FIXEID Check # 005: Claimed decrease in agriculture rates

FIXEID Check # 005:
Claimed decrease in agriculture rates

From the fixeid.org home page, the entry for February 11, 2012:

"In stark contrast to the huge increase in residential water rates, EID’s proposed new rates for Large Agriculture customers (see pages 4 and 6 of the Notice) reveal that most Agriculture customer bills will DECREASE more than 20% from 2011 rates. For all usage over 4500cf, EID’s proposed new rates for Agriculture will be just 6% of residential rates… a seventeen-fold difference."

This is factually false. Agriculture rates have the same percentage increases as residential rates (see the tables below).

Read with caution
if you visit fixeid.org

FIXEID has not demonstrated that it understands rates in general, let alone agriculture rates. The rate schedules demonstrate application of the same rate increases to both agriculture and residential rate classes.

Table 1, below, illustrates the year-to-year percentage change in agriculture rates, using the basic rate formula numbers for Base Charge, Tier 1 consumption, and Tier 2 consumption. A major change in the 2012 Proposed rates shifts part of agriculture's cost recovery from consumption rates to the Base Charge. These tables demonstrate Base Charge increases of not less than a factor of 6: The range tabulated runs from $678.34 for a 4-inch meter in 2012 to $3,299.86 for an 8-inch meter in 2015.

In Table 1 and Table 2,

Year "2012A" refers to year 2012 with billing using the already-adopted rate schedule.
Year "2012P" refers to year 2012 with billing using the proposed rate schedule.
The line highlighted in yellow is 2012P, which changes from a 70/30 consumption/base-charge revenue to 50/50.
For this case customer COSTS (not the rates that generate the costs) produce 6% more EID revenue than the 2012A rates.

Table 1: Actual year-to-year percentage changes in the Agriculture rate class's rate formulas

Year	Base Charge, 4-inch Meter	Base Charge, 8-inch Meter	Consumption Charge Rates per cufic foot (cf)
Year	Base Charge, 4-inch Meter	Base Charge, 8-inch Meter	Tier 1 0 - 1,800 cf	Tier 2 1,801 - 58,200 cf per acre	Tier 3 Above 58,200 cf per acre
2012A	+ 5%	+ 5%	+ 5%	+ 5%	+ 5%
Rates above use 70/30 consumption/base-charge cost recovery. Rates below use 50/50 cost recovery Consumption rates for 2012P - 2015 use only two tiers: Tier 2 is all usage over 1,800 cf
2012P	+ 183%	+ 726%	- 16%	- 33%
2013	+ 11%	+ 11%	+ 11%	+ 11%
2014	+ 11%	+ 11%	+ 11%	+11%
2015	+ 5%	+ 5%	+ 5%	+ 5%

The line highlighted in yellow represents a 6% rate increase overlaid on the conversion from 70/30 to 50/50 cost recovery. That refers to the portion of costs recovered by means of commodity billing, proportional to metered water consumption, and the fixed base charge.

Agricultural accounts involve an indirect measure of commodity billing in the base charge by means of pricing for different meter sizes. The basic principle is that higher water use requires a larger meter. A first-order analytical approximation is:

Water flow rate is primarily proportional to the square of the diameter (cross-section area) of the meter and distribution tubing.
Flow rate constrains the quantity of water that can be used in any given time period.
Customers select the smallest, most economical, meter size to support their needs for irrigation within limited time periods.
Consequently, water consumption tends to be roughly proportional to the square of meter size.

Table 2: Rate schedules for the Agricultural with Residence rate class.

The Small Farms rate class uses the same Base Charge schedule, depending on meter size. Small farms' proposed rates retain a 3-tier schedule of consumption rates, instead of simplifying to 2 tiers.

Table 2 illustrates base charges only for 4-inch and 8-inch meter in order to present a readable sample. The full schedule lists 15 meters, involving 11 meter sizes and one option. Use of a turbine meter is optional for sizes from 1½ inches to 6 inches, only turbine meters are supported for 8-inch through 12-inche metering. For any specific size of supply line turbine meters afford higher flow rates than conventional meters. Therefore, their Base Charge involvels a component proportional to the difference in flow rate.

Year	Base Charge, 4-inch Turbine Meter	Base Charge, 8-inch Turbine Meter	Consumption Charge Rates per cufic foot (cf)
Year	Base Charge, 4-inch Turbine Meter	Base Charge, 8-inch Turbine Meter	Tier 1 0 - 1,800 cf	Tier 2 1,801 - 58,200 cf [* per acre]	Tier 3 Above 58,200 [* per acre]
2011	$99.20	$155.22	$.01309	$.00137 *	$.00156 *
2012A	$104.16	$162.98	$.01374	$.00144 *	$.00164 *
Rates above use 70/30 consumption/base-charge cost recovery. Rates below use 50/50 cost recovery Consumption rates for 2012P - 2015 use only two tiers, with Tier 2 for all usage over 1,800 cf. (see note below table) That change also eliminates the earlier explicit dependence on consumption per acre for determining the consumption amount dividing Tier 2 from Tier 3.
2012P	$190.99	$1,183.37	$.01154	$.00096
2013	$212.00	$1,313.54	$.01281	$.00107
2014	$235.32	$1,458.03	$.01422	$.00119
2015	$247.09	$1,530.93	$.01493	$.00125

Note that eliminating Tier 3 also eliminates the earlier explicit dependence on consumption per acre for determining the specific consumption level separating tiers 2 and 3. By shifting from the 70/30 rate model to 50/50 the 2012P rate formula tends to increase the portion of Base Charge that directly represents commodity consumption associated with meter size.

Related note: Typical consumption levels

FIXEID's consumption citation of 4,500 cubic feet per bimonthly billing period is unrealistically low for agricultural customers.
In the Cost Of Services study EID used these example consumption levels:

Low: 18,835 cf
Medium: 73,751 cf
High: 332,533 cf

At FIXEID's 4,500 cf consumption level Ag account cost per billing period would increase by...

With a 4-inch turbine meter: 69.5%, $87.89 per bimonthly billing period
With an 8-inch (turbine) meter: 561.3%, $1,024.25 per bimonthly billing period

Equivalent residental-rate costs (with a 3/4 inch) meter would have only a 7% increase, going from $92.93 in 2011 to $105.88 in the proposed 2012 rates.

An Ag account with a 4-inch meter would pay 83% as much as the residential account.
An Ag account with an 8-inch meter would pay 867% more than the residential account.

FIXEID's claim of a 20% decrease in ag rates is highly invalid.
FIXEID's claim that ag accounts using over 4,500 cf consumption would pay only 6% as much as residential accounts is highly invalid.

These points are most reasonably understandable as evidence of FIXEID analytical incompetence.

References:

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