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Show SUMMARY OF FINDINGS 2.5 - 2 - 1.5 - 0.5 Figure ES- 4 Seasonal Rate Illustration Two - - Peak Season • Off Peak - - I I i i 10 20 30 MONTHLY WATER USE ( IN 1,000 GALLONS) 40 Drought Year Surcharges Drought year surcharges are surcharges to be assessed in years meeting certain criteria and qualifying as drought years. A key distinction between drought year surcharges and other conservation- inducing rate forms is that the surcharges are temporary. They are imposed during drought years and eliminated when the drought conditions no longer exist. Surcharges can serve two purposes. First, in severe drought years, utility costs can greatly exceed costs in a normal year as the utility seeks added water sources, such as purchases from other suppliers. Compounding this problem is the fact that water sales may ( and hopefully will) be lower than in a normal year due to water conservation efforts by retail customers. Thus, surcharges enable the utility to temporarily increase per- unit revenues to cover normal and extraordinary costs of providing services. Second, surcharges can be used like a " tax" to transfer the recovery of revenues from customers who conserve water to those who do not conserve water by imposing surcharges on water usage in excess of pre- set limits. However, using surcharges to induce customer conservation efforts can cause revenue instabilities if the customers respond in levels in excess of those predicted by the utility. Surcharges often cause confusion and anger among consumers. Most surcharges are designed to go into effect if water sales fall below a pre- set level or if certain drought conditions exist. Customers occasionally believe that they conserved water because of the drought, and their reward is a rate increase. To counteract this phenomenon, the ES- 17 Executive Summary |