In an effort to promote water as a “service provided,” rather than a “commodity that is sold by the gallon,” a team funded by the Water Research Foundation has spent the last two years focusing on alternative business models for water utilities. At ACE 2012, the research team delivered an interactive series of presentations on “modifications” and “transformations” to the current utility business model, American Idol style! The models (described below) were very theoretical at that point. But, the audience enthusiastically chimed in with their feedback by voting on the models presented. Since that time, the team has incorporated this feedback, as well as feedback from various other events and sources, into a closer exploration of these models. The team has actually applied some of the models to historic data for specific utilities to see how the revenue stability, in particular, might be improved.
The first model, called the Peakset Base Rate Model, would charge individualized base charges founded on a customer’s maximum period of consumption. This concept is akin to the “demand charges” used by power utilities, yet it is grounded in the limitations of current prevalent water metering technology. Under this rate structure, a customer’s base charge would be individually set based on their three-year rolling average peak month of demand. The utility would still charge variable rates, but they would constitute a lower proportion of a customer’s bill. This model would allow a utility to build more of its cost recovery into the base charge while still promoting customer conservation and efficiency. In particular, it would encourage steady water use. The presentation will include the results of applying these concepts to one utility’s data for 2011.