The Mutual Water Companies Analysis & Alternate Proposal R.11-11-008 Bob Burke Regulatory Liaisons Oct 13, 2015.

The Mutual Water CompaniesAnalysis

& Alternate Proposal

R.11-11-008

Bob BurkeRegulatory Liaisons

Oct 13, 2015

Financial InstabilityUtilities & Customers

• The 30%/70% rule and Inclining Block Rates create leverage with Volumetric Sales

• Wild $ swings to Utilities & Customers are predicted by underlying math when computed using current methods

• The illusion of the Forecast• WRAM/MCBA amplify the risk

Financial Instability:Today’s 30% / 70% Rule

30%/70% Rule

% Quantity Forecast Achieved

Financial Stability:Stable Rate Design Rule

% Quantity Forecast Achieved

Conservation via Mass Media Technology: Jan 17, 2014 - State of Emergency (419K web hits)

Conservation via Mass Media Technology

March 19, 2015 – $1B Drought Aid404K web hits April 1, 2015 –

Brown’s Executive Order18.2M web hits

May 5 – SWCB’s Regulations1.02M web hitsApril 25, 2015 –

Brown’s Redouble Effort230K web hits

Conservation via Low Flow Technology

– 38M California Population– 12.6M residences in CA, 1.8 toilets / residence– 475K hotel rooms in CA, 1.1 toilets / room– Approximately 21M high flow toilets in CA now– 8 uses per day / capita at 4 gal/flush vs. 1.3– 310 BG / Year saved if all 21M are converted =

1x - 2x the current drought annual savings rate

Conservation via Rate Design

• About 10 out of 100 reports we found actually used statistical techniques to compute Price Elasticity

• Most saw volume decrease with price increase• We ran the numbers on our own price

elasticity in 2006• Consensus: Water Price Elasticity is in the

range of 20% to 25% of the CHANGE in price

Financial Instability: The Design Flaw with Inclining Block Rates: too few get the

“conserve” price signal

Volume

Price

Block 1 - 100%of customers

exposed

Block 2 - 50%of customers

exposed

Block 317%

exposed

Block 43% are

exposedthe other 97% don’t

get this signal

No “conserve” price signal

Sent to those who use 0 to L

L M H0

Step 1 - Barrier Block Rates

Volume

Price

Block 1 - 100%of customers

exposed

Block 2 - 50%of customers

exposedBlock 3

17%Block 3

3%

Inclining Barrier Blocks

DecliningOr Uniform Rate Blocks

RoR $ / Customer with Today’s 30%/70% Rule & Increasing Rate Block Conservation Designs

The Result Customers Get at Forecast Now:which persons and corporations are disadvantaged?