The document discusses strategies for increasing revenue stability through water rate design in the City of Conroe. Currently, the city relies too heavily on variable water revenue which declines during droughts and with conservation efforts. The rate design committee aims to develop a structure that supports expenses while encouraging conservation. It is important to increase the ratio of fixed to variable revenue. Recommendations include raising base rates for future increases and meter rates, adding a surcharge for drought stages, and simplifying the tiered rate structure. Charts show current rates and static water levels in the Jasper Aquifer.

1. Revenue Stability
Through Rate Design
June 13, 2014
Chris Loomis Environmental & Water Conservation Manager
1

2. Addressing the Water
Conservation Conundrum
• Currently the City of Conroe has a high ratio
of variable water revenue to fixed revenue.
• The city has experienced in past years a drop
in sales volume due to drought, wet weather
and conservation.
• Increasing the variable portion of the water
rates would increase revenue vulnerability.
2

3. City of Conroe Rate Design
Committee Goals
3
• Develop a rate structure that supports
water and sewer system expenses and also
meets current financial, political and social
goals.
• The new rate structure must take into
consideration that water conservation may
end up raising rates.
• It’s important to have a higher ratio of fixed
revenue.

4. Rate Considerations
4
• The City of Conroe has a set fixed and
variable cost that need to be recovered.
• High water conservation rates run the risk
that higher users will use less water in a wet
season.
• Should high users subsidize low users.
• Too high of water rates will elicit a behavioral
response that will drop sales volume.

5. Average Per Capita Demands
5

6. The City of Conroe uses
Inclining Block Rates
6
Pro’s
• Sends a strong pricing signal.
• Discourages usage.
Con’s
• Discourages usage.
• Weather sensitive.
• Can be politically unpopular.

7. Conroe’s Current Water Meter Rates
7

8. Conroe’s Current Water Rates
8

9. Water Rate Recommendations
9
• Future price increases will go to the base
rate to increase fixed revenue.
• Consider a surcharge for Stage 3 Drought
Contingency.
• Increase water meter rates to reflect the
rate of similar cities.
• Consider a 4 tier rate structure instead of
the current 6 tier rate structure.

10. Tracking the Static Water Levels of
the Jasper Aquifer
10

11. Tracking the Static Water Levels of
the Jasper Aquifer
11

12. Questions?
12