Water rates are not doubling One of the issues being talked about for the 2012-2022 Ten Year Plan is a proposed increase to water rates. Here’s what you need to know.

Water rates are not doubling. The part of the water rate that is proposed to double is the base charge which would go from $26 per year to $52 per year.

This is only one of several options that will be considered by elected members through the Ten Year Plan process.

It costs a lot of money to deliver water to your tap. An increase of some sort is needed to help the Council’s water supply activity cover its costs.

If you feel strongly about the increase you should make a submission to the Ten Year Plan.

The above points are elaborated in more detail below. Water rates are not doubling. The word ‘doubling’ is misleading and it only applies to one part of the water rate. Water rates are made up of a base charge and a volumetric charge.

The base charge is like your phone connection. It is currently $26 per year.

The volumetric charge is like paying for the calls you make. It currently costs $1.58 for every cubic metre of water that you use. (One cubic metre is 1,000 litres … or around 165 flushes of an average 6 litre toilet.)

Proposed increases in the Ten Year Plan are:

Base charge goes up from $26 per year to $52 per year. This is the part that would double.

Volumetric charge goes up 11 cents from $1.58 to $1.69 per cubic metre.

(All of the above costs include GST.) What does the increase look like in an average water bill? An average household pays $310 per year for water (base charge and volumetric). The proposed increases would turn that into around $356 per year. Other options

The above proposal is the option that has received a lot of attention. There is a range of other proposals that the elected members might consider, including the following:

leave the fixed charge at $26 and increase the variable charge from $1.58 to $1.80

increase the fixed charge to $78 and leave the variable charge at $1.58

increase both the fixed charge and increase the variable charge over ten years (gradual increase).

Why the increase?

The Council’s water supply activity has not consistently covered its costs in the last few years. Options to recover costs and past deficits are:

increase the base charge

increase the volumetric charge

strike a balance between both the base charge and the volumetric charge. This is the principle behind the proposed increase in this year’s Ten Year Plan.

Note that the base charge for households has not changed much since 2004. The base charge was reduced from $80 down to $25 in 2004. This allowed for an increase in the volumetric charge in order to promote water conservation. The strategy since 2004 has been to make adjustments to the volumetric charge and leave the base charge alone. The proposal in the Ten Year Plan adjusts that balance slightly in a way that avoids making a large increase to the volumetric charge. The proposal in its current form would see the water supply deficit cleared in two to three years. The direction of the elected members is that the water supply activity should pay for itself rather than being funded by general rates. Either way you will always have to pay for your water. Why has Water Supply not covered all of its costs? Projected income in the previous ten year plan was based on the expectation that the city’s water use would increase, whereas in fact water use has not gone up as expected. Possible reasons for this are the recession and a few wet summers. Meanwhile the costs to run the business have not decreased.

(In fact, some of the major costs have increased. Each year councils are required by law to fund depreciation on things like water treatment plants, pump stations and water pipes. Depreciation ensures we have the funds in future to replace these assets. The cost of depreciation has increased in recent years as we build more infrastructure and as existing assets are revalued to current replacement value. Depreciation has increased from around $4M (in 2009) to around $5.9m (budgeted in 2013). Some operating costs, such as electricity, have also increased more than general inflation.)

Taking all that into account, it is simple enough to say that because the city has used less water than was expected over the past three years we now need to charge more to keep the business paying for itself. Keeping the balance The Council’s goal is to keep the city supplied with water at an affordable rate. We have to manage the supply carefully so that it doesn’t run out, which is why conservation initiatives have been so important.

The water supply activity operates independently from the rest of Council and it aims to break even without generating surplus.

If the city uses increasing amounts of water then we need to pay more for infrastructure to keep up with the demand. So far we have managed to defer the need to build a new water treatment scheme at Waiari until 2019. (Without water meters this would have been required 10 years ago.)

If the city uses decreasing amounts of water then the water supply activity does not pay for itself. This is our current problem.

The goal is to maintain a fair balance between using too much and not using enough. Not everyone will agree with the proposed way forward but at the end of the day the money needs to come from somewhere. You are encouraged to make a submission to the Ten Year Plan if you feel strongly about the proposed increase.

Other background issues Amidst the public discussion around proposed water increases there have been some comments about water meters and the fact that water should not have a cost. Water is a basic human right. Why do I have to pay for it at all? Water is free. You can grab yourself a bucketful of water any time. However, if you want someone else to collect the water, treat it for harmful bacteria and deliver it safely to your home, there will always be a cost. Tauranga City Council has around $300 million invested into a system of treatment plants, pump stations and pipe networks that is needed to get drinking water safely from the stream to your tap. The total cost of the system adds up to about $6,000 per household. We also have to operate the system. There are power costs, maintenance costs and running costs that add up to around $9 million per year for the whole city, or around $180 per household per year. That’s not including debt servicing, depreciation and overheads. All of this to deliver you high quality water. The quality of Tauranga’s water is graded Aa, which means it is some of the best in the country. Water meters Water meters were introduced in 2002. The Council at the time did not think that charging the same flat fee for everyone was the fairest way to cover water costs. Before water meters the flat fee was $235 per year, no matter how little water you used. It meant that low water users were subsidising high water users. It also created an impression that our water supply is endless. Water is not an endless resource so the city regularly got into trouble during the summer months

when the garden hoses came out. This usually meant water restrictions were needed. Water meters were introduced to help manage the city’s water consumption. Suddenly, you couldn’t take water for granted because you knew that the more you used, the more you paid for. For many people who were used to having their water costs absorbed into their general rates bill, this didn’t seem fair. Since water meters were introduced to Tauranga City:

summer water restrictions have not been required

we have not had to pay for a new water treatment plant at Waiari; this project has been deferred until 2019.

For more comprehensive information about water tarrifs and water demand management there is an excellent, in-depth paper called Water Metering – The Tauranga Journey written by Peter Bahrs and John Sternberg.