Are Residents Being Overcharged For Water – You Be The Judge!

Many residents were upset to learn that their water bills were projected to rise from an average of $349 per year to $550 per year – a 58% increase – if the Stave Lake Project was approved. This was on top of unprecedented increases over the previous 5 years.

In 2007, residential water rates were $0.64 per cubic meter (m3). In 2012, rates had risen to $1.15/m3, an increase of 80%. This is an unacceptable increase at a time when inflation was less than 10%.

Residents are diligently working to conserve water and overall volumes have steadily declined since 2007. Instead of being rewarded for reducing their water consumption, residents received higher and higher water bills.

The City’s cost to provide all of the water it used in 2011 is approximately $0.69/m3. When the total volume is reduced because of water lost to leakage, required for firefighting, and consumed by other non-chargeable uses, the cost rose to $0.83/m3.

The current residential water rate is $1.15/m3, which means that residential water users are paying a 39% premium over cost. For the City overall, this works out to $millions from the overcharge. The City’s water system is not supposed to be a “money maker” – it’s a utility and billings should recover costs.

Unfortunately, it gets worse! The billing rate for Industrial, Commercial and Institutional (ICI), sector is as follows;

1 – 10,000 m3 $0.92/m3

10,000 – 100,000 m3 $0.85/m3

100,000 + m3 $0.69/m3

Up until 2008, residential water rates were always the same as the first tier of the ICI sector (1 – 10,000 m3). Beginning in 2008, the water rates for residential users increased at double the rate of the ICI sector. Apparently, this began at a time when the City could afford to charge lower rates to ICI customers in order to attract new businesses, some of whom used water at non-peak times. Regardless of the reasons, water bills are tax deductible for industrial, commercial and agricultural businesses, which means that they are receiving an additional benefit over residents who must pay with after-tax dollars.

Effective July 1, 2011, these already high water rates were further increased via tiered water pricing, a decision that was reversed in early 2012. For reference the tiered water rates were priced as follows;

1 – 60 m3 $1.13

61 – 90 m3 $1.43

91+ m3 $2.26

Large volume ICI water users are barely covering the cost of $0.83/m3. In fact, the largest users are paying LESS THAN COST. One of the largest water users is Matsqui Institution with a water bill of $81,440, based on 2010 consumption figures. Applying the residential water rate to the Matsqui Institution would have increased their 2010 water bill to $136,703, an increase of $55,263.

The residents of Abbotsford can no longer afford to subsidize the 3,000 plus ICI users, which collectively account for approximately 20% of our total water consumption in any given year. More particularly, why are the residents of Abbotsford subsidizing the operational costs of a federal prison by $55,263?

We need to realign water rates. Residential rates must come down and ICI rates must rise so that all users are paying the same rate. Water is a basic necessity and should be priced the same for everyone. Other large cities, like Surrey, do not offer preferential rates to the ICI sector – the City of Abbotsford shouldn’t either.

ICI discounts can no longer be justified as the City’s water supply comes under pressure. Increasing ICI rates would also encourage conservation efforts in this sector, thus further reducing the demand for water. Businesses are very good at finding ways to be cost efficient. However, there is no incentive for businesses to conserve water under the current rate structure.

The residential sector has decreased their average day consumption by approximately 15% during the past 5 years. Unfortunately, their reward has been that the City has increased rates from $0.64/m3 in 2007 to $1.15 in 2012 (an 80% increase), while the ICI sector rate only increased by 43% over that same time period. There is no rational justification for this – it is unfair and most stop.

Future water rate increases should be directly related to increases in costs or related to specific capital projects. Either way, future rate increases must be justified and the residents told what the rate increase will be used for.

In a future water blog post, I’ll explain what the City did with the extra money it collected from the residential water users.