patterns of all residential accounts (approximately 23,000 currently), and if they meet the spirit of the 0.67 SFE program, they would receive a discounted monthly rate for the next year. However, the estimated annual loss of revenue for Castle Rock Water would be $624k. Staff feels this would be an administrative burden and confusing for the customer from year to year.
Option 3: Allow all the current 0.67 SFE accounts to remain unchanged until the property changes ownership. This option would not penalize the current owner who has been budgeting and receiving this discounted monthly rate since inception of the account. Once the account changes ownership, the account would be set up at 1 SFE instead of 0.67 SFE.
Recommendation:
Staff does not recommend option 1 as this is the status quo and the program year over year is not effective and creates inequities amongst residential customers. Staff also does not recommend option 2 as this would create a burdensome process resulting in approximately 17% of the residential customers meeting the spirit of the program. This option would also cause a financial impact to Castle Rock Water of an estimated $624k in lost revenue per year. Staff does recommend for consideration option 3 that would stop the addition of more new accounts into this program, and allow those already in the program to remain unchanged until the property changes ownership.