11-25-2013 Council Work Session Packet

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Rate Option and Recommendations Tiered Rate Structure Beginning in 2010, we are recommending that the City implement a tiered rate structure for water usage. We are also recommending that the Navarre and Highway 12 areas be treated the same with the same rate tiers and charges. The Chevy Chase area will need a different tier structure due to the fact that these 15 residents are served by purchased water from the City of Wayzata and the usage patterns are different from the city as a whole. With a multi tiered rate system, the typical resident will pay more per gallon for higher water usage and for sprinkling than they will for water used in daily activities. The City bills water usage in units of 1,000 gallons. . :. - _.- • .. . � �� .. . - e .- 1 st 10,000 gallons 2.15 21.50 Next 15,000 gallons 2.69 Usage over 25,000 gallons 4.03 21.50 Overall cost er allon .00215 �.. ..- • �: . �� ._ .. « _ .- 1st 10,000 ga'I�ns 2.'.5 21.5�� Next 15,000 gallons 2.69 40.31 Usage over 25,000 gallons 4.03 8.06 93.88 Overall cosf er allon .00347 The two charts above illustrate how the cost per gallon, for water use only,becomes greater with higher usage. The charges above do not include the fixed quarterly fee. Cities adopt a tiered rate system for the following reasons: 1. To promote conservation efforts. 2. To allocate costs appropriately to those who are generating them. Cities construct water systems to meet the capacity of peak watering days in the heat of the summer. In Orono, the peak demand in the summer is approximately 2.74 times the winter demand. A tiered rate system charges more per unit for peak use, thereby allocating the cost of "oversizing"the system for peak days to the peak users. U�iliq-Rute S�u�v Puge 9 Citv of Urono,hlinnesorn D�ce+nber,1009