CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
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Pass the ordinance amending Title 8 (Public Utilities) Chapter 2 (Municipal Water and Sewer) Article C (Water and Sewer Rates, Connection Charges) of the Naperville Municipal Code
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DEPARTMENT: Water Utilities
SUBMITTED BY: Darrell Blenniss, Director
BACKGROUND:
One of the primary factors in establishing rates was the ability to appropriately fund future capital needs that were highlighted during the utility's asset evaluation. At the Oct. 19 City Council meeting, the proposed split of fixed and volumetric costs was raised in the context of whether those who use more water should pay a larger proportion of the costs currently allocated as fixed.
DISCUSSION:
Staff provides the following support for the proposed split of these cost categories.
Naperville's fixed versus volumetric split is well within - and below - industry standards
As a reminder, the fixed component of a customer's bill is static each month and represents the cost of being a customer of the utility. They address the assets and equipment used to provide the commodity and service as well as the backend and billing costs for the utility. Variable, or volumetric, costs, as the name implies, vary based on how much of the commodity or service is utilized during a billing period.
The City's current split between fixed and volumetric revenue averages 16% and 84% across all rate classes based on 2020 actuals. The proposed rates will adjust this split to 19% fixed and 81% variable by 2025 and 2026, with the residential split being closer to 25% fixed and 75% variable. The proposed split remains within - and is below - industry benchmarks. Surveys typically report an average split between 25% and 35% for fixed costs. According to Carollo, the most cited recommendation for fixed costs in the water and wastewater industry is 30%, which has been used successfully by many agencies seeking balance between affordability, conservation, and revenue reliabil...
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