To: Members of the Castle Rock Water Commission
From:
Mark Marlowe, P.E., Director of Castle Rock Water
Anne Glassman, Business Solutions Manager
Title
Customer Care Characteristics and Affordability Study
Body
________________________________________________________________________________
Executive Summary
As part of the annual rates and fees study, Castle Rock Water staff gathers several pieces of information to input into the four enterprise models for calculating rates, system development fees and cost of service. Throughout the study, staff will bring to Commission some of those inputs and deliverables used for this process.
Customer Characteristics Analysis
Castle Rock Water conducts an in-depth analysis of accounts in service to determine customer characteristics and consumption patterns (Attachment A). We start by looking at the most current billing data for FY2019. From there, we break down the number of accounts by meter size and customer class. We then compare the number of actual permits for the last several years to the number of projected permits in that same year.
An average consumption based on the most current three years (2017-2019) by account, meter size, customer class and winter versus summer season is calculated. This average three-year period serves as a comparison to previous three-year periods going back as far as 2012. This takes into consideration weather patterns and rainfall variances from year to year. Customer data for the last three years (2017-2019) then determines an average representative customer for each customer class. One customer from each customer class then represents the class average and their consumption patterns calculate a typical customer’s annual bill.
Billed usage by tier from 2012-2019 by customer class is analyzed to see if customers are staying within their budgeted tiered rate structure. The purpose of this data analysis is also to see if customers over time are conserving water and avoiding Tier 3 - Excessive usage and Surcharge (over 40,000 gallons per month).
We also look at the customers with a .67 SFE to see if their consumption patterns are meeting the intent of the program, to use a 3rd less water than an average ¾” residential customer’s usage. In addition to the .67 SFE accounts, we have added the new Water Efficiency Plan (WEP) accounts which started in 2019.
Other areas within the study include consumption patterns based on watering schedules, consumption patterns based on water wiser designations, customer classes consumption based on irrigated areas, consumption patterns for customers designated as HOA’s, bulk water accounts consumption and Town accounts consumption patterns over time.
Some conclusions that CRW has drawn from this year’s analysis include:
1. Our projections for estimated growth continue to fall short of actual growth numbers. While this results in higher than projected revenues, we need to make sure that we are planning our capital projects to meet the needs of this growth.
2. Despite all of our efforts on water conservation, the three year rolling averages do not show that we are making much progress in reducing the average residential customer’s water consumption year over year.
3. Non-residential customer water use is remaining flat year over year with the exception of the hospital where water use has been rising since 2013.
4. The 0.67 program appears to be working fairly well in terms of meeting the goals of reduced water consumption.
5. The actual use equivalency factors for irrigation seem to be out of range compared to the hydraulic equivalencies used for various meter sizes. This is an area where we should spend some time looking at how this impacts water use and rates.
6. Water Wiser program does not appear to be resulting in as much savings in water as we would hope. Water wiser customers appear to actually be using more water during irrigation season than non-water wiser customers. We may want to evaluate how to improve this program going forward.
Affordability Study
Each year during the rates and fees study staff looks at how affordable the rates are for all customers being served by Castle Rock Water. During the 2019 study, CRW worked with Stantec Consulting to update the affordability study that was currently being used as the industry has started to move away from the 1.5% median household income metric, typically which CRW maintained to be lower than 1.5% each year, to more detailed metrics. This resulted in two new methods as shown below.
The first of these shown in Attachment B is the Affordability at the 20th Income Percentile (AR20). This method measures the affordability of the average water and wastewater bill to the 20th percentile income. This indicates that of the monthly disposal income for this group, 4.99% is spent on essential water and wastewater usage for CRW. The average for large cities is 11.4%, which puts CRW well below average, a positive result.
The second method, also shown in Attachment B is the Basic Household Water and Sewer Cost Expressed in Terms of Hours of Labor at Minimum Wage (HM). This metric shows the number of hours required for one to work at minimum wage to pay the monthly water bill. For CRW this has come in at 9.12 hours. The average for large cities is at 9.0, which puts CRW very close to the average.
These two methods have very different results. This is because the minimum wage rate used for the area during the study period was $11.10 an hour where the 20th percentile income for Castle Rock is $50,466 a year, which actually makes the hourly income rate for this study to be at $24.26 an hour. This means that our 20th percentile income residents make more an hour than the minimum wage residents, which results in the difference of the affordability metrics and makes the 20th percentile study look more affordable. CRW’s consultant Stantec advises that we keep monitoring both these studies each year and compare the differences when looking at affordability.
Attachments:
Attachment A: Customer Characteristics Analysis
Attachment B: Affordability Study