1. Smart Metering East Coast, Raleigh NC Revenue Protection Practices Ken Sharratt Principal, Sharratt Water Management Ltd. Toronto, ON, Canada

2. Smart Energy Canada 2009, Toronto, ON Sources of Revenue Variability Installing meters first time Rate type selection Fixed vs. volumetric rate proportion Seasonal variation Large user changes Full cost capital replacement Natural water conservation

3. Smart Energy Canada 2009, Toronto, ON Water Meters Installation impediments No supply pressure – slow growth Decline in industrial use – over capacity Natural conservation – cuts demand Cost Public opposition

4. Smart Energy Canada 2009, Toronto, ON Water Metering Provides key data Water produced but not sold Sector demand stability residential>institutional>indust. Seasonal usage Metering varies across Canada Metering will cut use significantly Key conservation tool

5. Smart Energy Canada 2009, Toronto, ON Residential Metering (Population)

6. Smart Energy Canada 2009, Toronto, ON Canada Residential Usage – Metered/Non- Metered

7. Smart Energy Canada 2009, Toronto, ON Ontario Residential Usage – Metered/Non Metered

8. Smart Energy Canada 2009, Toronto, ON Metering Impacts on Water Sales If already metered - ICI No impact directly May respond to higher rates after meter May implement conservation Non-metered users – SF res. 30% reduction in water use More, if community concern

9. Smart Energy Canada 2009, Toronto, ON Residential Rate Type Constant unit and increasing rates popular Conservation important to public Rate types vary in revenue stability

10. Smart Energy Canada 2009, Toronto, ON Rate Type Trade Offs Moving towards increasing block- public interest Less revenue stability - implement reserve to deal with this Need high quality metered data Need frequent billing – AWWA 60% bill monthly Need careful analysis – consider demand elasticity Frequent rate tune ups

11. Smart Energy Canada 2009, Toronto, ON Fixed Portion of Rate Many System use two part rate Fixed based on meter size Variable based on sales volume Fixed revenue is almost certain Variable revenue less certain Seasonal factors important

12. Smart Energy Canada 2009, Toronto, ON Incidence of Fixed AWWA rate study - 2006 Most have fixed rate Fixed median 29% 77% do not include water in fixed rate Some use no fixed rate Toronto, Peel, London, Markham, Vaughan Fort Worth, Boston

13. Smart Energy Canada 2009, Toronto, ON Conservation/Equity Issues Conservation – want low fixed rate Low volume users - want low fixed High fixed rate – revenue stability But high cost/M3 for low vol. users

14. Smart Energy Canada 2009, Toronto, ON Seasonal Variability Seasonal variation a reality in Ontario 07 and 08 were extremes in Ontario 07 hot and dry Outdoor water use – landscape irrigation 08 cool with frequent rain Use conservation to reduce peak Reserve stabilization fund (RSF) RSF provides a buffer Gains revenues in hot dry years Gains cover shortfalls in cool wet years

15. Smart Energy Canada 2009, Toronto, ON RSF Sample Calculation Assumes Constant unit rate, No ICI seasonal use

16. Smart Energy Canada 2009, Toronto, ON Large Users – Strength/Weakness Keep rates down for small users Large users critical in smaller centres Comm. A single manufacturer – 31% Rev. Plans to cut 30% Comm. B large users – 53% Rev Have cut 30% Institutional, manufacturing, housing cut also Consult large users about plans Monitor sales

17. Smart Energy Canada 2009, Toronto, ON Capital Renewal Cost Variability Walkerton changed regulations Required capital expenditures Financial planning requirement Full cost pricing Infrastructure renewal provisions Life cycle approach – asset management Have funds when needed – reserves New capital renewal/repl. leading rates

18. Smart Energy Canada 2009, Toronto, ON Small community 2,500 accounts Bill 459 reg. improvements SWSSA – 100 year life cycle Did not include source protection - growth User fee increases – 2002 to 2016 $796,000 to $2,797,933 current $ 149% constant $ 6.7% growth/yr constant $ Water bill – use 300 M3/year 09 - $498 16 $548 constant $ Case Study – Cost Increases

19. Smart Energy Canada 2009, Toronto, ON Expenditure Source – Full Cost

20. Smart Energy Canada 2009, Toronto, ON Op. Expense/Revenue Ratio

21. Smart Energy Canada 2009, Toronto, ON Capital Renewal Projection Variability Long range projections made originally Should provide superior database Totals being revised up yearly New technology needs replacement sooner Emergencies Road construction schedule takes priority Operations staff fill gaps Long term reserves should buffer Once capital renewal reserves fully established

22. Smart Energy Canada 2009, Toronto, ON Natural Conservation Everywhere –Savings without water eff. programs Water eff. toilets, showers, faucets Front load washing machines Price increase induced reduction

23. Smart Energy Canada 2009, Toronto, ON Water Cost Increase Issues Water rates rising in Ontario Affordability issues Monthly Billing – 59% of US survey Demand reduction – elasticity issues

24. Smart Energy Canada 2009, Toronto, ON Summary – Dealing with Variability –Full metering –Rate stabilization reserve –Undertake water conservation –Apply water conservation factor –More frequent readings/billings –Consult key users –Long range capital renewal plan –More frequent rate tune ups –Conservation rates need learning