1. Sewer Rate Evaluation Wareham, Massachusetts January 14, 2014 Michael J. Schrader, P.E.

2. Project Goals Make an informed decision relative to: 1. What should the basis of the sewer rate be: EDU’s or Gallons? 2. What should the rate itself be?

3. Ratemaking Goal No. 1 To ensure that the utility has revenue sufficient to -Operate the utility (pay the bills) -Maintain all facilities in working order (upkeep) -Replace/upgrade equipment as required (capital) -Repay debt (sustainability)

4. What do Rates Cover? Expenses: Direct & Indirect Payroll & Benefits Electricity Utilities Chemicals Capital Debt Service Capital Outlay

5. What do Rates Cover? Fixed vs. Variable costs: Fixed (independent of flow) Payroll & Benefits Capital Debt Variable (Flow dependent) Chemicals Electricity Sludge

6. Ratemaking Goal No. 2 To allocate or distribute those costs back to users fairly and proportionally What does fairly and proportionally mean? It means that bills reflect cost to treat What does THAT mean?

7. Variables effecting cost Flow: It costs more money to treat more gallons, but is each gallon equal? No. High strength waste costs more to treat. Why?

8. It’s all about the bugs Wastewater is food for the bugs. More food =more bugs More bugs = more air more sludge more chemicals more cost

9. Ratemaking Goal No. 3 To predict the need for future rate changes by planning ahead.  Costs will generally go up  Capital planning will impact debt and rates

10. The Importance of Capital Planning Wastewater infrastructure is replaced due to: ■Service condition: Equipment is subject to harsh operating conditions and 24/7 operation. A 20 year service life is generally assumed and often optimistic.

11. The Importance of Capital Planning Wastewater infrastructure is replaced due to: ■Obsolescence – equipment design changes over time. ■New requirements – Increasingly stringent permit requirements can require new equipment. ■Failure

12. The Importance of Capital Planning ■Failure is always more expensive than planned replacement

13. The Importance of Capital Planning The Town is planning to complete a Capital Improvement Program (CIP) to help identify future needs based upon ■Likelihood of failure (Condition) ■Consequence of failure Projecting the Town’s capital needs over the next 20 years will bring an additional degree of predictability to rates and reduce chance of failure.

14. Ideal Rates The idealized rate would incorporate volume and strength, but that is not realistic: Instead… ■Town’s charge per gallon and set limits on wastewater strength (non residential users only) –Some stuff costs more to treat so you pay more –Some stuff is toxic and you just can’t discharge it ■How does this compare to what we’re doing now?

15. Current Rate Structure The EDU or “Equivalent Dwelling Unit” is commonly used to develop wastewater projections Pro’s and Con’s of using EDU’s Pro’s –Convenient –Steady revenue  Con’s –May not be equitable –Hard to defend 1 EDU

16. Flow based Rate Structure Each user would be billed for sewage discharged using water use as a surrogate measurement. Pro’s and Con’s to using water usage for sewer Pro’s –Accurate –Fair and equitable  Con’s –Increased complexity, added parties –High Strength waste is not addressed –Susceptible to loss of big users / weather/ usage

17. What do other Town’s do? ■Rate Structure

18. Wareham, Progress to date ■Step one – Data gathering ■Wastewater Plant –Expenses: last three years, budget and Actual –Debt schedule –Operating costs ■Water System(s) -Water usage -Annual statistical reports

19. Who has what? ■To evaluate going to water consumption based rates we need to understand how many customers have water and sewer. ■To do this we compared lists… lots of lists ■And we made maps This is what we found:

20. Who has what? 59% of Town is sewered

21. 91% have both water and sewer, 9% are on wells Who has what?

22. Trends Residential water use is decreasing Commercial / Industrial water use is increasing Wareham Fire District

23. Trends Residential water use is decreasing Commercial / Industrial water use is increasing Onset Water District

24. Distribution of Users ■Wareham Fire District –10% of usage comes from top 20 users (0.3% of total) –50% of usage comes from top 1121 user (16% of total) ■Onset Water District –10% of usage comes from top 10 users –50% of usage comes from top 563 users (9%)

25. Next Steps Decide which option best suits Wareham: ■Keep EDU based system ■Adopt usage based system with - one rate - one rate with a minimum charge - ascending rate - separate rate for residential and commercial