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Show WATER PRICING POLICY STUDY or less frequently, the adoption of conservation rates imposes significant additional implementation costs. A related issue is the number of customer classes. A large number of water utilities have a pricing policy imposing the same rate schedule on all customers. Moving to a pricing policy including multiple customer classes will increase the complexity of billing, assigning customers to a rate schedule, and revising rates in future rate proceedings. Simplicity This review focused on examining the level of complexity of the various rate structures. At issue was whether the rate structure would be understandable to customers. Rates designed to influence demand will always be more complex than a flat monthly charge, but it should be possible to explain the structure to customers. Some truly complex rates provide incentives to ( 1) increase average consumption per unit of peak consumption, or ( 2) reduce peak consumption but not average consumption. Even rate experts can have trouble understanding such structures. Legality This review examined issues related to the legality of various rate structures. It seems apparent that all of the rate forms examined are legal if they are applied equitably. Utilities, like all other public entities, cannot treat individuals or groups in a discriminatory fashion. Thus, any pricing policies adopted by utilities should be based upon objectives and analyses that are applied consistently to all groups. Cost- based rates are one of the best defenses against legal challenge. Water Conservation A key issue is whether a given pricing policy will effect the change that the utility desires. Pricing policies must be selected on the basis of the type of impact expected from the policy. For example, some rate forms will reduce average water usage while leaving the peak water demand relatively unchanged. If peak demand reduction is the objective, it should be obvious that the utility should select a different rate form to meet the demand- shape objectives. EVALUATION OF RETAIL RATE STRUCTURES The Act requires that CUWCD evaluate a specific set of rate structures. It should be noted that any of the rate structures that are evaluated in this study could be implemented with some measure of success by agencies within the CUWCD service area. Conversely, the overall pricing policy developed by an agency could include any of the rate structures that are evaluated in this study, and still not be effective based on the criteria enumerated earlier. The following rate structures were evaluated. Figures ES- 2 through ES- 8 provide graphic interpretations of the evaluated rate structures and are presented for illustrative purposes only. Executive Summary ES- 14 |