Town Meeting to Ratify Water Rate Increases?

I will make a slide presentation at the Annual Town Meeting, May 16, 2016 that proves that some residential water rates are too high and commercial rates are too low. I sent the following advance information to all Town Meeting members:     Warrant Article 14 – Water Rates Bylaw

MA General Laws, Chapter 41, Section 69B says: “The water commissioners …. {are} … subject to all lawful by-laws and to such instructions, rules and regulations as the town may from time to time impose by its vote.” And “They … fix and collect just and equitable prices and rates for the use thereof.”

This article would require Town Meeting to approve water rates proposed by the town’s water commissioners (the selectmen) before they take effect. This article is necessary because:

1) The current rates are not equitable. The top rates paid by residential users are far higher than the top rate paid by commercial users

2) The top commercial rate is too low to encourage more water conservation by large commercial users.

3) Incorrect reports on residential consumption were used to justify the 2012 and 2015 rate increases. The selectmen have given no indication that they will enact new rates that are more equitable.

4) Water fees are a significant source of revenue, and are paid by almost everyone in Shrewsbury.

Since the water commissioners haven’t corrected these problems, Town Meeting should.

In addition to the state requirement for just and equitable prices and rates, there are two state-imposed water limits that directly influence rate setting: 1) a residential average of 65 gallons per person per day, and 2) a limit on the total number of gallons pumped per day. In 2003, 2006, and again in 2008 the selectmen addressed the first limit by enacting higher rates for residential compared to commercial consumers. The result was that every year since 2010 Shrewsbury has more than met the residential limit of an average 65 gallons per person per day, i.e. average residential consumption per person per day has been 55 gallons or less. Yet in 2012 and 2015 the selectmen imposed even higher residential rate increases that widened the differences between residential and commercial rates substantially.

This chart shows the rate increases in the top rate tiers over time. Click here Final ATM flyer graph to see graph. Note: Residential Rate is also the Condominium Rate

Meanwhile, the selectmen did not take stronger action on commercial rates that would help address the state limit on total daily pumping. Imposing substantially higher water rates at consumption levels above 100,000 gallons per quarter would encourage more conservation and reduce daily pumping levels significantly. And almost all consumers above 100,000 gallons are commercial users. In FY2015 the top 90 commercial water bills were just 0.20% of all commercial, residential, and condominium bills, yet they consumed 9% of total water in these categories.

But the top commercial water rate is only $4.30 per thousand starting at a very low 26,000 gallons, and the rate stays at $4.30 even for commercial users who consume over 1,000,000 gallons per quarter.  Meanwhile, residential and condominium users pay $6.90 per thousand for amounts over 25,000 gallons (already $2.60 per thousand more than the top commercial rate), and $14.00 per thousand for residential consumption above 60,000 gallons. These rates are not equitable, and the top commercial rate is too low to encourage more conservation measures by large commercial users.

The Massachusetts Water Conservation Standards (June 2012 update) has the following comment about water conservation for both residential and commercial users: “The price difference between blocks (a block is a range of water consumption with the same rate) and the number of gallons included in each block are very important in influencing the customer‘s use behavior. If the difference in cost between blocks is too small, or the number of gallons included in each block is too large, it will not provide the incentive to conserve at the higher block rate.” And under recommendations specifically for commercial users, it also says “Significant users should aim, wherever possible, to decrease their average water use by at least 10%”.

Shrewsbury’s commercial rates are deficient based on these standards. Shrewsbury’s top commercial rate applies to all consumption levels above 25,000 gallons. Clearly this consumption range is too large, and the difference between the top $4.30 commercial rate and the next lower commercial rate of $3.30 is too low, to encourage more aggressive water conservation efforts by high volume commercial users. In other words, to encourage more conservation and reduce daily pumping levels, the focus should be on increasing commercial rates substantially between one consumption range and the next.

The additional water revenues needed in 2012 and 2015 could have been obtained solely by higher commercial rate increases at higher consumption levels. For example, almost all of the increased revenue expected from the 2015 rate increases could have been generated by increasing the highest commercial rate to $6.90 per thousand, equal to the second highest residential rate. Then most of the residential and commercial rate increases at other consumption levels would not have been necessary.

In summary, there are three primary objectives for setting water rates: 1) they should be just and equitable; 2) residential consumption should be significantly below the 65 gallon state limit; and 3) total daily pumping should be reduced. The selectmen’s water rates have only achieved the second objective. More scrutiny and better analysis of water rates are needed to ensure that all three objectives are met. Approving this water by-law will make it more likely that all three goals will be achieved.

PLEASE VOTE YES ON ARTICLE 14.

Thank you.   John Lukach