Parry Sounds ~ Ideas and Opinions, In and Around Parry Sound

In this post I offer my analysis and comments concerning the proposed water rates for the Town of Parry Sound as presented in the November 8, 2020 report from Watson & Associates. I have separately been concerned with certain figures used in the report regarding customer numbers and water usage estimates. I have sent my concerns to the Town. A copy of my letter can be read through this link.

Top Line Numbers
The report presents the water and wastewater expense and revenue estimates for residential and non-residential water users. I have clipped and pasted the most relevant portions below.

The report, page 6-2, states (italicized for emphasis):

For water services, monthly base charges are forecast to increase by 5.0% annually for the period 2022-2028 and then by 3.9% in 2029. The consumptive rate is forecast to increase by 0.04% over the forecast period.

For wastewater services, monthly base charges are forecast to increase by 3.2% annually for the period 2022-2028 and then by 2.5% in 2029. No change in the consumptive rate is forecast over the period to 2029.

 The detailed calculations of the proposed water and wastewater rate calculations are contained in Appendices A and B to this report, respectively.

And on pages 6-4 and 6-5:

High volume non-residential users would either benefit (reduction in annual costs) or experience minimal increases in their annual water and wastewater bill. It is anticipated that the annual bill for a small residential customer would decrease slightly in 2021 (i.e. 1% decrease), while the bill for an average residential metered customer would increase by 9%. Greater bill impacts in 2021 would be seen for residential customers consuming greater than average annual water consumption (i.e. greater than 26,704 gallons). Bills for all customers would increase by approximately 2% each year for 2022-2029.

Comments

1. The rates as presented use the forecast fixed and variable costs related to providing water and wastewater services. These forecast costs are then allocated over the expected number of customers (base rates) and volume used. An underestimate of either customers or usage will raise the recommended rates as presented in the report.
   I believe that the report is seriously underestimating the expected increase in water and wastewater usage. They are estimating an increase in customer number of 1.2% over the next ten years, all of them metered. Their estimate of billed water usage is expected to increase by less than 1% over the next decade, or 0.1% per year. This is despite the construction of some very obvious new multi-unit residences and the real possibility of an aquatic center, ‘da pool’.
   This underestimates the reasonable revenue that can be expected and increases the proposed rates represented in the report.
2. The report suggests that billed water usage will essentially remain flat for ten years. That certainly is optimistic given the proposed rate structure. As proposed, the base (fixed) rate for metered residential customers will increase annually, but the consumptive rate is proposed to remain effectively unchanged over the next decade as presented in the report (below in italics).
   For water services, monthly base charges are forecast to increase by 5.0% annually for the period 2022-2028 and then by 3.9% in 2029. The consumptive rate is forecast to increase by 0.04% over the forecast period.
   For wastewater services, monthly base charges are forecast to increase by 3.2% annually for the period 2022-2028 and then by 2.5% in 2029. No change in the consumptive rate is forecast over the period to 2029.
   If the base cost increases annually but usage prices remain fixed there is little reason to conserve water, at least not to save money. Typically, organizations who wish to dissuade consumption increase the variable, or unit cost of an item. A good example is cigarette pricing. At $2 a pack there is little disincentive to buy a package of cigarettes. Raise the price to $13 and smokers either stop smoking or ration their usage. In the case of those water users who are not metered and enjoy an ‘all you can eat’ deal there is absolutely no reason to ration. Heck, you could get into the water business on a casual basis for our neighbours in the surrounding communities who are not sure their well water is really that safe. (Those water tests are such a pain.)

The Bottom Line
It really doesn’t matter what we say or point out, this report presents the Town of Parry Sound water rates for the next decade wrapped in a polished consultant veneer. I can afford the proposed increase but I worry about some of the folks in town who live on a fixed income.

As a consultant, I am more than annoyed with some of the assumptions underlying the conclusions and the lack of transparency. This includes, omitting historical customers and water usage, and not defining the terms underlying the forecast of customers and water use. It’s hard to comment on forecasts when the basic information and assumptions are missing. I suspect that the consultants expect the report will be received, not really understood, and accepted as written. These are competent folks and it would be hard to push back against their recommendations without some experience in the area. How often do you push back against your physician’s recommendations?

The net/net is that Council will accept the water rates as proposed in the report. Council unfortunately will not be able to claim that the rate structure encourages water conservation. The only way to accomplish conservation would be to require all residences to install water meters and make water incrementally more expensive with use above some sort of baseline. That is, as they say, a ‘third rail’ issue. They won’t touch it.

If you have particular comments, I encourage you to contact a member of Council. The formal commenting period has closed and the item is on this Tuesday’s agenda.