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Water Rate Structures

Structuring Water Rates to Promote Conservation

In the West, rivers, streams, and aquifers sustain cities and towns by feeding our urban water supply systems. With this finite supply, we must maintain the delicate balance between providing water that flows through our faucets and keeping water in our rivers to maintain healthy ecosystems. Westerners place a high value on both.

Water rate structures play an essential role in communicating the value of water to customers, promoting long-term efficient use. Increasing block rate structures (picture a staircase) most effectively encourage efficient water use. Customers who use low or average amounts of water are rewarded for conservation; those using excessive volumes pay higher unit prices.

WRA’s Smart Water study of regional water use found a correlation between cities with dramatically increasing block rates and those with the lowest per capita consumption levels. Along with other conservation and efficiency programs, effective rate structures can help stretch existing water supplies further and avoid much of the cost and controversy that result from large new water development projects. If designed appropriately, increasing block rates:

• Provide water at low prices for basic and essential needs, so all customers can afford it;
• Reward conserving customers with lower unit rates for water;
• Assign water supply and development costs proportionately to the customers who place the highest burden on the supply system, and on the rivers that feed the supplies; and
• Do all of the above while still maintaining a stable revenue flow to the utility.

Throughout our region, a variety of water rate structures exist, ranging from progressive, efficiency-based designs to rate structures that actually promote inefficient water use. Although many municipalities have come a long way in instituting efficiency-based rate structures, many still have room for improvement. This is precisely why WRA’s Water Program is accelerating its efforts to promote efficiency-based rate structures throughout the Southwest.

We have already begun assisting various Colorado municipal governments, water utilities, and environmental organizations in assessing the most effective rate structure options in each community.

Water Rate Structures in Colorado: How Colorado Cities Compare in Using this Important Water Use Efficiency Tool (2004)

Water rate structures are becoming an important tool for encouraging the most efficient use of precious water in the arid West. This report offers a guide to the various pricing options that urban water managers and policymakers can use. It explains which options generate the strongest incentive for efficient water use and yield the fairest billing for consumers who place different levels of strain (demand) on water supply systems. It then compares water rate structures in communities along Colorado's Front Range and on Colorado's Western Slope.

Water Rate Structures in New Mexico: How New Mexico Cities Compare Using this Important Water Use Efficiency Tool (2006) (1.1 MB)

Written by Western Resource Advocates and Professor Denise Fort of The University of New Mexico, this report takes a close look at the wide variety of water rate structures in New Mexico cities, ranging from those that promote efficient water use to those that actually encourage wasteful use.

Water Rate Structures in Utah: How Utah Cities Compare Using This Important Water Use Efficiency Tool (2005)

In semi-arid Utah, precious rivers, streams, and aquifers sustain cities and towns by feeding urban water supply systems. With a finite supply, Utah citizens, policymakers, and water utility managers must fulfill the dual role of ensuring water in customer taps and in Utah’s rivers, as Utahns place a high value on both. Water rate structures play an essential role in communicating the value of water to water customers, thus promoting long-term efficient use.

With the Bear River’s Fate at Stake, Ogden Improves Water Conservation

For more than two years, WRA and the URC met with the staff of the Ogden Public Utility and members of the Ogden City Council, provided sample rate plans and analysis, and educated the public on the benefits of the new water rate structure. The city’s strengthened increasing block rate structure assigns the most cost to those who place the highest burden on water supplies and rewards those who use water efficiently. The improved water rate structure better reflects the true value and cost of water in the arid West.