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Show Commodity costs are those that vary with the quantity of water produced. They usually include costs of chemicals, a large part of power costs and other elements that increase or decrease almost directly with the amount of water supplied. Costs related to stored water, or other costs that vary with average daily demands such as raw water pumping, may also be considered as commodity costs. Purchased water cost, if water is bought on a unit volume basis, would also be considered a commodity cost. Purchased water costs may include a demand component. Demand costs are associated with providing facilities to meet the peak rates of use, or demands, placed on the system by customers. They include capital related costs on plants designed to meet peak requirements, plus the associated O& M expenses. This component may be divided into costs associated with meeting specific demands. Maximum- day, excess maximum- hour or other periods that may be appropriate to the utility may be included. Customer and direct fire protection costs are defined under the base- extra capacity method. In- State Rates Figure 3 shows four of the most common rate structures. First is the Uniform Volume Rate, which is simple and direct. The water provider needs only to estimate annual usage and set the charge so that revenue covers all anticipated costs. Charges can be raised and lowered occasionally as conditions change. Price City, Carbon County, uses this rate. Figure 4 shows Price City's present rate schedule. A base rate is used which is the same price per thousand gallons as the overage rate, $ 1.40/ 1,000 for the first 10,000 gallons and $ 1.50/ 1,000 for usage above 10,000 gallons. This rate schedule provides an incentive for conservation because more use means a bigger bill. Figure 5 shows the Inverted ( increasing) Block Rate and is demonstrated in Kaysville, Davis County. The base rate is set at a relatively low level, in this case $ 1/ 1,000 gallons for the first 10,000 gallons. The next block of 10,000 gallons is priced at a higher rate of $ 1.50/ 1,000. Kaysville' s rate increases to $ 3.00/ 1,000 gallons for all use over 20,000 gallons, but only during April to October. The purpose of this seasonal component of the rate schedule is to encourage customers to use their pressurized irrigation system. Thus, Kaysville's rate is an inverted rate and a seasonal rate. This rate schedule is likely to result in conservation because of the higher cost for water use beyond what is considered a reasonable amount for a single family. Figure 6 shows the structure for a seasonal rate schedule, which Salt Lake City has recently adopted. Use during the peak season ( summer months) is discouraged with a higher price than is charged during the off- peak winter months. Lessons Learned From the Electric Power Industry The OPEC oil crisis of the 1970s sparked a fourfold increase in crude oil prices. Of the industries that are sensitive to fossil fuel prices, the electric power industry suffered the most. Interest rates quickly increased. Consumption decreased, forcing the cancellation of large, nuclear powered facilities. Electric utilities responded to this new environment with conservation programs ranging from rebates for high efficiency motors to insulation for low income residents. Conservation Pricing While it is difficult to measure the actual gains of the energy conservation initiatives arising from the OPEC crisis, some of them still exist. Foremost among them is conservation pricing. 38 |