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COMMENTARY by Amadeo Petricca: Equitable/ inequitable water rates - Parts 1, 2, 3 & 4

Amadeo Petricca
Vice chair, Marco Island City Council

PART I

It has been stated that the current Marco Island Utility Rate Schedule is equitable, but the facts indicate that it is inequitable. This the first of several letters based on irrefutable facts that the utility rate schedule is inequitable.

Example No. 1:

I presented to the Marco Island City Council at the Oct. 19 meeting a comparative analysis of large volume users. The comparison was individually metered condominiums compared to high volume commercial users, the Hilton, the Marriott and North Marco Utility.

The inequitable result deals with the base charges. That is the charge each customer pays even if they do not use one gallon water or wastewater (sewage).

Water base charge comparison:

In fiscal year 2015, individually metered condominiums consumed 31 million gallons of water and paid a base charge of $660,000.

In fiscal year 2015, the Hilton consumed 31 million gallons of water and paid a base charge of $13,000.

In fiscal year 2015, the Marriott consumed 78 million gallons of water and paid a base charge of $52,000.

Result: individually metered condominiums paid a base charge of $647,000 in excess of the Hilton and $608,000 in excess of the Marriott.

Is that equitable?

Wastewater (sewage) base charge:

In fiscal year 2015 individually metered condominiums produced 31 million gallon of wastewater (sewage) and paid a base charge of $514,000.

In fiscal year 2015 the Hilton produced 31 million gallons of sewage and paid a base charge of $8,000 and I adjusted that dollar amount for the fact that they pay $1.09 per 1,000 gallons of sewage to be $42,000.

In fiscal year 2015 the Marriott produced 78 million gallons of wastewater (sewage) and paid a base charge of $33,000 and I adjusted that dollar amount for the fact that they, too, pay $1.09 per 1,000 gallons of sewage to be $118,000.

In fiscal year 2015 North Marco Utility produced 25 million gallon of wastewater (sewage) and paid a base charge of $8,000 and I adjusted that for the fact that they pay $1.09 per thousand gallons of sewage to be $336,000.

Result: individually metered condominiums paid a base charge of $443,000 in excess of the Hilton, $396,000 in excess of the Marriott and $478,000 in excess of North Marco Utility.

Is that equitable?

The results of this comparative analysis clearly indicate that one class of utility customer is paying a significant amount of base charges versus three commercial accounts.

Reach Amadeo Petricca at City Hall via email, apetricca@marcocitycouncil.com.

PART II 

Equitable? Inequitable!

In my first letter to the editor concerning the equitable or inequitable of the current Marco Island utility rate schedule (Sun Times, Nov. 19 and online), I compared the customer class of Individually Metered Condominiums to large commercial classes of customers, the Hilton, Marriott and North Marco Utility for total base charge only.

The reason I selected these classes of customers is predominantly where the base charge inequitableness occurs. The current utility rate methodology is based on Equivalent Residential Connection (ERC) or meter size. Therein is the problem. This is not easy to explain, but I am going to try.

This methodology was developed by the American Water Works Association many years ago and I for one can’t understand their logic. Meter size, only determines the capacity of gallons flowing through the meter to meet the customers requirement. That is why one facility has a 5/8” meter (Low volume requirement) versus another facility need for a 4” meter (high volume requirements) of water to satisfy their needs. For each meter size a number of ERC’s is applied. Example of meter size: 5/8” meter = 1 ERC, 2” meter = 8 ERCs, 4” meter = 25 ERCs and 6” meter = 50 ERCs. In layman’s terms, single family home has a 5/8” meter = 1 ERC, the Marriott has a 1 - 1 ½” meter = 5 ERCs and 2 - 6” meter = 100 ERCs or total of 105 ERCs compared to 1 ERC for a single-family home. Is that equitable? The methodology is archaic, since it does not take into consideration the demand on the water and wastewater (sewer) plants. Be that as it may, let me continue to explain the current rate schedule. Base rate charges were established for meter sizes and examples are as follows:

Water 5/8” - $33.68, 1 1/2” - $168.49, 2” - $269.54, 4” - $842.34, 6” = $1,684.72.

Wastewater 5/8” - $27.46, 4” - $687.39, 6”- $1,374.67.

Individually metered condominiums predominately use a 5/8” meter, the Hilton has a 2” and 4” meter and North Marco Utility has 4” meters and the Marriott has a 1 ½” and 2 - 6” meters.

WATER -- Individually metered condominium is a base charge of $33.68 per living unit. So if you have a 126-unit condo they are billed 126 x $33.68 = $3,243.68 per month.

The Hilton has 298 hotel rooms and they have one 2” meter and one 4” meters and they are billed 1 x $269.54 and 1 x $842.34 = $1,111.88 per month. Cost per Hotel unit is $3.73. In addition to the hotel rooms they have a swimming pool, Restaurants, Spa and Beauty Shop which will further reduce their unit cost. The Marriott has 727 hotel rooms and they have one 1 ½” meter and two 6” meters and they are billed 1 x $168.49 and 2 x $1,684.72 = $3,537.93 per month. Cost per Hotel unit is $4.87. In addition to hotel rooms they have several restaurants, cocktail lounge, pools, spa and beauty shop which further reduce their unit cost.

WASTEWATER (Sewage) -- Individually metered condominium is charged a base charge of $27.48 per unit. If you have a 126-unit condominium, they are billed 126 x $27.48 = $3,462.48 per month.

The Hilton has 298 hotel rooms and they have one 4” meter and they are billed 1 x $687.39 per month. Cost per hotel unit is $2.31.

The Marriott has 727 rooms and they have two 6” meters and they are billed 2 x $1,374.67 = 2,749.34 per month. Cost per hotel unit is $3.78.

North Marco Utility is a bulk user for wastewater (sewer) and they have several hundred users. They have one 4” meter for sewer and they own their own sewer infrastructure as well as their lift/pump station. They are billed 1 x $687.39 = $687.49 per month. The cost per unit is minimal.

Summary--The individually netered condominium demand on the plants for 126 units that consumes on average 151,000 gallons of water per month and generates 151,000 of wastewater per month pays a combined base charge of $7,703.64 for the month. Their base charges per unit is $61.14.

The Hilton demand on the plants that consumes on average 2,500,000 gallons of water per month and generates 2,063,000 gallons of wastewater per month pays a combined base charge of $1.799.27 for the month. Their base charges per unit is $6.03.

The Marriott demand on the plants that consumes on average 6,500,000 gallons of water and generates 3,715,000 gallons of wastewater per month pays a combined base charge of $6,287.24 for the month. Their base charges per unit is $8.65.

North Marco Utilities demand on the wastewater plant is that it generates on average 2,100,000 gallons of wastewater per month and pays a monthly base charge of $687.39 for the month. Their base charge per unit is less than $1.

The above clearly demonstrates that the base charges are inequitable. Base charges to customers must be allocated on their demands on the plants. Rather than recommending another methodology at this time, I will continue to point out other inequities in the current utility rate schedule at a future date.

Amadeo Petricca

Member, Marco Island City Council

PART III, published Dec. 2

Equitable? Inequitable! Part III

This is my third writing concerning the equitable or inequitable of the current Marco Island utility rate schedule. I am now going to compare the customer class of individually metered condominiums to master metered condominiums.

Master metered condominiums prior to fiscal year 2006 were charged a Base Charge determined by meter size, same as large Commercial Customer are being charged now. History: In Fiscal Year 2006 the Utility with the guidance from a majority of City Council change the Water Base Charge to Master Meter Condominiums from meter size charge to a charge of 75% of Single Family Home, one ERC charge, or .75 x $33.68 = $25.26 per Condominium Unit.

I asked for a copy of the worksheet that determined that percentage, but it was never made available to me for my review. While I was a member of the Utility Advisory Committee and Utility Advisory Board I questioned the merits of that change as to why it was not applied to other class of customers? My question fell on deaf ears. When I made the statement to Council that the methodology change increased the revenue to the Utility by $1.1 million, silence occurred, hence that comment also fell on deaf ears. In a subsequent year the same 75% of a Single Family Home Sewer base charge was to be implemented on the Wastewater (sewer) side to Master Metered Condominiums, but that never materialized.

Now let me proceed with the comparison of the two classes of condominiums. There are 1,505 Water User individually Metered Condos and 9,891 Master Metered Condos and 1,502 Wastewater User individually Metered Condos and 8,510 Master Metered Condos.

In my part two segment (Sun Times, Nov. 26, page A3), I used an example of a 126 unit Individually Metered Condominium and I will do the same here and compare it to a 129 unit Master Metered Condominium with a 4-inch size meter.

The Individually Meter Condominium pays a Base Charge of $33.68 per unit for Water or 126 x $33.68 = 4,243.68 per month, and a Base Charge of $27.46 for Wastewater (sewer) or 126 x $27.46 = $3,459.96 per month for a combined total of $7,703.64 per month. The base cost per unit is $61.14 per month.

The Master Metered Condominium pays a Water Base Charge of 75% of a one Equivalent Residential Connection (ERC), of 75% or .75 x 33.68 = $25.26. The Base Charge for Water is 129 x $25.26 = $3,258.54 per month. The Base Charge for Wastewater (sewer) is based on Meter Size and they have a 4” meter. The 4” meter Base Charge is $687.39 for the month, for the building. The base charge per unit is $5.33. The combined Base Charges is $3,945.93 per month. I have to adjust the sewer base charge because this type of condominium pays $1.09 more per 1,000 gallons to process their sewage, $1.09 x 191.000 gals. = $208.19. The adjusted base charge for an apple to apple comparasion is $4,154.12. The cost per unit is $32.20 per month.

The Individually Metered Condominium pays a combined base charge of $3,549.52 more than a Master Metered Condominium or 46.1% more.

As a point of information all Master Metered Condominiums that has a 4” meter, their base charge for wastewater ranges from $2.59 to $7.63 per unit.

In summary:

Individually metered condominium consumed an average of a 151,000 gallons of water per month or 1,198 gallons per unit.

Master metered condominium consumed an average of 191,000 gallons per month or 1,481 gallons per unit.

Both condominiums are low volume users of water and producers of wastewater (sewage), but their base charges are considerably different.

This is another prime example of inequitableness in the current utility rate schedule by class of customers.

Amadeo Petricca 

Member, Marco Island City Council

Part IV, published Dec. 10, 2015

Equitable? Inequitable! Part IV

As you can see, explaining the Marco Island utility rate schedule is not a simple task. There are many inequities embedded in the rate schedule that are not apparent to the ratepayers. My goal to inform the ratepayers of those inequities and ultimately recommend to them a rate design that will level the playing field, where all ratepayers will be paying a rate based on the utility’s responsibility for readiness to serve and the utility customers’ demand on the plants.

With that in mind, I will now illustrate an inequity within the commercial class of customers. In my previous writings, I mentioned three large volume users, the Hilton, the Marriott and North Marco Utility. In fiscal year 2015 the commercial class of customers generated 168 million gallons of sewage and were billed a base charge of $310,000.

The Hilton, Marriott and North Marco Utility generated 98 million gallons of that sewage or 58 percent and were billed a combined base charge of $49,000, or 15.8 percent of base charges. The remaining commercial class of customers generated 69 million gallons of sewage or 42 percent and they were billed a base charge of $261,000, or 84.2 percent of base charges. The readiness to serve and demand on plant concept must not have applied in this case.

In fiscal year 2015, the commercial class of customers consumed 257 million gallons of water and they were billed a base charge of $493,000. The Hilton, and Marriott consumed 106 million gallons of water or 41 percent and were billed a base charge of $56,000, 11.4 percent of the base charge. The remaining commercial class of customers consumed 151 million gallons of water or 59 percent and were billed a base charge of $437,000, or 88.6 percent of the base charge. Here again the concept of readiness to serve and demand on plant does not apply.

There are inequities in the single-family homes class of customer as well with respect to low volume users of water are paying the same base charge as high volume users of water in the majority of cases. I recognize that single-family homes have conservation rates based on tiers (lot size) and blocks rates (volume of water they are billed based on lot size). Example: a single-family home on a lot of 9,000 square feet is allotted 21,000 gallons of water to consume at a rate of $4.21 per 1,000 gallons. For every gallon above that up to 32,000 gallons, they are billed $6.32 per 1,000 gallons or 50 percent more per 1,000 gallons. In no way does that make up for the low base rate they are charged for the volume of water they consume.

The billed base charges to low volume users of water and wastewater (sewer) in the following classes of customers, commercial, individually metered condominiums and single-family homes, are subsidizing the high volume water and wastewater customers as well the master metered condominiums on the sewer side only.

In addition to the above, single family homes, in almost all cases, do not have a deduct meter (meters volume of water for exterior use) which is deducted from total water consumed, resulting in amount of water used internally. Sewer usage is capped at 6,000 gallons. Because of the current rate structure a home that is vacant for several months during the year and irrigates their lawns, with no internal use will be billed for all gallons water consumed as well as 6,000 gallons for sewer usage. There are more than 1,000 homes that fall into this category and the result is (based on the report of gallons processed by the sewer plant in fiscal 2015). The plant processed 287 million gallons for single-family homes. Single-family homes were billed for 397 million gallons. That 110 million gallons in excess of what the plant processed generated $587,000 of additional revenue to the utility, which was a significant reason the utility had $1.2 million revenue surplus fiscal 2015.

It is imperative this city council finally recognize that the current rate schedule does not allocate cost of operations appropriately to all class of customers (even though it has been in place for a long time) and take a positive step forward and implement a rate design that levels the playing field for all customer classes. The previous councils’ philosophy was if you consume more you pay more and that presently is not the case.

Amadeo Petricca

Member, Marco Island City Council