At Monday's Richardson city council meeting, resident David Chenoweth suggested (Section 5, Part 3, beginning about 28:30) that the city's water rates do not promote conservation. Does he have a point? I think so, at least enough of a point that someone at city hall ought to review the situation and decide just what we're trying to accomplish with the rates. According to the city's Web site, the water rates are:
Minimum $7.00 plus per each 1,000 gallons consumed $2.95 for 1,000-11,000 gallonsAt first glance, it looks progressive, that is, the bigger consumers of water pay higher rates. But David Chenoweth pointed out that that $7.00 minimum charge skews things quite a bit. For example, if you conserve and use only the barest minimum of water for a month, say 1,000 gallons, you'll pay $9.95 for that 1,000 gallons. Say your neighbor uses four times as much water as you, 4,000 gallons. His total bill will be only twice as big as yours, a total of $18.80. That's only $4.70 per 1,000 gallons, less than half your effective rate of $9.95 per 1,000 gallons. For even bigger consumers of water, that $7.00 minimum charge gets spread over many more gallons, bringing their effective rate per 1,000 gallons ever lower. Eventually, at 35,000 gallons usage, it bottoms out at $3.37 per 1,000 gallons (remember, the extreme conserver paid $9.95 per 1,000 gallons). It's not until 40,000 gallons usage that those higher rates for big users take over and the rate per 1,000 gallons starts creeping upward again. Here is the same table again, only this time showing the effective rate per 1,000 gallons.
$3.19 for 11,001-20,000 gallons
$3.33 for 20,001-40,000 gallons
$3.87 for 40,001-60,000 gallons
$4.05 for 60,001 and over
$9.95 per 1,000 gallons for 1,000 gallonsThe council members understood what was happening here. City Manager Bill Keffler quickly identified that minimum $7.00 charge as being responsible for the high unit price paid by conservers of water. He said that there's a minimum $7.00 charge just because it costs something to connect people to the water system no matter how little water they use. That's true enough. But so what? If the primary goal is to conserve water, then the city should eliminate that minimum charge. The rates for usage can be adjusted upwards to keep the change revenue neutral in total. If the goal is conservation, then residents should be charged only for the water they use and the effective rate should go up with increased usage, instead of down as the current structure has it.
$6.45 per 1,000 gallons for 2,000 gallons
$5.28 per 1,000 gallons for 3,000 gallons
$4.70 per 1,000 gallons for 4,000 gallons
$4.35 per 1,000 gallons for 5,000 gallons
$4.12 per 1,000 gallons for 6,000 gallons
$3.95 per 1,000 gallons for 7,000 gallons
$3.83 per 1,000 gallons for 8,000 gallons
$3.73 per 1,000 gallons for 9,000 gallons
$3.65 per 1,000 gallons for 10,000 gallons
$3.59 per 1,000 gallons for 11,000 gallons
$3.41 per 1,000 gallons for 20,000 gallons
$3.38 per 1,000 gallons for 30,000 gallons
$3.37 per 1,000 gallons for 40,000 gallons <--- lowest rate
$3.47 per 1,000 gallons for 50,000 gallons
$3.54 per 1,000 gallons for 60,000 gallons
$3.60 per 1,000 gallons for 70,000 gallons
But perhaps that's too radical. Perhaps the council feels there's a fairness issue here (although Bill Keffler did not say so in his response to David Chenoweth). Perhaps the council wants everyone to pay that $7.00 because that's the cost of just maintaining the pipes, before any water runs through them at all. Fair enough. Then, they should at least adjust the rates so that the unit rate per 1,000 gallons bottoms out at much less than 35,000 gallons usage per month. Lower the rate for the first 11,000 or 20,000 gallons and increase the rate for usage over 20,001 gallons. Again, adjust the rates to keep the change revenue neutral, but set the rates so that the bigger users pay more, not just in absolute dollar amounts, but in the effective rate per 1,000 gallons as well.
All this is dependent on the assumption that the goal is to conserve water. Bill Keffler implied that was the goal of the rate structure, but there are two reasons why that might not be the only careabout driving the rate structure. First, council members may want to actually favor the bigger users of water for various reasons, or at least not be seen as penalizing them. More importantly, the city contract with the North Texas Municipal Water District (NTMWD) guarantees the city will buy from NTMWD a given amount of water each year. Conservation below that contracted minimum won't result in any cost savings for the city at all. There might be more global reasons why water conservation would still be a Good Thing™, but the city council might not care as much if it doesn't save the city any money directly.
In summary, David Chenoweth did have a point. The city's goals in this area ought to be reviewed and clarified, then the water rates themselves ought to be reviewed and adjusted if necessary to better impact the city's goals.
48 comments:
I don't know that anyone is quibbling about the numbers, but the real problem is not our City but the underlying rate schedule charged by the NTMWD.
As you noted, we are required to buy a minimum amount of water, and if we have a rainy year (i.e., less water usage), we pay for the guaranteed amount anyway, even if we used much less (although there is a small rebate for unused water based on unconsumed consumables in the water 'manufacturing' process).
This seemingly screwy system was agreed upon by all the initial members in the district decades ago, because it encouraged development of more than adequate infrastructure by collecting money for capital investment without regard to actual usage. And that part has worked well - we really do have reliable (and relatively cheap) water thanks to this system. However, as cities mature (like Richardson), the deal becomes less of a deal, because we're paying capital costs for the new cities that we ourselves don't need any more.
So why not change it? Actually every Council member of the current and previous Councils would have been delighted to change it - except they can't. The initial deal that the cities struck also stated that there would be no changes in the general rate structure unless ALL 34 or so members of the NTMWD agreed. Since we still have developing cities in the NTMWD, they have zero interest in changing the rate structure, because, in essence, we are subsidizing the development of their infrastructure.
In fact, I recently saw a memo from the McKinney city staff to their Council that said exactly that - McKinney has no interest in changing the way water rates are computed.
Since we have no control over how the rates are computed so long as even one city has a veto, the only way the Richardson City Council could address this would be to further subsidize residential water bills. Subsidize? Yes, even now, the City does not pass through the annual rate increases from the NTMWD, preferring to absorb the increase one year and raising the rates in catch-up mode the next year.
So, the real question is: does the City want to subsidize very low water usage using City tax dollars? I state it this way not to express an opinion, but so that we can properly frame the question - rather than wondering what on earth the Councils (current and previous) were thinking, we need to recognize that they don't have any choice in the matter, and they can only control how much money we will spend if we start aggressively encouraging conservation in the manner described.
Would waiving the $7 fee (for example) make sense in a environmentally sensitive City? Sure, maybe, if we knew where the money to pay for it was coming from and we fully understood how the process worked...that's the real point for discussion...
Bill
It's always so nice to have Bill McCalpin weigh in with his 10,000 word essays. Why is it that he seems to always be defending the council (Slagel, et. al.) and city staff. He is starting to sound a bit like Bob Macy - actually, no one can sound that bad.
Speaking of Macy, I didn't see any comments by Bill McCalpin concerning, say, the post on Bob Macy's now famous verbal stumble on Monday night. It's a free country - respond to what you like - but it does seem strange. I guess he doesn't want to offend the Richardson Coalition.
Bill, you seem to have totally gone to the dark side. What happened? :(
P.S. I know, Ed, my comments are personal here - no need to chide me! :)
McCalpin sounds like Barnie Frank.
What nobody has spoke to is the vast difference between wholesale and retail water rates.
This notion that the "city subsidizes" services by not adding small wholesale increases to the already lucrative retail rate is silly logic. Sure, the net result is that there is less cash accumulating in the Water/Sewer Fund. But then that is how we wound up with that $7+$7 fee tacked on to our water+sewer bill in the first place.
The crumbling infrastructure and dozens of water main breaks in past dry years kind of drained the piggy bank. Had there been a fiscally responsible bunch running the show, the maintenance would have not suffered the fund transfers that were used to pay for losing follies.
As usual, your pointless personal attacks actually support me, because they show that you have no substantive information to contribute. So, thank you for confirming that I am on the right track.
As for defending "Slagel, et. al" (which is misspelled - it should be "Slagel, et al."), if you had any sense, you would have recognized that I was clearly defending every current and recent Council member, no matter what political stripe. If you had attended any of the candidates' forums this spring, when this issue came up and the challengers all jumped up and said that THEY would fix the problem, all of the incumbents - from Gary Slagel to Pris Hayes and Dennis Stewart - agreed that the underlying rate schedules couldn't be fixed, unless all the members of the NTMWD would agree, something not likely to happen.
As for sounding like Barnie Frank (again misspelled if you mean the Democratic Congressman Barney Frank), well, it might help if you explained why I sound like Congressman Frank or why anyone in Texas should even care.
Basically, all you two (or the same person twice) have managed to communicate is that you can't spell, you can't read what I actually wrote, and writing cheap insults is easier for you than actually contributing anything intelligent to the discussion.
'Personal attacks' + 'anonymous sources' + 'nothing intelligent to say' = 'a waste of time' for people who have to wade through this nonsense desperately hoping that someone, somewhere, has the integrity to rationally discuss this issue...
Bill
Now why did I take a break from my squabbling children to read this again??? Who knows.
Ok now Bill, sticks and stones may break your bones....(:
D.
hahaha, Destiny!
The nice thing about posting online under your own name (or mine) is that it forces you to think about what you write - more people writing under their own names would equal less nonsense for everyone to wade through. Would that other people had your gumption...
Bill
As usual the form of the personal insults are the same. Attack someone without substance, complain about the length ('its too hard to read lots of those words.'), say somethng irrelevant and then somewhere later of drop the name "Richardson Coalition" as if that contributes anything.
This is getting old
William J. 'Bill' McCalpin, thanks for the additional information. Correct me if I'm wrong, but the retail water rates Richardson charges residents are not dictated by the wholesale water rates NTMWD charges Richardson, other than a simple desire by Richardson to raise enough money to pay NTMWD.
If the city has the power to set its own retail rates (which I believe it does), and if the city wants to promote conservation (which I believe it does), then my analysis suggests a change in the water rates is called for.
No, Ed, I was mentally confusing the overall issue of the minimum required water purchase versus individual water rates.
However, my point is still sort of valid - rate discussions including discounts and incentives ought to be at least aware of the underlying costs. For example, just the other day at Council, the staff reported that the cost to pick up garbage at a residence was something like $23/month (if I remember the numbers correctly), while the homeowner is charged $18/month (again, forgive me if the numbers are off). The City does this because it in essence overcharges the commercial users; that is, commercial enterprises in Richardson subsidize residential garbage pick-up.
Obviously, this doesn't bother the businesses much or they would leave, but these things need to be monitored so that we don't let them get out of hand.
As you may recall, we used to subsidize local phone service with overcharging on long distance. Eventually, so many people got upset about the cost of long distance service being so disproportionately high that they pushed for deregulation, which led to much lower long distance rates and then much higher local phone service rates.
So, I would just ask that when we examine the local water rates with the laudable goal of encouraging conservation, that we recognize that when we don't charge a certain class of water user the wholesale price, someone else is going to have to make it up - either other users or the taxpayer. That is, the residents need to understand that just because some residents use less water, this doesn't mean that the City can save money by buying less water and easily pass the savings on to the resident - the City (i.e., other users or the taxpayer) is still paying for water...
Bill
Yeah, us common folks don't know how to spell 'cuz were so dumb. We just ain't as smart as ol' Bill McCalpin. Seriously, his intellectual arrogance is quite apparent.
Did you notice that Bill didn't respond to the comment on why he didn't respond to the post on Macy? He's not going to do so. Nope. He doesn't want to risk offending Chuck Eisemann and his band of elderly Richardson Coalition cronies. While I (and others) may not post our names (the RC is known to do bad things to those who do), we can safely say that we aren't carrying water for anyone - unlike Bill McCalpin.
Seems Bill has just become the front man for the Richardson Coaltion - boo, hiss - or maybe just John Murphy - either way, it's all the same.
Again, correct me if I'm wrong, but I don't think the rates the city charges businesses are more or less than residences. And I'm not suggesting the city subsidize water users by charging in total less than what Richardson owes NTMWD. What I am suggesting is that the city set *effective* rates that go up with usage. As it is now, *effective* rates drop off quickly (like off a cliff) from 1,000 gallons/month to about 20,000 gallons/month, then slowly continue to drop until they bottom out at 35,000 gallons/month. This is backwards if the goal is to encourage conservation.
"While I (and others) may not post our names (the RC is known to do bad things to those who do)"
About that, all kidding aside, when do I start getting my unmarked envelopes in the mail? Have I not posted my home address publicly enough times or am I just not a threat....at all...by any means.
I'll choose the latter. But c'mon, somebody, seriously, at least xerox a copy for me.
Hi Ed,
This is my first time to your site. Destiny told me you had posted something about the comments I made at the budget session the other night, and gave me your URL. Thanks Destiny.
It was very nice to see you got what I was talking about. I have had several conversations, mainly with Dan Johnson about this issue. He has been very helpful with any information I have asked for and very pleasant and patient. The times I have talked to him, it was very clear he understood my concerns. I have talked to Pris about this several times, and John Murphy. I had always looked at it from a financially point of view; it was Pris who pointed out the environmental component to me.
For me, I understood that the City of Richardson had a certain amount they had to pay NTMWD each year, and that it was unrelated to the retail rate structure. The direction I wanted to see the retail rate structure go was in a direction that did not penalize users who used low amounts of water, for whatever reason, and also for those people who felt a personal need to conserve (affectionately known as tree huggers) and for others who just wanted to responsibly use limited resources. It has been my contention that the elimination of the minimum fee should be done and made up for in the price per 1,000 gallon charge. In doing that, the result would be that we will all pay proportional to our water own usage.
Bob Macy’s comment (his is one of the few I remember about this) was that the gas company, the electric company and everyone else charges a minimum fee, so Richardson should too and more or less, just fall in line with what everyone else does. He so didn’t get the point (to use some Buffy language there) about people who intentionally conserve and residents and businesses that have low water usage, and the fact that they are severely penalized for doing so. Actually, no one that night, that I can remember, got that point or commented about it.
Anyway, it is good to see someone else talking about it and someone else who understands the concerns I have. I have an email into Dan about this again, (he is the one that oversees this part of city services), and am waiting for his reply, most likely tomorrow morning.
Thanks again,
David Chenoweth
@anonymous 8/27/2009 8:14 PM
Well, Mr. Anonymous, since you don't have the courage to tell us who you are and why we should believe anything you say, you "can safely say" anything you want - because there is no way for reasonable people to evaluate it.
You know, I bet you're the sort of guy who loves the issue of "transparency" - the City ought to be transparent about this, the Council ought to be transparent about that...where is YOUR transparency?
If the Founding Fathers of this country were as determined as you to hide their identities, the Declaration of Independence would have been signed by 56 guys named "Anonymous"...and we would all still be British citizens...
Bill
Destiny, because I am not on the Coalition's radar - despite all that blather to the contrary - I don't get those unmarked envelopes either :-(
As for "the RC is known to do bad things to those who [post our names]", like you, I have to simply laugh...some people like our anonymous friend are willing to say absolutely anything, no matter how stupid, to avoid explaining to the public why they don't have the courage that you do to speak openly in public...
P.S. if the Coalition sabotages one of the wheels on your car again (wink wink), let me know - I'll come and help you fix it ;-)
Bill
David, in practice, it's the City of Richardson that is "severely penalized" for conserving water. So long as the current rate schedule is used by NTMWD (which, as I noted, we can't easily change), the more than Richardson residents conserve, the more we will have to pick up from either higher water fees on some class of residents or from the taxpayers as a whole.
I don't in any way want to discourage conservation of water; I just want to note that if we shift the cost per gallon from the low end - as may seem reasonable - then that cost will be made up somewhere else, just as when you squeeze a balloon in one place, it expands somewhere else.
Is this a subject worthy of serious discussion? Absolutely! So long as everyone understands the dynamic that Richardson has to pay for the capital improvements for NTMWD whether or not Richardson uses any water at all, then we can have a productive discussion...
Bill
"This is backwards if the goal is to encourage conservation."
Ed, I would say that this is "a goal", but not the only goal, since the citizens of Richardson also want cost effective government.
There is a fixed cost to the City for each water utility account - because we have to set up the billing in the database and actually bill people and who knows what else - and if you reduce the charge for someone who uses 1,000 gallons or less to cover only the water used, then the City can't recover its cost of overhead.
But when you do an artificial computation of total bill divided by thousands of gallons used, then it will look like we are overcharging at the low end, when we aren't.
Example:
Let's say that it costs the City 7 dollars a month for overhead for each account (I have no idea if this is true - just work with me). The City would charge $7/month plus a fee per thousand gallons.
If you take the monthly bill and divide the total ONLY by the number of thousands of gallons, you distort the actual cost to the City, because the City would pay $7 for an account, even if no water was used at all. Of course, the number drops in your computation as you approach 40,000 gallons, because you are amortizing the overhead cost in the consumption cost.
By the logic of the table above:
we would pay $∞ (infinite) per 1,000 gallons for zero gallons - which, surely, you don't mean.
Again, I don't want to be opposed to encouraging conservation, but basing the fees charged for water solely on usage doesn't reflect the true cost to the City...hence my request that we understand all the parameters while engaging in this discussion...
Bill
David Chenoweth, thanks for the feedback and confirmation that I understood your point.
William J. 'Bill' McCalpin, in my original blog item, I suggested there may be other interests at work here. But the city hasn't cogently explained just what it's trying to accomplish with its rate structure and why. What it has stressed repeatedly is the need to conserve, most recently during the drought of a couple of years ago. I still maintain that its current water rates are poorly structured to encourage conservation.
Gary Slagel gave this response in The Dallas Morning News Voter Guide from the last council election:
"What strategies should your city pursue to ensure future water supplies?
Gary A. Slagel: Richardson takes water conservation very seriously. We have made significant strides to reduce its residential water consumption from 196 gpcd in 2000 to 164 gpcd in 2006. This has been accomplished by City staff's commitment to educating residents on how to use water wisely. Past and on-going education includes using efficient ways to eliminate wasteful water-use habits. On a larger scale, Richardson has taken steps to ensure our water system has minimal water loss. This includes the distribution system of pipes, water tanks and water towers, some of which have been recently refurbished. In the coming years, we intend to continue to be vigilant in this regard, and anticipate the City meeting the State's established of 140 gpcd goal by the established date. However, because of the future demand for water based on regional growth projections, the city is also working with the North Texas Municipal water district to develop additional water sources."
Wee Willy Waa! Is it my imagination, or is little Willy whining about anonymous posts on an anonymous blog? Does the same identity standard apply to the master of ceremonies here? Get a grip on that Willy! But do it privately, please.
Bill, your need to be right AND have the last word makes it impossible to take you seriously. Get that chip off your shoulder or don't talk!
So what was this all about again????
Oh we were talking about water, I remember!!!!!
So what if someone uses 500 gallons per month and the city pays NTMWD for actual usage, then what is the actual variance between water actually used and water paid for? What is someone used 1100 gallons in a month and paid for 2000 gallons. Seems the variance could get rather rich.
Anonymous at 8/28/2009 1:31 PM, I don't understand your questions. What do you mean by "actual variance?" In your examples, are you talking about the current rate structure or what I am proposing?
At the risk of overexciting those that suffer from McCalpin Derangement Syndrome (with apologies to Charles Krauthammer), let's take a different look at the water rates.
The homeowner doesn't pay his or her water bill in thousands of gallons – he/she pays a total amount. The less water you use, the less the total amount is. Following Ed's table, here are the first few amounts:
0-1,000 7.00 + 2.95 9.95
1,000-2,000 7.00 + 5.90 12.90
2,000-3,000 7.00 + 8.85 15.85
3,000-4,000 7.00 + 11.80 18.80
4,000-5,000 7.00 + 14.75 21.75
5,000-6,000 7.00 + 17.70 24.70
Thus, if I use 1,000 gallons, I pay less than half of what I would pay for 5,000 gallons – and it's the total amount that comes out of my checkbook, not the "amount per thousand gallons".
But that seems to be unfair to some, because if you do the arithmetic that Ed did to create his table (based on David's suggestion), the apparent rate per thousand gallons seems quite high at the low end – there's no dispute of that.
The problem is that this is the "apparent" rate. When you buy water from the City of Richardson, you are paying for 2 things: infrastructure and consumables. Infrastructure consists of things like water towers, large pipes, small pipes, water meters, pumps, IT, billing, customer service, etc. The following are the estimated year-end amounts for expenses by the City for 2008-2009:
$1,123,503 Customer Services
$414,465 Administration
$407,723 Geographic Information Services
$1,231,153 Water Operations
$15,631,686 Water Production, of which $13,002,787 went to NTMWD
$750,036 Meter Shop
So, assuming that I have extracted this correctly (water and sewer are somewhat commingled), we have $6,555,779 in annual expenditures for "infrastructure" to deliver water; this is about $186 per household per year or $15-$16 per month (assuming 35,200 households in Richardson per the 2000 Census).
Thus, if the base connect charge in Richardson is $7.00 (I am taking your word for it), the City is charging less than half of what the proportional infrastructure costs would be – I assume that it makes up the difference by charging more on the water consumption itself.
The problem with infrastructure costs is that they are not dependent on actual usage. That is, it will cost the City just about as much money to provide pipes, towers, meters, customer services, billing, etc, to a customer who uses 500 gallons as to one that uses 50,000 gallons.
Compare this to a restaurant: when you order a meal of spaghetti alla Bolognese, you could be shocked at the price of $15.95, because you know that the pasta costs 59 cents, the spaghetti sauce costs a buck or two, the vegetables cost another buck, and so on. But to think this way ignores all the other costs that the restaurant has to bear - the infrastructure, if you will. The restaurant has to pay for the building, the furniture, the table settings, the wait staff, the kitchen staff, the busboys and dishwashers, the kitchen equipment, utilities, taxes, ad nauseam. It would really be more appropriate to pay two fees: $12 for walking into the restaurant, and $3.95 for the actual cost of the consumables, right?
How the City charges for water is no different. You will notice that appetizers are often quite expensive in restaurants compared to the main course; this is so that the restaurant can recover its infrastructure costs from those people who come in just to order an appetizer as well as from those who order complete meals. The pricing seems disproportionate for the appetizer precisely because the restaurant doesn't charge separately for infrastructure, but it still has to recover those costs. For exactly the same reason, the "apparent" cost to low volume water users seems high in the City, but it's not.
Bill
To be clear on the table, it should be considered to be in three columns:
"0-1,000 7.00 + 2.95 9.95"
column 1 is 0-1,000, or monthly consumptions.
column 2 is 7.00 + 2.95, or the base cost plus the variable cost.
columns three is 9.95, or the sum of the numbers in column 2.
Sorry, Ed, but I'm not sure that table tags work here...do they?
Bill
William J. 'Bill' McCalpin wrote: "It would really be more appropriate to pay two fees: $12 for walking into the restaurant, and $3.95 for the actual cost of the consumables, right?"
Maybe, but restaurants don't charge that way, do they? So, why should the city? If the city wants to encourage conservation, it should do away with that fixed charge and spread the cost of the infrastructure over the users of water, with higher users paying more. If the city has other goals more important than conservation, then they can leave the rates as they are. I'd just like the city to tell us that conservation isn't important enough to set rates that encourage it.
Bill's just angling to replace John Murphy down the road. Fat chance. Bill, you're going to be old and grey - or for that matter, older and greyer - before Murphy ever reliquishes his seat. And, when he does, it won't be to you. Murphy is just stringing you along, pal. One this IS for sure, with turn limits, Murphy can only be on for another 12 years. OMG - that means he could be on the council for a total of 30 years!
Well, Ed, let's extend the restaurant analogy a little further and see where it leads us...
You see, this restaurant not only has to pay infrastructure costs in addition to consumable costs, but its sole supplier of consumables (the pasta, the sauce, the vegetables, etc.) requires that the restaurant order a large minimum annual purchase greater than the amount of consumables that the restaurant will actually use in most years. That is, even though you would think that the charge should be somewhat in proportion to the cost of the consumables, in fact, the restaurant is paying almost a fixed fee with very little regard for consumption at all.
Let's say that the restaurant has to buy $1,000,000 a year in consumables from the supplier. Ignoring all the other costs for the restaurant, that means the restaurant has to sell about 62,700 bolognese dinners at $15.95 per dinner. But the restaurant set the price for the dinner when it guessed that it would sell 62,700 - it actually won't know until the end of the year how many it will sell.
Suppose the restaurant sells 10% less. Then the restaurant loses $100,000 for the year. That is, for each dinner that doesn't happen the restaurant is risking $15.95, and it doesn't take much of a swing in consumption to cause large losses.
But the funny thing about this restaurant is that it knows that it will have 80,000 customers, but it doesn’t know how many will order the appetizer at $7.95 and how many will order the bolognese dinner at $15.95. Although this will send certain people into paroxysms of frenzy, we would represent the situation mathematically like this:
annual revenue = X(P1)+Y(P2)
where X is the number of people who order the appetizer, Y is the number of people who order the bolognese dinner, and P1 and P2 are the prices for the appetizer and bolognese dinner respectively.
We know that X + Y equals 80,000 in this model, but we don’t know – until the end of the year – how the 80,000 will be divided between X and Y. And as we saw above, each integer that we are off by for Y is a $15.95 difference, which will causes a big swing if we guess too many Ys and not enough Xs at the beginning of the year.
But suppose we recognize that since the restaurant has fixed costs, that some of those fixed costs should be passed to the consumer? Thus, we have
annual revenue = X(k+P1)+Y(k+P2)
where we have added a variable k to stand for a fixed charge or “cover charge” for each consumer. Since we know that X + Y will equal 80,000, then we know that the restaurant will have a guaranteed amount of revenue, and it will have less risk if the ratio of X to Y changes from the beginning of year prediction.
That is, if k is $5.00, then P2 is $10.95 and P1 is $2.95. This means that for every diner who joins the X group rather than the Y group during the year, the delta for the restaurant is only $10.95, not $15.95. Actually, it’s even better than that, since the swing is actually (P2-P1) or (10.95-2.95) or $8.00. That is, for each integer change in Y, the effect on the restaurant is only half as much, thus the restaurant suffers less risk of depleting its reserve funds and having to borrow money at the end of the year.
So, our problem is not just one of the desire to conserve water as a matter of public interest, it is also to minimize the City's risk created by large swings in amounts of water consumed. It is not only reasonable but mandatory that the City balance those two concerns, because in the no cover charge model (i.e., where the City charges no minimum hook-up fee) the larger the negative swing in the amount of water consumed, the more likely that the City will have to dip into its reserves, and perhaps even borrow money from the General Fund to cover the annual required expense.
I realize that some readers are rolling on the floor, foaming at the mouth at the very thought of actually reading and trying to understand this, but Ed and David, since you are being reasonable, will you look at this and see if it makes any sense to you?
Bill
William J. 'Bill' McCalpin wrote, "So, our problem is not just one of the desire to conserve water as a matter of public interest, it is also to minimize the City's risk created by large swings in amounts of water consumed."
Yes, that's a concern. But the swings in water usage historically have been due to droughts vs rainy years. Droughts result in mandatory conservation measures and that causes a big swing in water usage. The $7 fixed fee does little to dampen the swings. Eliminating it won't significantly affect the swings, either. But elimination might have a beneficial effect on conservation, which, I still maintain, the city promotes as its major goal with respect to water usage.
Yes, Bill - we are all foaming at the mouth - you are such a wise and knowlegeable person. I hope that one that day that I can be as smart as you.............
Is there an echo in here? Wee Willy, what's a matter? Nobody reading the Echo these days? We all appreciate your loneliness over there. But, please, lighten up on the yakity-yak, blah, blah, blah. Take your pontificals back to the echo chamber. And, while you are on the way, take heart and remember, 315 entries in Webster's 1996 Dictionary were misspelled.
After reading through all the responses, it just about has me ROTFLMAO! It is funny in a good way, by the way. There is a lot of creativity, thoughtfulness, time and effort going into most of the arguments. Very enjoyable! (I just pretty much ignored the most annoying of the anonymous comments)
The response I got back from Dan was that they view the current rate structure as having two components. The first component is, more or less, fixed costs. The second component is actual use. That view supports their argument that the current rate structure is fair, reasonable and responsible. I have little doubt their intention is nothing less than being fair and responsible.
From my point of view, I see no need to creatively subdivide the water bill into different components and create multiple partial charges. Just have one charge that is based on consumption. Whether that charged is proportional or slightly progressive, is not too important to me.
I have little doubt the city management would want people to conserve and be responsible with water use, but the unintended consequence of their viewing the water bill as a two part system, and creating separate partial charges for each part, is that it penalizes people who use little water and people who actively conserve.
So the arguments come down to just a few two points in my view. Which is more appropriate; basing the rate structure on multiple parts of the whole and having separate charges for each part, or basing the rate structure as if it were just one single item in total?
As a result of the current rate structure’s unintended consequence of penalizing conservation and low usage, is revising the rate structure to more actively promote and reward conservation worth while?
David
"Yes, that's a concern."
I am glad you agree.
"But the swings in water usage historically have been due to droughts vs rainy years. Droughts result in mandatory conservation measures and that causes a big swing in water usage."
I agree, and no "but" is needed.
"The $7 fixed fee does little to dampen the swings. Eliminating it won't significantly affect the swings, either."
Well, I would like the City staff to chart the variations out, with multiple sample fixed fees, just so that we can see it all with real numbers. Perhaps one or both of us will be surprised.
"But elimination might have a beneficial effect on conservation, which, I still maintain, the city promotes as its major goal with respect to water usage."
Yep, the elimination "might" (as you say) have a beneficial effect (really, we care more about a noticeable effect), but let's put some numbers to paper and see what the cost is versus the risk.
This is the conversation we should be having, not the nonsense spouted by those who know only how to irrationally criticize instead of debate...
Bill
Gee, Bill, by your comments, it sounds like us little people are annoying you. Intellectual snobs sure get put out by any comments that they feel are beneath them.
As for that internet rag, the Echo, that's where your comments belong. You and the owner of that site are BFF; real soul mates. And, your comments make about the same level of sense.
William J. 'Bill' McCalpin wrote, "I would like the City staff to chart the variations out"
So would I. That's not the response David Chenoweth got at the city council meeting. To paraphrase what I heard there, "That's the way we do it. That's the way the gas company does it. We're not going to explore why it's done that way or if it's still justified today. Next." If just one of the council members had said, "That's an interesting suggestion. Let's crunch the numbers and see what it looks like," I wouldn't have had to write this blog item.
David, this is a belated response to your update at 8/29/2009 11:56 PM. I don't expect the city to change their practice, but, for what it's worth, I fully agree with your position.
McCalpin isn't on the Richardson Coaltion's radar because he's now their front man; he wouldn't dare say a negative word about anything they are saying or doing. Bill, where did you leave your backbone?
hahaha! Don't make me laugh! Where is my backbone? It is you who hide your identity in total, knee-knocking fear that your spouse or your minister or your neighbors or your co-workers or your children may figure out the nonsense and slander you are publishing!
Every time you open your mouth, you prove the point that I am making - that people who hide their identities, have something to hide...
Bill
Bill McC.- you seem to whine a lot about anonymity. Why not direct this frustration towards your friend "Ed Cognoski". Last time I checked, this was a "writer's name" that "he" is using. Unless, you know who "Ed" is already.
Given your perceived involvement in the coaltion and your perpetual need to serve as John Murphy's campaign manager/press secretary, nothing would surprise me.
You still pay for water in lots of 1000 gallons, not actual usage plus the $7.00. That is how they bill the residents. Look at your water bill. Does it ever read that you used 1450 gallons, or 2225 gallons? No. If your actual usage is 2300 gallons, you pay for 3000 gallons plus the $7.00. There is always a variance and the city gets the kickback from NTMWD. How about digital meters like Oncor is putting in (we are scheduled to get them in 2011) so we pay for actual usage. I would rather have the kickback in my pocket, thank you!
Coalition Smoalition.....I am sick of hearing about them and Bill McC.
Bill, stop feeding the childishness!
Hi Anonymous@8:57.
In a way you are right, and in a way you are wrong. Let’s say at the start of the billing cycle, your meter read an accumulated total of 775.3 thousand gallons. If you use 600 gallons in that billing cycle, the meter will end on 775.9 thousand gallons. For that billing cycle you would be billed for $7 plus no usage for a total of $7. The meter did not roll over the 1,000 increment. The next billing cycle , the meter would start out at 775.9 and if you were to use only 400 gallons you will be billed for $7 plus 1,000 gallons because the meter went over the 1,000 gallon increment. Over time the you actually pay for only water used and bill in increments of 1,000 gallons plus $7 a month. Month to month the city does not bill you for the exact amount of water usage, only for each time you past the 1,000 increment on the meter.
I wish the city got a kick back from NTMWD, but the only “kick-back” they get would be the end of the year. That payment or credit the NTMWD give back to the city is for unused chemicals for the unused water for the year. Richardson uses about 7 or 8 billion gallons a year. The city has to pay as if they used the entire 11 billion gallons per the take or pay contract with the NTMWD. If Richardson only uses 7 billion gallons of water, the amount the city gets back is about $0.30 per 1,000 gallons. The number I have used here are rough estimate as best I remember them. But that is how it works between the city and NTMWD. Everything, from what I have seen is on the up and up between all parties. My only point when I started this was that the fixed minimum rate “penalizes” the lower volume water users. But on this issue, there is nothing I know of that is underhand or anything like that.
David Chenoweth
anonymous @ 8:59, is someone forcing you to read this page? If so, tell them to quit. :)
David Chenoweth, thanks for dispelling misinformation about how water usage is billed. Customers are billed when their meter "rolls over" another thousand. Some months users get billed less than their usage, some months more, but over time, the billing matches actual usage.
I don't know for sure, but I assume what the city pays NTMWD is determined by the meters where the water enters the city of Richardson's system, not by adding up all the metered usage at residents' houses. Otherwise, the city wouldn't get charged for water lost through leaky city pipes and would have less incentive to fix those pipes!
Thanks Ed. I have never thought much about how the city gets bill by NTMWD, but I would suspect you are correct. Seems about the only proper way to have it done.
I appreciate David's response, but I must say that generally speaking that it is true that meter roll over is accurate. The point I was making is that you do not know how much water you are using each month and though it may be logical that you always end up even. It is not entirely true. I have a house that was empty for 2 mo and questioned the water usage of 3 thousand gallons each month. I questioned city and was told that the usage was in line with lasts years usage and refused to audit until I paid a plumber to check for a water leak. No leak after paying plumber, then you are in a tussle with the city for an audit to actual usage.
Anonymous at 9/02/2009 2:46 PM, good point. Even though the details of your water bill might give your meter readings month to month, most people will only pay attention to the dollars they owe. In this day and age, it ought to be possible to charge people based on exact usage. Maybe there's still too much dependence on people going around and taking readings off water meters for that, but some day we ought to get there. Then, people can get immediately feedback on the benefits of conservation.
As for your problem with a vacant house, you ought to be able to check the actual meter readings month to month and see if there's a discrepancy between usage and charges. If the water's really shut off, the meter should quit turning.
Hi Anonymous@2:46. I have had problems before with something like that.One your meter, the is a small triangular wheel that is very sensitive to water flow. Even if it is just a trickle, that small wheel will show it. Kind of a pain to get to, have to take the top off the water box and clean the register glass.
Sometimes I don't think they read the meter every month, just on occasion though. On the bill, you can see the meter reading and compare to the meter. The few times I have checked mine, it was very close. Also, the guys at the water department have bent over backwards the time I have needed something of them. All of those guys I have dealt with I couldn't haave been happier with them and their attitudes. They are nothing like the horror stories I hear from city of Dallas water users. Anyway, good luck in the future.
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