Winnipeg water rate study

• Main Author: Woroby, William M.
• Published: 2012
• Online Access: http://hdl.handle.net/1993/6917

AT the time of unification of the area municipalities within metropolitan Winnipeg in 1972 many different water rate structures were in effect. In 1972 a task force reviewed all of the rate methods in effect and recommended that the then City of Winnipeg's rate method called the Functional Cost Method be adopted. The recommended rate structure included a three block declining rate schedule and a minimum bill. The new rates were implemented in 1974. Since that time, the minimum bill has been abandoned and rate increases have been applied as a uniform percentage increase to all blocks. In 1979, a committee of the Waterworks, Waste and Disposal Department recommended that an indepth water rate study be undertaken to review the equitability of the present rates, to review the adequacy of generated revenue, to ensure flexibility of the rate method to adapt to future change, to ensure simplicity of use and to ensure that the method to all legal requirements of the utility. The study was undertaken in 1980 as a "cost of service" study. After a review of alternative rate setting methods, the Functional Cost Method and the Base Extra Capacity Method were chosen to be studied. These two methods were applied to the 1979 water utility's cost data. The allocated costs were then represented in a three block declining rate schedule as a unit cost for water for the utility's customers. The block rate structure divides customers into classes. Most residential users fall entirely within Block 1. Larger users first pay the Block 1 rate for initial use, then the Block 2 rate and Block 3 rate for subsequent use. it is important to note that large users pay the same rate as residential users for inital use. The Base Extra Capacity method is different from the existing method in that it shifts cost from the residential rate to the other blocks. In the Functional Cost Method, the Block 3 rate only includes the cost of transporting water into the City reasoning that the costs of local distribution, etc. have been recovered from all users including industry in the initial blocks. The Base Extra Capacity Method applies some distribution costs in Block 3 reasoning that the system must be in place to supply even the last drop of water. In the Functional Cost Method customers are classed into blocks according to total usage. In the Base Extra Capacity Method customers are classed according to their demand characteristics, ie. the ratio of their peak usage to their average usage. This is an important refinement since the peak usage in many ways governs the design of pumps and watermains and the costs of building the system. The "blocks" are used to divide customers into low volume/high peak residential users to high volume/low peak industrial users. This recognition of peak usage and having some charges for all components in all blocks are the reasons that the Base Extra Capacity Method is accepted as more equitable than the Functional Cost Method. The study concludes that the Base-Extra Capacity Method results in more equitable rates than the Functional Cost Method. The study also concludes that further monitoring of peak demand is required before implementation of the new method to better define the demand characteristic patterns for the customer classes.