Author: Mary Tiger (Page 4 of 5)

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WaterWise Dividend Model

Mary Tiger is the Chief Operating Officer of the Environmental Finance Center.

Check

How would you like to get a check from your water utility instead of sending them one? This blog has included a few pricing alternatives that would better align a water utility’s objectives of full-cost pricing and conservation incentives. The PeakSet Base Model and the CustomerSelect Model are both comprehensive rate structures and pricing models. This blog post will discuss a slightly different approach; the WaterWise Dividend Model serves as a supplement to a utility’s pricing model rather than a stand-alone structure. It could really be implemented alongside any pricing model.

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Setting Up and Clearing Hurdles in a Water Pricing Overhaul

Mary Tiger is the Chief Operating Officer of the Environmental Finance Center.

We have written about a number of alternative rate designs for water utilities on this blog in the past year (see posts on PeakSet Base Model and CustomerSelect Rate Plan). Admittedly, we have a lot of fun at the EFC thinking through creative models, linking  those models to utilities’ underlying cost structures, and testing out the ramifications on utility finance, customer demand and affordability. But in practice most governing boards and utility managers are hesitant to blaze a trail, especially on an initiative that significantly alters the way revenue is earned.  In a Peer2Peer virtual exchange in December, we asked eighteen utility officials what hurdles would need to be cleared before moving forward with an overhaul to their utilities’ pricing model. Their responses communicated the challenging, but not insurmountable, process of transforming a utility’s business practices. 

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The Role of Rates in Ratings

Mary Tiger is the Chief Operating Officer of the Environmental Finance Center. Christine Boyle was a Post-Doctorate Fellow of the Environmental Finance Center. Thanks also to the direction and analysis provided by Jeff Hughes and Dayne Batten.

Rising costs, declining demand, and variable sales predicate our research into water utility financial resiliency for the Water Research Foundation.  As part of our investigation into revenue, rate, and financial policy trends, we are researching the processes and methods used by rating agencies and their resulting impact on utility operations. Given the amount of capital needed to bring U.S. utilities’ aging infrastructure up to modern standards, the long-term availability of reasonable-priced credit remains a pressing issue, especially as federal and state subsidies decrease. Our research will focus on credit rating agency research and perspectives as a key source of insight regarding access to debt financing. This blog post highlights the importance rating agencies place on rate setting.

S&P Credit Rating Considerations for 18 Drinking Water Utilities

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Hidden Residential Irrigation in NC

Mary Tiger is the Chief Operating Officer for the Environmental Finance Center at UNC.

Over the past four years, the Environmental Finance Center (EFC) conducted in-depth analysis of residential customers of some of North Carolina’s largest water utilities, represented by the Urban Water Consortium. Across the state, we “sliced and diced” customer data and presented each utility with a profile of its customer base from a number of different perspectives. In working with each utility, we have found that one of the most useful and enlightening perspectives we provide is that of households that are significantly irrigating through their standard meter.

Every utility in the North Carolina Urban Water Consortium offers separate meters for irrigation purposes, and under North Carolina law, separate irrigation meters are required for all newly plotted land with an in-ground irrigation system. Despite this, irrigation meters are not capturing all of the water used for irrigation in each of these utilities. In fact, in some cases, they are not capturing the majority of water used for heavy irrigation.

Our analysis attempted to capture the number of customers and amount of water likely to be attributed to heavy irrigation (i.e. using in-ground irrigation systems, not simply hand watering). The EFC used billing records to estimate how many existing residential customers were using a standard meter to supply water to an in‐ground irrigation system. This was done by looking at the water usage patterns for those households that did have irrigation meters and finding households without irrigation meters that had similar patterns.

The graph below shows the percent of customers that the Environmental Finance Center estimates to be irrigating through in-ground irrigation systems. As noted after the name of each utility, they are taken from different years.

The red area represents the customers that are irrigating through an irrigation meter. We assume that this group of customers will continue to grow as a percentage of the whole as all newly plotted lands with in-ground irrigation systems will be required to separately meter their irrigation water use. The yellow area represents customers that irrigate with reclaimed water. Currently only the Town of Cary pipes and meters reclaimed water directly to residential customers.

Irrigation Bar Chart

Click to enlarge

The blue area represents the group of customers that the EFC estimates to be irrigating through their standard meter. As the graph indicates, this group of customers varies significantly among the UWC members. The black “x” indicates one reason why this variance exists. This marker aligns with the additional costs to households to install a separate irrigation meter in FY10. For the utilities that fall under the shaded portion of the graph, the assumed irrigators were identified during a drought year, which may have resulted in an over- or under-representation of households irrigating from standard meters (depending on individual utility restrictions on outdoor water use). However, there are many other reasons why households were encouraged or discouraged to connect their irrigation system to a separate meter, including rate discrepancies and utility policies. The Environmental Finance Center recently published an article in Journal AWWA[1]exploring this issue.

These standard-metered irrigators have serious implications for utilities. For one, if they are indeed irrigating with an in-ground irrigation system, they should have a proper backflow prevention system installed and be conducting required maintenance of that system. In addition, it is important to know what water (and revenue) is at stake if the utility experiences a particularly wet or dry year that will influence irrigation demand.

More discussion on residential irrigation can be found at: http://www.efc.unc.edu/projects/irrigation.htm

Smart Meters, Smart Rates

Now in pursuit of his PhD at the University of Maryland, Casey Wichman wrote the report referenced below as an Environmental Economics Analyst with the Environmental Finance Center.

Water utilities in the Southeast are increasingly considering the adoption of “smart” water meters to replace decades-old infrastructure and outdated technology. With increasing demand for clean drinking water in the US, the need for efficient management of water supplies is driving the upward trend in demand for advanced metering infrastructure (AMI). New metering technology is attractive for a host of benefits well-known to those in the water management business: improved leak detection, reduced meter reading costs, enhanced customer service, remote service connections and disconnections, among others. AMI meters also provide an opportunity for better demand management by rethinking the way water is priced and distributed for different end-uses.

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