Proposed SAWS Rate Structure to Promote Conservation

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SAWS headquarters at 2800 US-281. Photo by Iris Dimmick.

SAWS headquarters at 2800 US-281. Photo by Iris Dimmick.

Its been almost five years since San Antonio Water System (SAWS) implemented its latest tiered rate structure that charges customers more per gallon if they consume more than base level usage. Tiered-rates are meant to reward conservation and promote sustainability – if ratepayers are charged more for using more water, they’ll be incentivized to conserve.

The Rate Advisory Committee (RAC) will vote at its Tuesday, May 26 meeting on a proposal that would move pricing from the current four tiers to eight tiers for residential customers. The proposed changes also would widen the price difference for low- and high-use commercial customers, and let sewer/wastewater fees reflect actual use.

Click here to download the draft report and recommendations , which are subject to changes by the RAC and require approval by the SAWS Board of Trustees and then City Council. The committee, made up of 17 members appointed by SAWS and City Council, has been working on the pricing proposal with SAWS staff and consultancy firm Black and Veatch for more than one year.

Less than half of residential customers will see a decrease in their monthly water bill, said SAWS Vice President of Business Planning & Controller Mary Bailey. People that use more water for “discretionary uses” – like watering a large lawn or washing a car – will pay more.

SAWS residential bill with new rate structure

SAWS customers that use less than 5,000 gallons per month will save money each month if the proposed rate structure is approved. Graphic courtesy of SAWS.

 

“These folks are going to start seeing that price signal (because) we’re going to send that signal sooner and people will have to think, ‘If I really want to use water outside, I’m going to have to pay more for it,'” Bailey said.

On the other end, customers will have more opportunities – more tiers – to save money by conserving water to reach low-use benchmarks.

Currently, the first 5,985 gallons for residential customers are priced at $0.23 per 100 gallons; after that, the price increases through the next three tiers. The proposal would set a new first tier price, $0.13, at 2,992 gallons (see charts below) and create eight tiers or “blocks” in total. For the first time, customers that use less than 2,992 gallons would receive a discounted Availability Charge (the minimum bill that SAWS charges for fixed costs).

Proposed SAWS residential rate structure.

Proposed SAWS residential rate structure.

Bailey said about 64% of customers fall into the existing Block 1 and pay the lowest rate. If the recommendations are approved as-is, about 38% of customers will fall into the new Block 1.

Commercial rates start at a rate based on the previous year’s monthly average use and would continue to do so under the proposed rates. What’s essentially different is Block 1 will be charged less and Block 4 will be charged more.

“If you’re a mom and pop business … or your USAA, you’re going to get to pay this (lowest rate) on whatever volume you use as long as it’s not any more than what you used on average last year,” Bailey said. “We don’t want to make it dramatically more because maybe that means you’re growing. … We don’t want to hinder growth but we do want to make sure that we don’t allow waste.”

Proposed SAWS commercial rate structure.

Proposed SAWS commercial rate structure.

About 85% of commercial customers pay their respective base (lowest) amount per 100 gallons, said SAWS Communications Manager Anne Hayden.

“It’s easier to plan for commercial customers’ water use because it tends to be more consistent year to year,” she said.

One of the major concerns of the RAC and of SAWS was to make sure that the rate structure didn’t disproportionately impact low-income customers. That 3,000 gallons – roughly 100 gallons a day – would not last long between a family of four considering that toilets flush 1-3 gallons, a bathtub holds 30 gallons, 20 for a shower and 40 for laundry (approximately).

So while the working title for Block 1 is the “life-line rate,” a basic amount needed to survive, it’s really more of an incentive for those close to the mark to conserve a bit more.

“We provide a discount to people depending on where they are on the poverty scale,” Bailey said. “That discount can be as high as a little over $14 off the bill.” The more people that live together, the lower the income, the higher the discount.  “(The rate structure is) one piece of affordability to add to all these other affordability programs.”

Between the Affordability Discount, free water-efficient fixtures, and WaterSaver landscaping coupons and consultations, SAWS hopes to close the gap for low-income customers.

But some of the big-ticket items, in terms of water savings and upfront costs, are out of range for most low-income residents, said Margaret Day, co-chair of the local Sierra Club chapter. Low-income customers are also more likely to live in homes that have leaks and poor water lines.

“And what the life-line rate does is favor single adult households,” she added.

Day said that while the tiered structure does promote more conservation, she would like to see a lower Availability Charge and a higher threshold for Block 1.

So why not just keep Block 1 at 6,000 gallons a month?

“If, all of a sudden, I want to put a very low rate for 64% of (customers), then the other Blocks would have to pay an extraordinary amount,” Bailey said. “That amount causes revenue instability in years like this year when it’s raining and people don’t use higher amounts of water. If they don’t use it, then we’re not recovering near enough revenue to keep our operations going.”

It’s a compromise, Bailey concluded. The numbers used in the report reflect a substantial amount of back-and-forth between the committee and the consultancy firm, which crunched the numbers and produced outlooks that demonstrated whether or not SAWS could reach its revenue requirements in a stable, sustainable way,

But keep in mind, the RAC has nothing to do with what happens with the money once it’s collected – its only task is to find a fair way to recoup SAWS’ expenses. “SAWS is a nonprofit governmental entity. So whatever we’re doing, we’re doing it to meet costs,” Hayden said.

“The rate structure process is revenue neutral,” added Bailey.

An important part of the rate structure process is to make sure that residential customers are not subsidizing the costs of commercial customers and vice versa. SAWS and the RAC believe this report does just that.

“I’m pretty sure that we’re on the same page,” RAC Chair Carroll Jackson said of the committee members. “With (17) people with all different points of view from different parts of town with different agendas … I thought we would have a hard time coming to an agreement.”

Jackson, who is also a senior vice president at Morgan Stanley, was confident that a majority of committee would vote in favor of the recommendations – that the minority would “agree to disagree.”

The committee was formed in Jan 2014 and has met 13 times. “It’s taken longer than we all envisioned because of Vista Ridge,” Jackson said. “But (the committee) decided that it had to be added in … it’s too big of a variable to leave out.”

City Council unanimously approved the $3.4 billion Vista Ridge contract in October 2014. The 30-year pipeline and water purchase deal that will add 50,000 acre-feet of water to the city’s supply from Burleson County/Carrizo Aquifer each year starting in 2020.

Critics of the deal, including the Sierra Club and various community groups, accused SAWS of back-room dealings and “lining up like sheep” to approve the deal, while accusing members of the business community with “lining their pockets” at the expense of working-class ratepayers.

“That whole deal needed to be property vetted by a third party,” Day said, adding that she thought the Vista Ridge project shouldn’t be carried out at all.

Read more about the details of the Vista Ridge contract here.

 

Correction: SAWS has had tiered water rates since at least the mid-1980s. A version of this article stated that “most” customers will see a decrease in their monthly bill, it’s actually just shy of half. Day’s comments have also been clarified to reflect complete opposition to the Vista Ridge project – no matter who develops it. 

*Featured/top image: SAWS headquarters at 2800 US-281. Photo by Iris Dimmick.

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3 thoughts on “Proposed SAWS Rate Structure to Promote Conservation

  1. Tiered rates are not the solution to water conservation! If residential customers would be able to conserve 20% of their water usage, it still wouldn’t amount to a drop in the bucket. This is because only eight percent of fresh water goes towards domestic use. If we really want to conserve water, we should curtail irrigation (which uses 70% of fresh water) and reduce industry’s allotment (which uses 22% of fresh water).

  2. Tiered rates are not the solution to water conservation! If residential customers would be able to conserve 20% of their water usage, it still wouldn’t amount to a drop in the bucket. This is because only eight percent of fresh water goes towards domestic use. If we really want to conserve water, we should curtail irrigation (which uses 70% of fresh water) and reduce industry’s allotment (which uses 22% of fresh water).

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