This presentation premiered at WaterSmart Innovations

watersmartinnovations.com

I Conserved - You Raised Rates – Yes But You Pay Less!

Bill HoffmanConsultant to Water Management, Inc.

512-294-7193billhoffmantx@earthlink.net

What We Will Cover• What is happening across the nation with water and wastewater

rates;

• The Texas Example – Conservation, Reuse and Drought Management offer the most water for the least cost;

• A hypothetical case that shows how 10 homes using the exact same amount of water before conservation and paying the exact same in water and wastewater rates will change after conservation – wasters pay more, conservers pay less AND TOTAL REVENUE NEEDS for the utility; and

• The impact on increased efficiency on the expansion of future treatment capacity and the cost reductions inherent to that will be reviewed.

Water & Wastewater Rates

Circle of BlueApril, 2016http://www.circleofblue.org/waterpricing/

Price of Water 2015: Up 5 % in 2016 in 30 Major U.S. Cities;

48 % Since 2010!

Consumer Price Index for Utilitieshttp://www.circleofblue.org/waterpricing/

$4.78 $5.73

$7.94

$9.47

$10.12

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$11

2001 2005 2010 2013 2016

Dol

lars

per

Tho

usan

d G

allo

ns

Year

Commercial Water and Sewer Rates for 100,000 gallonsfor Nation's 50 Largest Cities

Source: Black & Veatch - 50 Largest Citys Reports

Total Water Sewer

Even in Chicago, the Mayor Wants to Double Water Rates!

“Water is the oil of the 21st

century.”Andrew Liveris, Chief Executive,

Dow Chemical Co., August 2008.

Source:

$0 $5 $10 $15 $20 $25 $30 $35 $40

Denmark

Austria

Germany

France

England

Czech Republic

USA (Black & Veatch)

Dollars per Thousand Gallons

Average Residential Water and Sewer Rates in European Countries Compared to USA in 2013

Sources of Information: Europe -http://www.globalwaterintel.com/archive/12/9/market-profile/global-water-tariffs-continue-upward-trend.html

USA - http://bv.com/docs/mana

9 11 11 12 13 13 14 15 16 17 18 19 20 21 22 24 25 26 28 30 31 33 35 37 39 42 44 47 49

05

101520253035404550

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

Dol

lars

per

Tho

usan

d G

allo

ns

Year

PROJECTED NATIONAL FUTURE WATER AND WASTEWATER COSTS AT CURRENT INFLATION RATE OF

5.85%

Cost to Flush a Toilet at Current Inflation Rate of 5.85%

Gallons per Flush

Cents per Flush in 2014

Cents per Flush in 2034

5 4.9 15.43.5 3.4 10.81.6 1.6 4.9

1.28 1.2 4.0

Bridges have been the Poster Child for Infrastructure Needs!

Buried No Longer: Confronting America's Water Infrastructure

Challenge (American Water Works Association, 2012)+Investment needs for buried drinking water infrastructure total more than $1 trillion nationwide

over the next 25 years.www.awwa.org/Portals/0/files/legreg/documents/BuriedNoLonger.pdf

Water58%

Wastewater42%

EPA Breakdown of Water and Wastewater Infrastructure Dollar Needs

http://www.usmayors.org/urbanwater/documents/LocalGovt%20InvtInMunicipalWaterandSewerInfrastructure.pdf

This graph shows when residential water and sewer bills will exceed energy bills in selected cities (source – Alliance for Water Efficiency)

The Texas Example

Future Capital Cost Through 2070 in Texas

• Total Future Capital Costs for Texas Water/Wastewater Related Resources = $230 to $300 Billion

• 75% to 80% for Water and Wastewater Infrastructure NOT RELATED TO NEW SUPPLY

• New Supply is only about 20% to 25% of Future Capital Costs

• New Supply Costs = $62.6 Billion

Detailed Breakdown of Projected Water Use in Texas by Category

8

9

10

11

12

13

14

2020 2030 2040 2050 2060 2070

Mill

ions

of A

cre-

Feet

per

Yea

r

Year

Future Texas Water Use2017 Texas Water Plan

Agricultural Urban & Industrial

3.24.3

5.26.1

6.88.0

18.419.2 19.7 20.3 20.8

21.6

15.2 14.9 14.5 14.2 14 13.6

0

5

10

15

20

25

2020 2030 2040 2050 2060 2070

Mill

ions

of A

cre

Feet

per

Yea

r

Year

Total Demand, Existing Supply, & Shortfall in TexasHow do we fill the gap in 2070?

Shortfall Demand Exsisting Supply

516487111116

152203226

371631649

811887

1,1001,330

2,584

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2,800

Other StrategiesConjuncitve Use

Direct Potable ReuseGround Water Desalination

Sea Water DesalinationAquifer Storage & Recovery

Other ConservationDrought Management

Other ReuseGround Water Development

Indirect ReuseMunicipal Conservation

Passive ConservationNew Resevoirs

Irrigation ConservationExisting Surface Water

Thousands of Acre Feet per Year

New Supply in Texas in 2070

Desalinization2% of Supply

Other3%of Supply

New Resevoirs12%

Existing Supply34% of Supply

Conservation, Reuse & Drought Management

49% of Supply

Where Future Water Will Come From And its Capital Cost in Texas in 2070

Conservation, Reuse12% of Cost

49% of Supply

All Other88% of Cost

51% of Supply

Capital Cost of Future Projects in 2017 Texas Water Plan - $62.6 Billion

http://www.twdb.texas.gov/waterplanning/swp/2017/index.asp

$0.00$0.00

$0.45$0.58

$0.87$1.15$1.17

$1.30$1.38$1.44

$1.52$2.19

$2.31$3.48

$3.83$4.39

$0 $1 $2 $3 $4 $5

Passive ConservationDrought Management

Irrigation ConservationOther Conservation

Indirect ReuseMunicipal ConservationExisting Surface Water

Other ReuseAquifer Storage & Recovery

New ResevoirsGround Water Wells & Other

Ground Water DesalinationConjuncitve Use

Direct Potable ReuseOther Strategies

Sea Water Desalination

Dollars per Thousand Gallons - Not Delivered

Texas 2017 Water Plan Cost in Dollars per Thousand Gallons

The Cheapest Water You Will Ever Have Is The Water You

Already Have!

10 Homes in a Hypothetical City

Variable, 20%Fixed, 80%

Typical Utility Water/Wastewater Cost Breakdown

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10 10

9

8 8

7 7

5 5

0

2

4

6

8

10

12

1 2 3 4 5 6 7 8 9 10

Thou

sand

s of

Gal

lons

per

Mon

th

Household

Hypothetical Household Use for 10 HousesAverage Use - 10Kgal/Month Before - 8 Kgal/Month After

Use Before Conservation Use After Conservation

Analysis of Costs After Conservation• Of the $1,300 collected for the 10 homes, 20% is variable cost.

• Therefore variable cost equal $260 each month.

• The 10 homes reduce total water use to 8,000 gallons a month, down from 10,000 gallons a month, a 20% reduction

• Variable costs are also reduced by 20% or $52 a month that does not have to be recovered to cover operating and fixed costs.

• This means that the Utility still needs to receive $1,248 in revenue to cover its costs each month, down from $1,300.

• The utility must raise rates for the 10 homes by 11.4%

$1,300

$1,100

$1,248

$1,000

$1,050

$1,100

$1,150

$1,200

$1,250

$1,300

$1,350

Revenue Before Conservation Revenue After Use Reduction After Adjustment for NuteralRevenue

Dol

lars

per

Mon

thImpact of Conservation on Revenue from 10 Homes

A $52 per Month Savings

Well, Rates DID have to Go Up!

Current Rate Structure Use fees per 1,000 Gallons

Type of Service Water Sewer Total

$/kgal over 2,000 gallons $4.50 $5.50 $10.00

Base fees for first 2,000 gallons $25.00 $25.00 $50.00

New Rate Structure Use fees per 1,000 Gallons

Type of Service Water Sewer Total

$/kgal over 2,000 gallons $5.85 $5.785 $11.635

Base fees for first 2,000 gallons $27.50 $27.50 $55.00

$130 $130 $130 $130 $130 $130 $130 $130 $130 $130

$160$148 $148

$136$125 $125

$113 $113

$90 $90

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

1 2 3 4 5 6 7 8 9 10

Dol

lars

per

Mon

th

Household

Monthly Water & Wastewater Fees Before and After Conservation

Montlhly Cost Before Monthly Cost After

The BoTTom Line!• Those who did not conserve pay more.

• Those who do a good job pay less – some way less.

• Total bills are actually reduced even though rates are higher and total revenue demands WENT DOWN!

• AND THE TOTAL CHARGE FOR WATER SERVICE TO THE 10 HOMES WAS REDUCED BY $52 A MONTH!

The Cheapest Water You Will Ever Have Is The Water You

Already Have!

Water Treatment Capacity Impacts

$0 $5 $10 $15 $20

Conventional Potable Water

Conventional Wastewater

Advanced Wastewater

Sea Water Desalinization

Dollars per Gallon Day of Capacity

Capital Cost of Water and Wastewater Treatment

100

200

300

400

500

600

700

Mill

ions

of G

allo

ns p

er D

ay (M

GD

)

Year

Future Expansions of Water Treatment Capacity if Utility Population Grows at 2.5% a Year

4 expansions no conservation - 2 expansions with conservation

Current Average Rate of Use Current Peak Rate of 1.7 X Avg.Future Average Use @ 20% GPCD Reduction Future Peak Rate at 1.5 and 20% GPCD Reduction

Example CityBefore Conservation

• Now uses 150 MGD• Population Growth – 2.5%/Year• Peak Factor 1.7• Peak Day – 225 MGD• In 40 years will expand to 405

MGD• Peak 604 MGD• Four plant expansions

With Conservation

• Conservation – 20% use reduction

• Peak day down to 1.5• In 40 years average = 322 MGD• Peak 483 MGD• Two plant expansions

That is a $300 Million to $800 Million Dollar Capital Savings by not having to

build 200 MGD of capacity and expanded supply!

Conservation Delays Future Capital Investment Needs

The Bottom Line!

With Conservation & Reuse1. We get more economic expansion on the same

infrastructure;

2. Delay when politically sensitive bond elections must be held;

3. Reduce future costs;

4. Keep rates as low as possible.

The Cheapest Water You Will Ever Have Is The Water You

Already Have!

www.watermgt.com(703) 370-9070

GSA Contract # GS-21F-0038T

I Conserved - Your Raised Rates – Yes But You Pay Less!