AMWUA Blog

Jan 22 2018Share

Science And Math Help Balance Tempe’s New Water Rates

By Warren Tenney

Setting water rates is never easy. There are two overriding considerations for a city when calculating a new rate structure. First, city water departments need to cover service costs. These costs include replacing aging infrastructure and operating, maintaining and expanding water and wastewater systems, and loan payments for capital improvements. Second, cities recognize that water is a limited resource. That’s why most desert cities use a tiered rate structure for single-family homes. Tiered rates mean the more water a household uses the more a resident pays per gallon. It's a difficult balance to make these rates work for all customers and keep enough revenue flowing to the city. In 2015, during its bi-annual rate study, the City of Tempe changed its tiered water rates and the top 5 percent of residential water users saw their bills jump by 20-25 percent. The concerns of these residents led Tempe to scrutinize the methodology behind its water rates during the city’s 2017 study. As a result, the city created a more data-driven tiered rate structure tied to both cost of service and to water-efficient irrigation.  

If all homeowners used water exclusively inside their homes, everyone’s water use would be roughly the same. Despite the size of a home, per household water usage is about the same for such things as washing dishes and laundry, flushing toilets and taking showers. Outside water use –primarily landscape irrigation – drives the big differences in monthly demand among residential users. 

City water systems are built to meet peak demand, usually a date in June or July when water use for landscaping purposes is at its highest. Water Infrastructure (pipes, pumps, and treatment facilities) is sized for delivering water during this peak demand time. For many residents in older, large-lot neighborhoods, lawns are a tradition and point of pride, but keeping lawns green and growing in 110 degrees raises peak demand and that raises the cost of maintaining water infrastructure and service throughout the year. Rather than regulate what people can plant in their yards, cities are more inclined to encourage efficient water use and promote drought-resistant landscapes through tiered rates, incentives and education. 

Tempe’s water professionals went to work to find a compromise that would produce enough revenue to cover costs and encourage efficient water use, while still taking into consideration customers who live on large lots. The city used a more scientific approach to calculate an equitable tiered rate structure.  The first two tiers are based on the U.S. Environmental Protection Agency (EPA) average per person indoor use along with the census data for the average number of people per small household (tier 1) and large household (tier 2).  

Tiers 3 and 4 were calculated by using two new sets of data. First, Tempe determined the average parcel size for the entire city is 8,000-square-feet with an average irrigated area of 2,000-square-feet. Tempe also isolated the top 5 percent of the city’s largest lots. Of these largest lots, the average lot size is 16,000-square-feet, with an average irrigated area of 6,500-square-feet. The city combined the evapotranspiration rates and average rainfall to determine the volume of water needed to efficiently irrigate the landscaped area of the average lot and the average large lot. To provide the maximum flexibility, these numbers assumed the space was landscaped with grass and that homeowners could reach 70 percent efficiency. 

Second, water finance experts determined the cost of meeting the water demands for each tier based on how the tier’s water use impacts peak demand and how that affects the use, size and cost of the city’s water system. For example, tier 1 is based on indoor use for a small family and is assumed constant throughout the year with no impact on peak demand. Tier 4 considers outdoor use for large lots and therefore has an impact on the city’s water system during peak demand times and is priced accordingly. Here is Tempe’s new data-driven rate structure. 

Tier 1: 0 to 6,000 gallons per month at $1.80 per 1,000 gallons. This tier is based on EPA research that shows average interior use is 70 gallons per day per person for a small family (2.5 people).

Tier 2: 6,001 to 12,000 gallons per month at $2.49 per 1,000 gallons. This tier uses the same EPA research but is designed for a larger family (5.5 people).

Tier 3: 12,001 to 20,000 gallons per month at $3.65 per 1,000 gallons. This tier is based on the city’s average 8,000-square-feet parcel, which would have an average of 2,000-square-feet of landscape area. 

Tier 4: 20,001 to 40,000 gallons per month at $4.61 per 1,000 gallons. This tier is based on the average parcel in the top 5 percent of the city’s largest lots. The average parcel size in this tier is 16,000-square-feet, with an average of 6,500-square-area of landscape area. 

Tier 5: 40,001 gallons or more a month at $5.10 per 1,000 gallons. 

Tempe also wanted to do more to help home owners irrigate their landscaping more efficiently. In May, Tempe introduced a $500 High-Efficiency Turf Irrigation Rebate that encourages homeowners to upgrade their irrigation systems. These rebates require a free, outdoor water audit to help people understand how bent and broken sprinkler heads and a mismanaged or outdated irrigation timer can drive up water usage. During a water audit, an irrigation specialist reviews the existing irrigation system and assists the homeowner to better understand their water usage and what upgrades would increase efficient water use. For example, the specialist may determine that a weather-based smart irrigation-controller would increase efficiency. The specialist also would help the homeowner program the controller correctly to gain maximum watering efficiency. One large lot owner took advantage of the program and rebate and cut his average summer water usage by 30 percent. 

Water rates are changing in most Central Arizona cities because the cost to acquire, treat and deliver water is increasing and water infrastructure must be maintained and then upgraded as it ages. Tempe’s new rate structure will be reviewed after 2018 to make sure it is working for as many customers as possible, encouraging water efficiency, and still producing enough revenue to maintain reliable water service. Understanding efficient water application and conservation techniques helps residents save money - and helps to save water for all of us. 

For 49 years, Arizona Municipal Water Users Association has worked to protect our member cities’ ability to provide assured, safe and sustainable water supplies to their communities. For more water information visit www.amwua.org.

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