ISSUE

Due to its location in the southwest desert, the El Paso Water Utilities Public Service Board (PSB) faces numerous supply and operational problems that are magnified during periods of peak water demand. When PSB wanted to implement a rate plan through additional revenues and rate restructuring to fund future water supply projects, it needed to be sensitive to the fact that its service area had one of the lowest per capita income levels of any major metropolitan city.

SOLUTION

In order to verify that the recommended rate increases and structures would be accepted by the community, Red Oak evaluated a number of pricing alternatives, including the PSB’s inverted residential block structure and excess-use approach for nonresidential customers.

The selected rate structure — an excess use approach for all customers — was designed to balance the limited resources of the arid region and the influx of workers during daytime hours. Red Oak Consulting projected demand reductions based on price elasticity estimates so that, when considered within the spectrum of a comprehensive water conservation program, per capita usage could be reduced. The result: a decrease from 200 to 160 gallons per capita, per day (gpcd) over an approximate five year period. The PSB is now working to reach its target of 140 gpcd. Red Oak continues to work with the PSB to modify its rate approach to achieve this goal.

BENEFITS

The adopted rate structure considered the lower income level accounts, which was consistent with the utility’s comprehensive water conservation program (decreasing per capita usage by 30 percent) and generated revenues sufficient to maintain established performance metrics and attract new capital.