Rate Structure Design
Rate structure design, which means the number, price, name, and basis of tiers that form the volumetric component of a BBR water bill, is an important piece of implementing BBRs. Agencies put a lot of effort into designing a rate structure, including undergoing a rate study, with examples in Financial and Billing Information. The tiers must be defendable from a legal standpoint as well as understandable to the public. Legality is primarily concerned with meeting the requirements of Proposition 218, whether in rate structure design or implementing drought penalties. A discussion on Proposition 218 as it affects BBRs is included in Legal Considerations.
This section focuses on providing examples of tier structures from different agencies. In general, agencies use between four to five tiers, with naming in the lower tiers (i.e., the water budget component) referring to either indoor, outdoor, or base water use or implying water efficiency. The higher tiers, after the water budget is exceeded, generally have names related to wasteful water use. For example, in WMWD, tier widths are tailored to the unique consumption patterns of WMWD’s customers and subject to the District’s policy decisions. The recommended tier definitions are based on financial modeling, customer impact analysis using actual customer data, and efficiency standards written into California laws, codes, and ordinances.
The water budget is either the first tier or the sum of the first and second tiers, generally depending on if indoor and outdoor water use are budgeted separately. The widths or amount of water use of the higher tiers are defined as a%age of the total water budget (e.g., 101-150%). Agencies also may have penalties or surcharges that are assigned to customers in the case of water shortages or repeated water overuse. The equations, assumptions, and data that go into each customer classes’ BBR structure is described in detail in Setting a Water Budget. The final tiers are included in the following table showing examples of different agencies’ BBR structures.
Examples of Budget-Based Rates Tier Structures
BBR tier structures can vary depending on an agency’s customer composition and budget-setting process, as shown in the table below.
| Agency | Customer Type | Number of Tiers | Tier Names | Total Budget | Tier Rates | Basis of Tier | Penalties or Surcharges |
|---|---|---|---|---|---|---|---|
| CVWD | Domestic | 5 | 1. Excellent 2. Efficient 3. Inefficient 4. Excessive 5. Wasteful |
Tier 1 + Tier 2 |
Per ccf as of 7/1/2014 for Rate Area 1 (majority of customers): 1. $1.01 2. $1.12 3. $1.68 4. $2.24 5. $4.48 |
1. 90% of base rate (i.e., indoor water budget) 2. Base rate (i.e., weather-based outdoor budget) 3. 1.5 times base rate 4. 2 times base rate 5. 4 times base rate |
Drought penalties issued during the emergency conservation mandates in November 2015. A video about how they work (https://www.youtube.com/watch?v=zJvzRfxAq9M&feature=youtu.be ) explains that Tiers 3-5 and 36% of Tier 2 are affected. |
| EMWD | Single Family Residential and Multi-family Residential | 4 | 1. Indoor 2. Outdoor 3. Excessive 4. Wasteful |
Tier 1 + Tier 2 |
Per ccf as of 1/1/2016: 1. $1.861 2. $3.405 3. $6.102 4. $11.164 |
1. Indoor Budget 2. Outdoor Budget 3. 101-150% of total budget 4. Greater than 150% of total budget |
There are event-based penalties in the Water Use Efficiency section of the Administrative Code that are not directly tied to BBRs. |
| ETWD | Single Family Residential and Multi-family Residential | 4 | 1. Indoor Efficient 2. Outdoor Efficient 3. Inefficient 4. Excessive |
Tier 1 + Tier 2 |
Per ccf as of 7/1/2016: 1. $2.46 2. $2.83 3. $5.61 4. $7.18 |
1. Indoor Budget 2. Outdoor Budget 3. 101-130% of total budget 4. Greater than 130% of total budget |
ETWD may impose Administrative Drought Penalties under certain water shortage conditions through a Water Conservation and Water Supply Shortage Ordinance. The penalty can range from $2.00 to $10.00 and be imposed on each billing unit that exceeds the total water budget. |
| Landscape Irrigation | 3 | 1. Efficient 2. Inefficient 3. Excessive |
Tier 1 | Per ccf as of 7/1/2016: 1. $2.83 2. $5.61 3. $7.18 |
1. Outdoor Budget 2. 101-130% of total budget 3. Greater than 130% of total budget |
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| IRWD | Residential (1991-2015) | 5 |
1. Low Volume |
Tier 1 + Tier 2 |
Per ccf as of 7/28/2015: |
1. 0-40% of total budget 2. 41-100% of budget 3. 101-150% of budget 4. 151-200% of budget 5. Greater than 200% of budget |
None |
| Residential (2015-present) | 4 | 1. Low Volume 2. Base 3. Inefficient 4. Wasteful |
Tier 1 + Tier 2 |
1. 0-40% of total budget 2. 41-100% of budget 3. 101-130% of budget 4. Greater than 130% of budget |
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| Landscape Potable (1991-2015) | 5 | 1. Low Volume 2. Base8 3. Inefficient 4. Excessive 5. Wasteful9 |
Tier 1 + Tier 2 |
Per ccf as of 7/28/2015: 1. $1.11 2. $1.62 3. $3.92 4. $14.53 |
1. 0-40% of total budget 2. 41-100% of budget 3. 101-110% of budget 4. 111-120% of budget 5. Greater than 120% of budget |
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| Landscape Potable (2015-present) | 4 | 1. Low Volume 2. Base 3. Inefficient 4. Wasteful |
Tier 1 + Tier 2 |
1. 0-60% of total budget 2. 61-100% of budget 3. 101-160% of budget 4. Greater than 160% of budget |
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| Landscape Recycled (1991-2015) | 5 | 1. Low Volume 2. Base 3. Inefficient 4. Excessive 5. Wasteful |
Tier 1 + Tier 2 |
Per ccf as of 7/28/2015: 1. $1.08 2. $1.37 3. $1.52 4. $5.79 |
1. 0-40% of total budget 2. 41-100% of budget 3. 101-110% of budget 4. 111-120% of budget 5. Greater than 120% of budget |
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| Landscape Recycled (2015-present) | 4 | 1. Low Volume 2. Base 3. Inefficient 4. Wasteful |
Tier 1 + Tier 2 |
1. 0-40% of total budget 2. 41-100% of budget 3. 101-130% of budget 4. Greater than 130% of budget |
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| Commercial, Industrial, and Institutional (1991-2015) | 4 | 1. Base 2. Inefficient 3. Excessive 4. Wasteful |
Tier 1 | Per ccf as of 7/28/2015: 1. $1.62 2. $14.53 |
1. 0-100% of total budget 2. 101-110% of budget 3. 111-120% of budget 4. Greater than 120% of budget |
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| Commercial, Industrial, and Institutional (2015-present) | 2 | 1. Base 2. Wasteful |
Tier 1 | 1. 0-100% of budget 2. Greater than 100% of budget |
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| LVMWD | Single Family Residential and Multi-family Residential | 4 | 1. Efficient Indoor 2. Efficient Outdoor 3. Inefficient 4. Excessive |
Tier 1 + Tier 2 | Per ccf as of 1/12016: 1. $2.36 2. $3.18 3. $3.96 4. $4.98 |
1. Indoor Budget 2. Outdoor Budget 3. 1-1.5 times total budget 4. Greater than 1.5 times total budget |
|
| Irrigation (Potable Water) | 3 | 1. Efficient Outdoor 2. Inefficient 3. Excessive |
Tier 1 | Per ccf as of 1/12016: 1. $3.18 2. $3.96 3. $4.98 |
1. Outdoor Budget 2. 1-1.5 times outdoor budget 3. Greater than 1.5 times outdoor budget |
A progressive penalty is applied to usage greater than 2 times the total budget. A first time offense results in a warning, a second offense causes a $2.50/unit charge, and a third offense means a $5.00/unit charge. | |
| Recycled Water | Per ccf as of 1/12016: 1. $1.18 2. $2.91 3. $3.73 |
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| Commercial | 4 | 1. Tier 1 2. Tier 2 3. Tier 3 4. Tier 4 |
Tier 1 + Tier 2 | Per ccf as of 1/12016: 1. $2.36 2. $3.18 3. $3.96 4. $4.98 |
1. 0.33 times Commercial Daily Average 2. Commercial Daily Average 3. 1-1.5 times total budget 4. Greater than 1.5 times total budget |
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| MNWD | Residential and Multi-family | 5 | 1. Tier 1 2. Tier 2 3. Tier 3 4. Tier 4 5. Tier 5 |
Tier 1 + Tier 2 | Per ccf of 1/1/2016: 1. $1.49 2. $1.70 3. $2.62 4. $4.38 5. $9.17 |
1. Indoor Water Budget 2. Outdoor Water Budget Tiers 1-2: cost of water purchased minus revenue from outside sources (e.g., property taxes) 3. 101-125% of total budget 4. 126-150% of total budget 5. 151%+ of total budget Tiers 3-5: cost of water purchased plus cost to provide water use efficiency programs targets inefficient customers |
MNWD’s Water Shortage Contingency Plan addresses five specific stages of action the District can implement to reduce unreasonable and wasteful water uses during supply shortages. Each stage mandates specific conservation practices. Penalties are assessed for wasteful water use in stages 2-5, with water budgets tightened at each successive stage. |
| Commercial and Irrigation | 4 | 1. Tier 1 2. Tier 2 3. Tier 3 4. Tier 4 |
Tier 1 | Per ccf of 1/1/2016: 1. $1.70 2. $2.62 3. $4.38 4. $9.17 |
1. Total water budget 2. 101-125% of total budget 3. 126-150% of total budget 4. 151%+ of total budget |
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| Recycled Water | 4 | Per ccf of 1/1/2016: 1. $1.24 2. $1.74 3. $3.50 4. $8.29 |
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| RCWD | Residential and Multi-family | 4 | 1. Indoor 2. Outdoor 3. Inefficient 4. Wasteful |
Tier 1 + Tier 2 |
Per ccf as of 7/1/2015 for Rancho Division: Per ccf as of 7/1/2015 forSanta Rosa Division: |
Each tier is based on water supply costs from the least expensive to the most expensive source of supply. The District’s least expensive supply is local ground water, followed by recharge and recovery water (untreated water), and the most expensive istreated water. Untreated and treated water are purchased from a wholesaler (MWD). | During a declared water shortage, allocation surcharges may be assessed to customers exceeding their total water budgets. For customers exceeding their budget by 1-15%, a $3.40/ccf surcharge is assessed. For customers exceeding by more than 15%, $6.80/ccf is assessed. The amount is modeled from MWD’s allocation surcharge. |
| Landscape | 4 | 1. Ultra Efficient 2. Efficient 3. Inefficient 4. Wasteful |
Tier 1 + Tier 2 | ||||
| Agricultural, Commercial, Industrial, and Institutional | 2 | 1. Annual Allocation 2. Over Allocation |
Tier 1 | Per ccf as of 7/1/2015 for Rancho Division: 1. $1.23 2. $2.88 Per ccf as of 7/1/2015 for Santa Rosa Division: |
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| VWC | Residential | 5 | 1. Super Efficient 2. Efficient 3. Inefficient 4. Excessive 5. Wasteful |
Tier 1 + Tier 2 | Per ccf as of 1/1/2016: 1. $1.342 2. $1.598 3. $1.997 4. $2.597 5. $3.376 |
1. Indoor monthly budget 2. Outdoor monthly budget 3. 101-150% of budget 4. 151-200% of budget 5. 200%+ of budget |
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| Dedicated Irrigation Meters | 5 | 1. Super Efficient 2. Efficient 3. Inefficient 4. Excessive 5. Wasteful |
Tier 1 + Tier 2 | Per ccf as of 1/1/2016: 1. $1.342 2. $1.598 3. $1.758 4. $2.021 5. $2.527 |
1. 0-35% of monthly budget 2. 36-100% of budget 3. 101-150% of budget 4. 151-200% of budget 5. 200%+ of budget |
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| Dedicated Irrigation Meters Mixed Sources | 5 | 1. Super Efficient 2. Efficient 3. Inefficient 4. Excessive 5. Wasteful |
Tier 1 + Tier 2 | Per ccf as of 1/1/2016: 1. $1.598 2. $1.598 3. $1.758 4. $2.021 5. $2.527 |
1. 0-35% of monthly budget 2. 36-100% of budget 3. 101-150% of budget 4. 151-200% of budget 5. 200%+ of budget |
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| WMWD | Residential | 5 | 1. Efficient Indoor Use 2. Efficient Outdoor Use 3. Inefficient 4. Wasteful 5. Unsustainable |
Tier 1 + Tier 2 | Per ccf as of 1/1/2016: 1. $1.98 2. $2.31 3. $2.84 4. $4.42 5. $5.31 |
1. 60 gallons/person/day with a default of 3 people 2. Based on irrigated area and local ET 3. 101-125% of budget 4. 126-150% of budget 5. 150%+ of budget |
Tiers 4, 5, and 6 represent varying degrees of inefficient water use. The "penalty" is implied in the higher per unit charge billed to these tiers. |
| Dedicated Irrigation | 5 | 1. 40% of Efficient Outdoor Use 2. 60% of Efficient Outdoor Use 3. Inefficient 4. Wasteful 5. Unsustainable |
Tier 1 + Tier 2 | Per ccf of 1/1/2016: 1. $1.98 2. $2.31 3. $2.84 4. $4.42 5. $5.31 |
1. 40% of total Efficient Outdoor based on irrigated area and local ET 2. 60% of total Efficient Outdoor 3. 101-125% of budget 4. 126-150% of budget 5. 150%+ of budget |
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| CII | 5 | 1. Efficient Indoor Use 2. Efficient Outdoor Use 3. Inefficient Use 4. Wasteful Use 5. Unsustainable Use |
Tier 1 + Tier 2 | 1. 90% of up to a 3-year historic average 2. 10% of up to a 3-year historic average 3. 101-125% of budget 4. 126-150% of budget 5. 150%+ of budget |
8 Base Tier called Conservation Base Tier until 2009. It was changed to clarify that it is intended to represent normal efficient use, and not significantly reduced use through conservation. This was because some customers believed the term conservation meant less than normal usage, such as in a drought. As such, customers did not think that normal use could be within the first two tiers and within budget.
9 Prior to 1995 the Wasteful Tier was the Abusive Tier. It was changed to Wasteful as a result of customer complaints over the use of the term Abusive during the OJ Simpson trial.