ECONOMIC FORECASTING REVIEW - Parsons Brinckerhoff

Vol. 3 • Issue 2
An Innovative Billing System at a Wastewater Utility
The Authority desired a rate structure
that would capture this cause-andeffect
relationship. PB’s comprehensive
cost recovery study reviewed rate
structures in practice in addition to
providing benchmarking information
on CSO LTCP’s in other communities.
The review showed the extensive use
of cost allocation based on the amount
of impervious surface on properties for
stormwater programs. Although this
was a proven approach in stormwater
programs, it was a new approach for a
CSO program.
Similar to many other utilities, the
Authority charged customers water
and sewer rates based on the volume of
water passing through the customer’s
meter. Using this structure for the
CSO program was an option but it
implied the more water a customer
consumed the more a customer would
pay towards the CSO program; a poor
fit to the proposed cause-and-effect rate
structure.
An important consideration for any
change from volumetric rates to
land-based rates was the profile of the
Authority’s customers, specifically
the water consumption and land
ownership characteristics. The above
table presents data from Authority
billing records on water consumption
versus total impervious area on
individual properties by customer
category.
The table demonstrates that switching
to an impervious area-based rate
would meet the Authority’s objective
of having the cost-causer pay more of
the costs of the program. It also shows
that switching rate structures would
result in customer categories being
winners and losers while some would
remain about the same. Multi-Family
properties such as high-rise residential
buildings occupy a relatively small
footprint but consume higher volumes
of water for domestic uses such as
dish and clothes washing. So, an
apartment building would typically
Water consumption vs percent of impervious area
on property
Customer
Water
Consumption,
FY08
Percent of
Impervious
Area, sq. ft.
Residential 21.3% 28.8%
Multi-family 20.7% 10.7%
Commercial 33.0% 32.5%
Municipal 3.2% 6.4%
D.C. Housing
Authority
2.9% 1.2%
Federal 16.9% 17.9%
Authority use,
other
2.0% 2.5%
Total 100.0% 100.%
source: WASA
pay less for the CSO LTCP because they
have relatively less of an impervious
footprint compared to their share
of water consumption. On the other
hand, Municipal land use would have
much higher charges under this rate
structure since they have the opposite
characteristics: a large impervious area
footprint compared to their relative
share of water consumption.
How should customers be
billed?
Part of the implementation phase was
ensuring that the Authority possessed
the legal authority to create a new rate
structure. The Authority’s enabling
legislation gave it the ability to bill and
collect for volumetric water and sewer
fees and other related charges such as
hook-up fees. PB advised the Authority
on the phrasing of a modification to
the city’s code to allow for the use of
an Impervious Area Charge (IAC).
The IAC was developed as a service
charge and not a tax as the Federal
government, an important Authority
customer, cannot be taxed but can be
assessed a service charge.
Implementing a new rate structure
would require altering the Authority’s
databases and customer bills for the
estimated 120,000-plus customer
accounts. The Authority’s Customer
Information System (CIS) was set up
to bill customers for water and sewer
Impervious area approach: Definition of ERU
1,000 sq. ft.
1,200 sq. ft. 800 sq. ft.
Example:
1 ERU = 1,000 square feet of impervious area
Equivalent
residential unit
source: Florida
Stormwater Association
volumetric fees. The CIS and the
customer bills needed to be revised to
include the new IAC billing fields. The
rate structure needed to be transparent
and easily understood by staff and
customers.
PB’s research showed that a
methodology commonly used by
stormwater utilities to simplify billing
is the use of the Equivalent Residential
Unit (ERU). The ERU represents either
the mean or median impervious area of
all residential properties. An example
ERU calculation is depicted above.
Under the ERU methodology,
residential customers are charged
one ERU per month and the other
land use or customer categories
(Commercial, Federal, etc.) are charged
in multiples of ERUs. An advantage
of the ERU approach is that billing of
the approximate 105,000 residential
customers is greatly simplified for
Authority staff since they will all be
charged the same amount each month
(1 ERU).
Implementing the IAC required
capturing data from many sources and
integrating it into the Authority’s billing
procedures. The D.C. government
maintains property data layers in a
Geographic Information System (GIS)
platform for public and agency use.
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