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study site. These values were then plotted against the combined utility water and wastewater rate in $/kgal. The cost for water and wastewater ranged substantially from $2.83/kgal to $10.11/kgal, providing a useful data set for analysis. To improve the model fit, the data point from Indianapolis was removed from the elasticity model. Indianapolis was the only study site to feature a declining block rate structure (i.e. the more water used, the cheaper the price). All other utilities had either flat rate or increasing block rate structures designed to send an increasing price signal as demand increases. Two regression equations and curves were fit to these data to determine the price elasticity of demand – a straight line and a power curve. The fit of both models was quite good and the range of elasticities calculated fits well with previous research in this area. The straight line model had the highest coefficient of determination (r 2 ) value of 0.6437. Elasticities calculated through the straight line model ranged from -0.12 at $2.83/kgal to –0.65 at $10.11/kgal with an average of –0.29 and a median of –0.20. The constant elasticity power curve model had a coefficient of determination value of 0.5477. The elasticity calculated through this power model was –0.275. The research team concluded that if a single elasticity value were to be selected, the preponderance of the results from this analysis point to an elasticity of –0.27. However, the linear model result clearly shows that elasticity varies with price and this should be taken into account when applying these values to planning and rate models. IMPLICATIONS FOR PUBLIC POLICY The findings of this report carry broad implications for policy-makers at the local, state, and federal level. In this section, data from the report will be placed in the context of key issues facing the nation's urban water and wastewater managers. Following a discussion of key findings, recommendations are made for appropriate public policies toward separate billing systems. Separate Billing Systems: Rapid Adoption Without Public Incentives Billing systems for water and wastewater service - most notably submetering and RUBS systems - are expanding rapidly in the multi-family housing market. Although surveys undertaken for this report found no current examples of public sector incentives for either 258
submetering or RUBS, and few effective public mandates to submeter, the number of units covered by separate billing systems are reported to have grown by 25% per year during the last four years. This study's postcard survey of multi-family properties in 13 cities found that 13.4% of the responding properties were billing for water by submetering, RUBS, or hybrid methods (see Table 4.3). Based on the postcard survey, traditional in-rent billing for water and wastewater service prevails in about 84.8% of surveyed multi-family units, and that share is dropping. Confirming the trend, the survey of multi-family property managers in the same 13 cities shows evidence that the pace of conversion of existing mulit-family dwellings from in-rent to separate billing systems accelerated significantly during the years from 1995 through 1999, and that the pace of conversion activity has remained substantial since that time. Such conversions, coupled with newly constructed units that are operated with water and wastewater billing systems from the start, have made billing services a growth industry. The business case for property owners' growing interest in separate billing systems is indeed compelling. First, water and wastewater costs have begun to rise more rapidly than either core inflation rates or average rent increases, a trend expected to continue for the foreseeable future. Contributing to the national average, of course, are local water and wastewater rate increases that are markedly, and in some cases, acutely, higher than average increases, such as Washington, DC (42% in 1997), Seattle (24% in 2001), and Buffalo (23% - 2004). Thus, shifting payment for water and wastewater charges from owners to residents insulates property owners from a rapidly rising set of costs. Secondly, a by-product of this shift in payment for water and wastewater service, from the owners' point of view, is the increased net revenue per unit, and its effect on the capitalized value of the units converted to separate billing methods. There is little published evidence that rents have decreased as water and wastewater charges have been shifted to residents. Rents are determined by broad market forces. A $25 monthly water bill amounts to less than 3% of a typical $900 rent payment. What is recognizable, however, is that an increase in net revenue per unit (as a result of redirecting water and wastewater costs to residents) directly influences the capitalized value of the unit, at a ratio of about 10 or 12 to 1 (AWWA WCD 2001). Thus, if separate billing systems increase a property owner's net revenue by $25 per unit per month, the annual net revenue increase of $300 per year will increase the value of the unit by $3,000 to $3,600. Even if the property owner has no immediate plans to sell, the increased value 259
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NATIONAL MULTIPLE FAMILY SUBMETERIN
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CONTENTS LIST OF TABLES............
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Matched-Pair Analysis .............
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LIST OF TABLES Table ES.1.1 Breakdo
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Table 6.6 Elasticity values, analys
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Figure 4.30 RUBS water bill #6 ....
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investigated local water savings as
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We are grateful to the members of a
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quantitative aspects of separate bi
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3. Owner/postcard survey: To identi
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"averages" of impact property water
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in-rent properties, others used the
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of these models included the billin
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70 Average Annual Water Use Per Uni
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COSTS AND BENEFITS Beyond quantifyi
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service charge, then the resident w
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Billing Method Efficient Fixtures?
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70 Avg. Water Use per MF Unit (kgal
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REGULATORY FRAMEWORK REVIEW The fra
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Table ES.1.12 NSUAA Summary of Stat
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above, the researchers offer the fo
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service is preferable, and would he
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practices (BMPs) should be implemen
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infrastructure of the building and
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multi-family housing. The transfer
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CHAPTER 1 INTRODU CTION More and mo
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In 1998, 15.0%, or 15.4 million, of
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TERMINOLOGY AND DEFINITIONS OF BILL
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submetering. With utility-submeteri
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all the two bedroom units for $20 p
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HOW TO USE THIS REPORT This report
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CHAPTER 2 LITERAT URE REVIEW As the
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A review of the literature unearthe
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The price elasticity of water deman
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expected. Additionally, McClelland
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submetered and five control (in-ren
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Another study might want to target
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CHAPTER 3 RESEARC H METHODS, APPROA
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1. Selection of participating study
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STUDY SITE SELECTION The Study aime
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Figure 3.2 National Multiple Family
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Matched pair protocol/survey - conf
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information given the available bud
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survey. Service companies that prov
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in “business to business” calli
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MATCHED PAIR SAMPLE The purpose of
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The second part of the visit requir
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epresentative of a known population
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51 Table 3.7 Postcard survey statis
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Table 3.8 Comparison of annual wate
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postcard survey. Nevertheless, exam
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confidence interval ranged from 49.
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particular property (e.g., the mont
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State PUC officials - water commiss
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10. The PROPID number appearing on
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These costs represent the commodity
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The postcard survey provided inform
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Table 4.4 Average number of units f
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Two-thirds of the properties that r
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Percent of Surveyed Properties with
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$700 Average Rent Per Bedroom ($) $
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Percent of Surveyed Properties with
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Impact properties were also more li
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Table 4.8 Issues considered before
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Percent of Surveyed Impact Properti
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60% Percent of Surveyed Properties
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From the visits, it was found that
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100% Percent of Surveyed Residents
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Roughly similar proportions of resi
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inserts for toilets (21%) or low-fl
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proportion were unsure, 37% from su
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Table 4.18 Ownership and rental rat
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Figure 4.17 Submeter water bill #1
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wastewater rates are not shown so t
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Figure 4.23 Hot water hybrid water
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RUBS Sample Bills Seven sample RUBS
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wastewater rates are not shown so t
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Figure 4.28 RUBS water bill #4 from
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Figure 4.30 RUBS water bill #6 RUBS
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directly to and then paid by the th
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never subtracting for common area w
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Late Fees At the start of water bil
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124
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intuitively clear, and matches comm
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Indoor water use was normalized on
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Table 5.3 Summarized water use anal
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easonable assumption since there is
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Figure 5.1 shows the frequency dist
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40 Difference in Annual Water Use p
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after 1995. By including only those
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Table 5.11 Statistical tests compar
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Factors that Influence Water Use Th
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Table 5.12 Association of categoric
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Indoor Water Use per Unit in 2001 I
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Table 5.13 Continuous factors from
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Multivariate Models to Determine Im
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properties built before 1995 were c
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A = Beta coefficient for “Propert
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substantially reduces the sample si
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Table 5.17 Model #2 coefficients an
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0.00 indicating that whatever fit d
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commodity charge for water and wast
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properties having generally lower w
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110 Average Annual Water Use Per Un
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analysis, intended to control best
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Table 5.27 Paired samples test, all
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Table 5.30 Estimated water use befo
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Table 5.33 Comparison of water savi
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180
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sector only reduced usage by 18% (A
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Table 6.1 Avoided costs from submet
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submetered. Complete responses of c
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included in this cost/benefit analy
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Table 6.3 Cost and benefit for owne
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Perceived Concerns In the resident
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With a service fee, residents could
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Table 6.4 Economic return for a res
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ANALYSIS OF PRICE ELASTICITIES Econ
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concluded that if a single elastici
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esults from this analysis point to
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over which they have control than d
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According to the basic consumer cho
Page 260 and 261: The consumer choice problem can be
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Page 264 and 265: water systems from compliance with
Page 266 and 267: and methods of practice. NIST publi
Page 268 and 269: Table 7.1 NSUAA Summary of State Re
Page 270 and 271: New Surveys of State Agencies and W
Page 272 and 273: the AWWA WaterStats 1999 database.
Page 274 and 275: Measures, which dispatches a public
Page 276 and 277: Mississippi, Missouri, Pennsylvania
Page 278 and 279: 226 Table 7.6 Summary of utility re
Page 280 and 281: DISCUSSION - KEY EXAMPLES OF STATE
Page 282 and 283: ill. Condominium associations are g
Page 284 and 285: under construction after January 1,
Page 286 and 287: Weights and Measures Regulation In
Page 288 and 289: from the submetering. Meter testing
Page 290 and 291: clean and decent housing or the lac
Page 292 and 293: 240
Page 294 and 295: NATIONAL ORGANIZATIONAL STRUCTURE F
Page 296 and 297: complaints in all 50 states and app
Page 298 and 299: - Meters must demonstrate in testin
Page 300 and 301: - Plumbing systems are space constr
Page 302 and 303: (2) Twisted or kinked flex supply l
Page 304 and 305: 252
Page 306 and 307: Estimated Water Use By Different Bi
Page 308 and 309: there are clear benefits to these s
Page 312 and 313: immediately strengthens the owner's
Page 314 and 315: among the nation's key strategies f
Page 316 and 317: all repair and replacement decision
Page 318 and 319: These findings underscore the obser
Page 320 and 321: varies with volume of use) for mult
Page 322 and 323: Recommendation 6 - Efficient plumbi
Page 324 and 325: financially responsible for their o
Page 326 and 327: individual unit, the volume allocat
Page 328 and 329: RECOMMENDATIONS FOR FURTHER RESEARC
Page 330 and 331: Fixed rates - Part of a master mete
Page 332 and 333: Total-capture submetering - a type
Page 334 and 335: 282
Page 336 and 337: Corral, L.R. 1997. Price and Non-Pr
Page 338 and 339: McClelland, L. 1980. Encouraging En
Page 340: Young, C.E., K.R. Kinsley and W.E.
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