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Show on income distribution. Although taxes such as the income tax take account of income, size of family, etc., a user charge does not. If distribution of income is to be a factor in the design of a water rate, an increasing block structure is the most effective. Under any conditions it is possible to practice a discriminatory pricing policy which will allocate benefits regressively and burdens progressively ( Figure 9). By setting the initial block quantity price ( Pj) below marginal cost, low use customers are given water below their cost to the system. This is essentially a subsidy to low use customers. The next block is priced equal to marginal cost ( Pm) which gives those customers in the middle range a subsidy for the initial quantity followed by a charge equal to their responsibility for the costs. The last rate ( Pe) is above the marginal cost curve over most of the range and equal to the marginal cost only at the marginal cost- demand intersection ( point E). The revenues generated by the third block make up the difference lost by the initial subsidy. The rates then begin as a subsidy for low volume users approach, actual costs at the margin, and finally collect a tax from large consumers to pay the subsidy. The total revenue in Figure 9 is equal to the sum of the rectangles PJEQJO, FDQmQj, and CAQeQm, which is equal to the total cost represented by rectangle PcBQeO. Price Pe Pc Pm Pi ..- V--- c i MC Ov- F E D BV D Qi % Quantity Figure 9. Increasing block rate under increasing cost conditions which accounts for distribution of income. RATE STRUCTURES IN UTAH A survey of rate structures used by cities and towns in Utah was conducted in 1975 to sample current practice. A questionnaire designed jointly by the staffs of the Utah League of Cities and Towns and the Utah Water Research Laboratory was used to gather information about user fees and connection charges ( where applicable) for three municipal services: culinary water, sanitary sewerage, and solid waste disposal. Participants were also encouraged to provide information regarding their established user fee policies. The questionnaire was mailed to every city in Utah with a population greater than 1,000 ( as reported in the 1970 census) and to other selected municipalities ( e. g., Manila and Randolph) included to ensure that each county would be represented. From this sample of 91 cities, 54 responded ( 59 percent). The information collected was published in a separate report ( Houston, Ballard, and Hester, 1975). Only the information on water user fees obtained from this survey will be reviewed here. Appendix B contains several comparisons of water costs derived from this information. Culinary water in Utah is generally supplied by municipally owned water utilities. All of the utilities which are not publicly owned are subject to regulations by the Utah Public Service Commission at rates based on costs and rate of return on capital investment. Privately owned utilities which sell water on a retail basis are few in number and serve only relatively few Utah residents. However, to get an accurate assessment of service charges in Utah, 6 of the 29 privately owned utilities were sampled. In a national survey, over 90 percent of the cities were found to be using the declining block rate ( Gysi and Loucks, 1971). However, only 23 of the 54 responding cities in Utah used this fee structure. The most common pricing policy in Utah ( 30 cities) is the constant block rate. The other fee schemes used were, the flat rate, which was found in five cities; the increasing block rate found in two cities, and the summer differential rate, which was found in only one of the Utah cities in this survey. Seven of the survey cities acknowledged using two pricing policies. The culinary water rates submitted by the 54 municipalities responding to the survey are shown in Table 2. The rates shown in this table do not include hidden water charges such as water conservancy district taxes, etc. Nine monthly water volumes were then selected, and the total cost for each volume in each city is shown in Table 3. In Appendix B, these costs by city are grouped by population of the city ( Tables B- l to B- 6) and subareas within the state ( Tables B- 7 to B- 14) for ready comparison. In these tables, each city is followed by several numbers which denote various rates used in that city. The number enclosed in parantheses following the name of a city or town, indicates an unusual rate design upon which the fee is calculated and is explained in the footnotes following Table B- 6 in Appendix B. Declining Block Rates Only 23 of the responding cities in Utah use the declining block rate structure. For example, the 23 |