Water utility eyes rate hikes to promote conservation

A ban on lawn watering and other non-essential uses figures to be Citizens Water’s most effective tactic to conserve water during future droughts, its newly released water-conservation plan shows.

But the utility is also considering “conservation-based” rates to discourage usage on peak days in future years.

Such rates, which would be higher for those using the most water, are among recommended measures in a conservation plan Citizens filed this week with the Indiana Utility Regulatory Commission.

The plan sets a savings goal on peak usage days of 23.9 million gallons per day by 2015, and 28.6 million gallons per day by 2020.

“This evaluation results in an aggressive, yet realistic, expectation of potential savings and impact on forecasted demands,” states the filing.

That amount excludes water savings from bans on lawn watering and other non-essential uses, which could save 81.5 million gallons on a “peak day” by 2020, the utility estimates.

Rather, Citizens sees the next biggest potential savings —13.5 million gallons a day by 2020 — as the result of consumer-education efforts to encourage conservation.

That’s followed by a 5.2 million-gallons-a-day savings from a new rate structure that would provide a financial incentive for customers to ease back on water use.

Such conservation-based rates could take the form of seasonal rates, excess-use charges and tiered rates that increase as customers use more water. That could have big effects on major water users such as golf courses, which can draw vast amounts of water for irrigation.

Such users could even be put on interruptible status, where water is shut off for a short time when the system is under the most strain.

“These rate structures will be evaluated as part of the cost of service/rate design study to be conducted in Citizens Water’s next rate case,” states the filing.

Citizens’ next water rate case is set for the first half of 2013.

“The idea is to encourage [customers], through price signals, to conserve,” Jake Boomhouwer, an engineer with Camp Dresser & McKee, told the Board of Waterworks last year.

The approach is different than the current one, in which rates are structured to decline on a per-cubic-foot basis as a customer uses more water. But many utilities are moving away from that type of payment model. Nearby Louisville, for one, adopted conservation-based rates last year.

CD&R said a conservation-based rate structure could even lower rates for lower-volume residential users.

Higher-volume commercial water users would be hurt by such a rate structure. Right now, the biggest water users pay less than half the per cubic-foot rate than the smallest users.

One way to alleviate such strain could be to establish the average water consumption amount used by a business on an annual basis and then raise rates only when they exceed such usage.

Indianapolis might need to upgrade its current metering system before it can apply more sophisticated billing schemes, CD&R said. These include automated meters, which in some cities are capable of taking water-use readings every six hours.

Retrofitting a city the size of Indianapolis with smart water meters could cost in the range of $40 million to $80 million, the engineering firm said last year.

At the same time, the utility has had success in dealing with drought conditions this summer without such costly upgrades.

On July 13, Mayor Greg Ballard declared a ban on lawn irrigation and, within 24 hours, system demand plummeted by about 40 million gallons a day.

The peak daily usage during one day in July was 233 million gallons.

Citizens has explored increasing its water supply. Among long-term ideas are building pipelines to tap water in the Ohio and Wabash Rivers. Such projects could cost hundreds of millions of dollars, however.

About 75 percent of Citizens’ water comes from surface supplies such as Geist, Eagle Creek and Morse reservoirs. Levels have fallen by more than 5 feet in some places this year during the drought.

The rest of the city’s water supply comes from well fields.