| OCR Text |
Show WATER PRICING POLICY STUDY construction of additional storage facilities can also be estimated relatively easily by the larger utilities in the service area. The most important drawback to marginal cost pricing is that public utilities in Utah cannot legally charge rates that raise significantly more revenues than are needed to meet revenue requirements. Marginal costs can only be used as templates to distribute embedded costs in a manner reflective of marginal costs. Goal- Based Rates Goal- based rates are based on individual customers water consumption goals. The goals can be determined by previous customer consumption or by expected base consumption for a customer exhibiting specific characteristics. After a customer's goal has been determined, a base cost for that consumption is developed. The actual bill received by the customer would then equal the base cost plus or minus the percentage of consumption over or under the consumption goal. The actual discount or surcharge applied may differ by applying different " application rates". In other words, the customer may receive a bill discount of 5 percent for consuming 10 percent below the goal. This rate structure does provide a conservation incentive through the direct tie between consumption and total cost. It is likely that this pricing system would require a high level of communication of rates and consumption to the customer, further increasing the conservation potential. A concern from the utility's standpoint, however, is the large amount of data necessary to develop and implement goal- based rates. For many water agencies, the expense involved in creating this rate structure may be prohibitive. Executive Summary ES- 22 |
