Denver Water’s new rate structure shocks customers after summer watering

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The notice was inserted in February’s water bills, an extra piece of mail that most people probably sent straight to the recycle box.

It explained that Denver Water needed an overall 3.8 percent revenue increase this year to fix aging pipes and underground storage tanks. But even if people had read the flyer, it would have taken bill-history research and a calculator to figure out how that revenue increase would translate to their own bill.

Denver Water’s new rate structure — now inspiring outrage at the height of the summer lawn-watering season — had the effect of raising water bills by up to 35 percent for customers who use the least water. And while those customers were gasping in shock at their bills, another set — homeowners with vast lawns and swimming pools who use the most water — were seeing a sizable discount, The Denver Post found.

“I thought I was just imagining things,” Centennial resident Patricia Mericle said of her water bill jumping from $12 to $78, in part because of the rate increase but also because she used more water. She went on Denver Water’s website looking for answers but found the explanation hard to follow. “It seems to me there is not much transparency. It seems like they can just do whatever they like.”

Denver water increases
Crews from Denver Water put in a new water line in a residential neighborhood in Centennial. Denver Water’s new rate structure, the Denver Post found, increases water bills by 25-35 percent for the 5 percent of customers who use the least water yet decreases bills by 30 percent and even more for the 5 percent of customers who use the most water.

The new rate structure is still based on “the more you use, the more you pay,” using tiered rate levels. It’s just that some of those using the most are not paying as much as they were.

Rates last year ranged from $2.75 to $12.16 per 1,000 gallons, depending on how much water a household used and whether customers were in Denver or the suburbs. Now the most a customer will pay per 1,000 gallons is $7.87, which could save the largest consumers a few hundred dollars per year. While the largest water consumers are saving money, many low-use and middle-use customers are paying higher rates.

Denver Water raised its fixed service charge and condensed its rate structure from four categories to three, an adjustment intended to maintain consistent revenue even as its 201,800 customers collectively have gotten better at conserving water. A shrinking number of customers — down to just 7 percent — were in the top two highest-rate categories last year.

A “typical” Denver resident will see his or her water bill rise about $11 per month from June-September, while a typical suburban customer’s bill will go up about $17 per month in the summer, according to Denver Water calculations. But the impact is even more stark when looking at customers who moved from the first-rate tier to the second under the new structure, resulting in bills going up by 25 to 35 percent. And it’s the biggest-water users, those formerly in the fourth tier and now in the third, who are receiving up to 30 percent decreases.

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“It was entirely shocking,” said Gayla Ruckhaus, a school teacher who lives near downtown Littleton. “I have a child in college. We’re middle-wage earners and we try to be pretty conservative in our spending. It was a huge impact … for a water bill to double in the matter of a month or two.”

Ruckhaus had never had a water bill even close to $100. Her family’s typical summer bill, she said, was less than $50, but the bill for June came in at $101 and the July bill was even higher at $129.

On top of the rate hike, the weather has contributed to higher water bills this summer, Denver Water officials said. Denver had 5 fewer inches of rain this June-July compared with last
year. Overall water consumption increased by 4.3 billion gallons, or 32 percent, this June and July.

Another Littleton resident, Shaylynn Hall, has stopped watering her lawn after a huge jump in her bill. Hall’s husband, an electrician, will have to pick up side jobs so the family can get ahead after bills of $299 each for June and July. Their typical bill has never been higher than $150, she said.

“I am not happy,” Hall said, after Denver Water sent a worker to check for leaks at her request and found none.

Hall, like many others, doesn’t remember receiving any notice. “There is always a little pamphlet in the water bill,” she said. “I would have tossed it out. It says the same thing every time: how to save water.”

Denver Water, which has customer care workers answering phone calls from baffled residents, acknowledged struggling with the “communication component.”

“This is one of our lessons learned here,” said spokesman Travis Thompson. “The challenge we had is how to talk about this.”

The bill insert alerting people to a 3.8 percent “revenue” increase “confused the message,” Thompson said, adding that it was “tough to give an increase for anyone because the bills are so individualized.” Still, Denver Water attempted to avoid any shock by mentioning the rate changes on bills for three months straight, e-mailing customers on its notification list and blogging about it.

One customer, a recently retired petroleum engineer who is accustomed to cranking out spreadsheets, not only read the notice in his winter bill but crunched the numbers. Carl Paulson discovered his bill would go up by 26 percent because he is now paying an average rate of $5.74 instead of $4.56.

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Paulson requested data on customers’ average water usage from Denver Water, plotted graphs and presented them to Denver Water commissioners in March. Why are the highest water-users getting a break while average users are seeing such increases, he wanted to know. The committee that reviewed the rate structure, Paulson said, received data from Denver Water officials that was “wholly inadequate in describing the impact.”

Denver water increases
Patricia Mericle has stopped watering her lawn, except briefly at 2 a.m., because of her water bill, went from $12 to $78.

“Denver Water is intentionally hiding the impact from the public,” Paulson said. “Denver Water is counting on it being a small enough dollar increase that no one will notice and if they do notice, they will believe the increase was equal for everyone.”

The new rate structure went into effect April 1, but because people were consuming water at winter levels — basically only to cook, bathe and do laundry — the increase of a few dollars did not spark a major reaction.

Neighborhood online message boards lit up in July. “This is what happens when we don’t participate in governing,” wrote one woman, lamenting that she had not attended a Denver Water board meeting.

Denver Water officials said the new rate structure will result in more consistent revenue even in times of drought or above-normal rainfall. The change also was needed because in the last 10 years, customers have cut water consumption by more than 20 percent, which is good for the environment but hinders the utility’s ability to pay for pipe and water tank improvements, treatment plant upgrades and dam rehabs.

Under the new structure, the fixed service charge per month increased for all customers, whether they live in Denver or in the suburbs, from $6.74 to $8.79. Then, an “average winter consumption” was calculated for each customer — the amount of water a household uses to cook, bathe and do laundry. Those gallons are charged at the lowest rate, which is $3.28 per 1,000 gallons for suburban customers.

Typical winter consumption is about 5,000 gallons per month.

Customers who use up to 15,000 gallons more than their winter average — the amount needed to water an average-sized yard — are charged for those additional gallons at $5.90 per 1,000 gallons. And customers who crank up summer watering 15,000 gallons or more beyond their winter average pay $7.87 per 1,000 gallons for that additional water. Under the now-gone fourth tier, suburban customers using more than 40,000 gallons paid $12.16 per 1,000 gallons.

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The rate structure is the same in the city, but the rates are lower. City customers who used the most water previously paid $11 per 1,000 gallons but now will pay a rate of $6.74.

“The philosophy hasn’t changed: the more you use, the more you pay,” said Angela Bricmont, Denver Water’s chief of finance.

But why did Denver Water do away with the fourth tier? “A larger user doesn’t mean they are inefficient,” said rate manager Todd Cristiano, noting that the rate decrease for the largest consumers was a sticking point for the stakeholder group that reviewed the new structure but ultimately voted in favor.

Denver Water intends to watch closely and could revise the rate structure if cheaper water causes those high-use customers to start using more, Cristiano said. “Should we see a pattern where they use more water, that’s something we could go back and evaluate,” he said. “The rate structure is certainly not static.”

Bart Miller, a water expert with Western Resource Advocates, said the new rate structure is a “nimble approach” that encourages conservation because people will more quickly jump from the lowest rate tier than they would have previously. Any customer who uses more than their average winter consumption will move to the second tier. “They are getting a price signal even sooner,” he said.

And, Miller said, even though the biggest water-users are charged at a lower rate than before, they are “still getting a solid price signal and their annual water charges remain high.”

The new rate structure is projected to raise 5 percent more in revenue from residential customers this year, from about $104 million to $110 million. Denver Water’s total budget, including revenue from residential and commercial customers, cash reserves and selling electricity from its seven hydropower facilities, is $387.5 million. Denver Water does not receive tax dollars and its charter prohibits it from making a profit, meaning its rates are set to cover service costs.

The city of Littleton, after hearing from residents who are angry about the increase, recently requested additional data from Denver Water and a meeting with the city engineer. The city was not “directly invited to participate” in the rate review process, said acting city manager and public works director Mark Relph.

“Is there an opportunity in the future when they consider such issues for us to participate more directly?” he asked. “We are not the only community that has this concern.”

Denver Water’s customer care line: 303-893-2444

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