Wednesday, December 28, 2011

Coldstream sewer rates - Morning Star

Coldstream sewer rates - a minority report.

Council has voted 4-2 to adopt the Finance Director’s (CFO) recommendation for the 2012 sewer rates, thus, the debate is over. My comments are directed to the report by Jennifer Smith in the Morning Star (attached). It is also an advance notice of my recommendations for next year.

My proposal for the new sewer rates was based on a complete analysis of the data collected by the District on water and sewer consumption and revenues received based on  those consumption.

Here is the situation in a nutshell:

We cannot measure sewer contribution directly as there are no reliable individual sewage meters. The first quarter water consumption is used to estimate each household’s contribution as it is assumed that during the winter months most of the water consumed by customers end up in the sewer. We estimate the full year’s consumption by multiplying the first quarter’s water consumption by 4. Adding up all first quarter consumption volumes we arrive at the total sewage contribution from all users. In Coldstream it amounted to about 346,200 m3 .

The total cost for providing sewer service for Coldstream customers is estimated at $1,400,000. The estimated cost of collecting, treating and disposing 1 m3 of sewage is then estimated at $4.00 (with refinements it is actually $3.80).

It is fair that every customer contributes a minimum amount to the system so a base fee is established. Here is where the CFO and I made different recommendations.

The CFO calculated a minimum fee by establishing a base fee at $56.45 plus a 15 m3  consumption at $2.51, for a total minimum of $94.10. Every customer must pay this. Additional consumption is charged at $2.51 per m3 . How did the $3.80 unit fee dropped to $2.51? It was due to charging $94.10/15=$6.28 per m3 for the first 15 m3 to all customers whether they use it or not. The setting of the minimum fee and the consumption fees have very little to do with the actual unit cost of sewage. The result is that the unit cost is decreasing with increased consumption (see Table 1).

The proposal I advanced to Council involves actual unit costs of sewage all the way through.

The minimum fee was set as the cost of 20 m3 of sewage at $3.80 per m3 or $76.00 per quarter. All additional m3-s are charged at $3.80. Table 1 also provides a visual example of the KISS principle. It demonstrates that up to 20 m3 consumption unit prices are dropping from a high of $76.00 at zero consumption to a minimum of $3.80 at 20 m3 and it remains at $3.80 per m3 from there on. The 20 m3 minimum is necessary to ensure that everyone contributes to the operation and maintenance of the system.

It is true that larger families (and less careful consumers) are paying more due to higher consumption. They do so for every other commodity they must purchase. More bread, more milk, more shoes, etc. but it is not Councils prerogative to request that sewer customers subsidize larger consumers. Councillor McClean’s comment that “We are actually going to penalize larger families and they have no choice, consumption is consumption,” is incorrect. We are not penalizing them, we are billing them for their consumption at cost. Customers with lower consumption will also be paying their fair share.

“This is a big step to more of a true user-pay system,” he said (Trevor Seibel) of Kiss’ proposal which would have generated Coldstream an additional $70,000 in revenue.” It is true that $4.00 unit cost would have provided $70,000 more revenue. However, a correction to $3.80 per m3 rectified that problem and the revised costs would yield the right amount of revenue. The major point here is that it would be “more of a true user-pay system”!

Table 2 represents the frequency distribution of users in 10 m3 increments. Note that nearly 83% of users are between 0 and 60 m3.

Figure 1 is the visual representation of the same frequency distribution.

One way to design more accurate billing models would be to measure sewage contributions directly. Unfortunately, meters for individual sewage measurements are not available. A dual water metering system, one of which would measure indoor usage of water, and another the otside would be a reasonable alternative. It is not recommended at the present time.

If anyone is interested to compare billing rates based on the 2011 first quarter water consumption could visit sewer rates 2012.

Comments are welcome.


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About Me

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I have been a resident of Coldstream since 1976. I have had 15 years of experience on Council, 3 years as Mayor. As a current Councillor I am working to achieve fair water and sewer rates and to ensure that taxpayers get fair treatment. The current direction regarding water supply is unsustainable and I am doing all I can to get the most cost effective water supply possible.