Water and wastewater rate review

The City has begun a review of our water and wastewater user rates and charges.

A well-developed rate structure will support and improve water and wastewater services, be fair to all customer groups, and help our customers understand how their money is used to provide these essential services at cost—the City does not make any profit by providing water and wastewater services.

The City’s multi-phase water and wastewater rate review aims to:

  • fairly allocate water and wastewater service costs among the City’s customer groups (e.g. residential, commercial, industrial);
  • ensure that the City’s water and wastewater user rates and fees cover the full cost of providing these essential services to customers; and
  • maintain the long-term financial sustainability of the City’s water and wastewater utilities.

The City’s Water and Wastewater Services departments last completed a rate review in 2007. No significant changes were made to customer user rates following that review.

The American Water Works Association (AWWA) industry best practice recommends completing a water and wastewater user rate review every five years. The AWWA industry-standard for developing water and wastewater rate structures includes:

  • determining revenue requirements;
  • analyzing the cost of providing the service; and
  • designing a rate structure considering the above two.

The three phases of the City’s rate review with approximate timing are as follows:

  1. Water and wastewater cost of service study: 2016-2017
  2. Billing exemptions study: 2017
  3. Rate design study: 2018-2020

Read more about these phases in the tabs below.

Guelph water and wastewater rates

 The City’s current Water and Wastewater rates include a mix of variable rates (based on volume used) and fixed rates (daily basic charges).

Based on the current Council–approved rate policy, volume charges cover about 85 per cent of the cost to provide water and wastewater service. Basic service charges fund the remaining 15 per cent of service costs, and go toward some of the fixed costs of providing water and wastewater services.

However, while revenue is highly dependent on variable customer rates, most of the cost of providing water and wastewater services are fixed (90 per cent) and only a small portion (10 per cent) are variable.

Guelph water and wastewater rates

The City’s current Water and Wastewater rates include a mix of variable rates (based on volume used) and fixed rates (daily basic charges).
Based on the current Council–approved rate policy, volume charges cover about 85 per cent of the cost to provide water and wastewater service. Basic service charges fund the remaining 15 per cent of service costs, and go toward some of the fixed costs of providing water and wastewater services.
Pie chart shows that basic charges make up about 15 per cent of utility revenues, while volume charges make up 85 per cent

Water and wastewater utility charge (revenue) breakdown

However, while revenue is highly dependent on variable customer rates, most of the cost of providing water and wastewater services are fixed (90 per cent) and only a small portion (10 per cent) are variable.

Fixed costs are those needed to run the water and wastewater utilities on a day–to–day basis, regardless of how much water is supplied, or wastewater treated. These costs include:

  • base staffing needs,
  • billing and administrative costs (e.g. buildings, equipment, computers),
  • ensuring water for fire protection, and
  • meeting Provincial regulations.
Pie chart shows that variable costs make up about 10 per cent of utility costs, while fixed costs make up 90 per cent

Water and wastewater utility cost breakdown

 Variable costs, on the other hand, change based on the amount of water supplied and wastewater treated. These include things like electricity, water treatment, and responsive operations and maintenance (e.g. responding to water or sewer pipe breaks).

Conservation and its effect on rates

Volume-based rates give customers some cost control as people can change how much water they use (habit and behaviour changes) and/or buy more efficient water appliances (e.g. clothes and dish washers) and fixtures (e.g. toilets, showerheads and taps). Volume-based rates also encourage water conservation to everyone’s benefit.

There is a common misperception that water conservation is the main cause for annual water and wastewater rate increases. While it is true that the City gets less volume-based revenue as customers use less water, conservation has saved our community far more money than it costs, both at the utility (City) level and the individual (customer) level.

Since 2006, an investment of $10.2 million in water conservation and efficiency programs and resources has resulted in over $40 million in savings from deferred infrastructure projects and related operating costs that the City would otherwise have needed to build to supply the Guelph community with drinking water.

Without conservation efforts, today’s water and wastewater rates would be much higher than they are now.

Learn more about water and wastewater rates

Cost of service study

The Cost of service study looked at both the City’s revenue requirements and the cost of providing water and wastewater services.

Costs were evaluated by service type (e.g. water versus wastewater) and by customer sector (e.g. residential, commercial and industrial users). As part of this work, the main cost drivers for each customer group were determined to help with future cost forecasting.

This phase is almost complete. Final reports will be posted under the Updates tab when available.

Billing exemptions study

 The City’s billing exemptions study will evaluate billing exemptions and associated impacts to future revenue requirements including:

  • high water bill forgiveness,
  • cost relief for water volumes consumed/evaporated by customer end uses, and
  • terms for approval and/or billing of water-only or wastewater-only customer accounts.

This study will also review City operational and administrative costs to support any related policy changes.

The City expects the billing exemptions study to be complete by the end of 2017 after which staff will provide a final report to Council for approval.

Study focus

The billing exemptions study will include:

 Reviewing water and wastewater billing-related best practices, policies and programs of other municipalities;

  • Evaluating whether high bill customer forgiveness policies, billing incentives for wastewater diversion, social assistance-based programs, and water-/wastewater-only accounts are practical and appropriate for Guelph;
  • Determining revenue losses of proposed policies or programs and potential cost impacts to other customer groups as a result;
  • Quantifying the operational and administrative investment costs that would be needed to support proposed policies or programs; and
  • Assessing support (by customer group) of proposed policies or programs.

Stakeholder engagement

 The City is collecting feedback from various customer groups by the following methods:

  • Small and large business stakeholder interviews and consultations,
  • Residential customer market research study,
  • Separate market research studies for small and large business customers.

 Updates and reports related to this part of the study will be posted under the Updates tab.

Rate design study

The final phase of the water and wastewater rate review is a rate design study. The rate design study is technical analysis of rate structure options.

The rate design study will assess the how well the City’s current water and wastewater user rates and fees are at recovering the full cost of providing water and wastewater services to each customer group, and recommend a rate structure to use going forward including and changes to user fees.

Proposed rate structures will consider the cost of administering essential water and wastewater services to each customer group, and the long-term financially sustainability of the City’s water and wastewater utilities.

The rate design study is expected to start in late 2018 with completion by the end of 2019 or early 2020.

More information will be posted here after this study begins.

Resources

For more information

Water Services
519-837-5627
waterservices@guelph.ca