Print Back to Calendar Return
  Business Items   Item #:   3. d.    
Committee of the Whole Meeting
Meeting Date: 06/21/2010  
Utility Costs and Monthly Utility Billing - Goodwin
Presenter: D. Goodwin Submitted By: Corporate Services
Department: Corporate Services  
Strategic Vision Element: Related Goal:

Information
Recommendation
That the report regarding utility costs and monthly utility billing be received as information.
Purpose
To provide information about utility costs and monthly utility billing as a follow up to deliberations at the May Committee of the Whole Meeting.
Background
Administration is seeking input from the Committee on the direction to be used when planning for the management of utility costs and billing. Direction on the following items will assist Administration with the preparation of new initiatives and service changes for Council's consideration.

Utility Costs

Committee direction has been to minimize expected utility rate increases needed to sustain operating costs and future utility infrastructure requirements. Current levels of utility revenue are not sufficient to sustain the utilities. The attached chart illustrates estimated utility costs relative to projected revenue.

Historic and current levels of revenue have covered annual operating costs as well as providing a portion of the funds needed for infrastructure replacement. However, the current revenue levels will not cover all capital replacement and would not provide funds to construct a new reservoir.

Approximately $4 million per year is needed to cover the annual cost of utility capital projects needed over the next 10 years and to set aside funds each year for the construction of a reservoir. Replacement of water and wastewater infrastructure needed over the next 10 years totals $27 million. Depending on population growth and consumption levels, the City will require a new reservoir in the next 10 to 15 years. The reservoir is estimated to cost approximately $20 million in addition to the ongoing infrastructure replacement.

The cost of capital replacement of utility infrastructure has always been significant. However, utility rates have not covered this cost. Municipalities have used a combination of ways to keep utility rates artificially low. Capital replacement has been deferred, grants have been used for utility infrastructure and, as in the case of Spruce Grove, much of the infrastructure is relatively new. 

Spruce Grove has adopted the same approach taken by many Alberta cities. Utility rates are expected to continue increasing by 10-20% annually until revenue is sufficient to cover all operating costs, capital replacement and future infrastructure requirements. 

Monthly Utility Billing

April 2010 utility bills were analyzed to determine what percentage of customer bills are $200 or more. April bills indicate the average annual consumption, but do not reflect the peak consumption of the summer. In 2010 13% of customers have bills of $200 or more. If rates increase as projected, the number of customers with utility bills of $200 or more will grow to 35% in 2011 and exceed 50% in 2012.

In May, Committee received information that monthly utility billing could be provided at a cost of approximately $1.00 per customer per month. The additional costs would be for printing, paper, postage and one additional billing staff member.  

However, there is an alternative that would cost only $0.52 per customer per month. The cost of an additional billing position could be avoided if the City makes an earlier investment in new water meter technology.

Accelerated Meter Replacement

If the remaining residential water meters are replaced, virtually all residential meters would be equipped with a transmitter that allows the City to obtain the meter reading by walking by the residence. The time required to read meters would be significantly reduced and the meter reader position would be able to work on analyzing meter reading data, contacting customers who may have water leaks, performing data entry and assisting with customer inquiries.
Options
Not applicable.
Impacts/Consultation
Committee's discussion about utility charges will be incorporated into the recommended Corporate Plan for Committee's consideration. Review of the plan is scheduled for the Committee of the Whole meeting on November 15-17, 2010. Adoption of the plan is scheduled for the Council Meeting on November 29, 2010.

Through the proposed initiatives various positive impacts would result. Described below are the potential benefits.

Leak Detection

Existing meter reading software identifies continuous leaks wherever a new generation of meter is installed. Currently, customers are notified as soon as possible within the 60 day meter reading cycle. Customers who have leaks would benefit greatly from monthly meter reading. In the course of the April 2010 meter reading, leaks were reported for 203 meters; 180 of which were for 35 or more days. Efforts are made to contact customers about leaks a few days after the meter reading, but additional resources are necessary to establish this as a new service level. 

Currently, around three quarters of the residential meters in the City are able to detect continuous leaks. If an accelerated meter replacement program is undertaken, virtually all residential meters would be able to detect leaks. Approximately 500 commercial/industrial meters would remain to be replaced as they reach the end of their useful lives.

Collections

For many customers, payment of a bi-monthly utility bill is more difficult to manage than payment of a monthly bill. Monthly utility billing provides a bill with a lower amount and a monthly due date. Monthly billing would eliminate the need for separate reminder notices.

Billing Services

In 2011, the City would enhance billing services for utility customers by further promoting pre-authorized payments and introducing eBilling. If monthly utility billing is approved, these enhancements will be coordinated with the roll out of monthly billing.

Implementation/Communication
Adequate preparation and testing are key to a successful implementation of changes to the utility bills. Existing financial software allows for monthly utility billing and eBilling, but sufficient time and consulting resources are needed to configure and test the software.

Efficiency Improvements

There is an opportunity to reduce the cost and staff time needed to process utility payments by further promoting pre-authorized payments. Currently, 888 customers utilize the pre-authorized payment program - 10.6% of all customers. There is a good potential to increase the number of pre-authorized payments.

eBilling offers the possibility of savings in costs and staff time. The City would first pilot eBilling with a small group to ensure proper procedures are used for the collection and maintenance of customer information.

Schedule

Arrangements would be made to replace the remaining water meters in early 2011, subject to Council approval in November. If meter replacements are completed in the first quarter, monthly billing would commence during the second quarter of 2011. The enhanced customer leak detection program would commence as soon as the monthly billing was successfully introduced - likely during the third quarter of 2011.

The utility billing brochure would be updated and distributed to explain monthly billing, enhanced leak detection, eBilling and promote pre-authorized payments.
Strategic Goals
The Corporate Plan contributes to the following strategic goals approved by Council. 
  • Goal One - Benefiting from Growth - The City of Spruce Grove will manage growth to maximize benefits to the community.
     
  • Goal Two - Pursuing Operational Excellence - The City of Spruce Grove will be an efficient, operationally effective, well-managed organization.
      
  • Goal Five - Embracing Environmental Stewardship - The City of Spruce Grove will work with industry, business and residents to improve the health of our environment.

Fiscal Impact
Financial Considerations:
The operations and maintenance costs of operating the water and wastewater utility continue to grow at a rate slightly higher than inflation. The contracted costs of purchasing water and processing wastewater are expected to grow at an even higher rate because these charges recover both operating and capital costs.

Capital replacement costs are also increasing; primarily because of the age of the City's infrastructure. In accordance with the master plans, the City is preparing to construct a new reservoir and continue to replace utility infrastructure as required.

Service Change - Monthly Utility Billing

Depending on Committee discussion a service change would be prepared to implement monthly utility billing. To minimize the cost to the customer significant savings in staff time are needed. The needed savings in staff time could be achieved by accelerating the meter replacement program to replace all remaining residential water meters in early 2011. Otherwise additional staff resources would be required.

Preliminary estimates indicate that monthly utility billing could be implemented for a cost of $44,550 in 2011 and $55,400 in 2012; which translates to $0.52 per customer per month. The additional costs are primarily printing and postage costs plus increasing the meter reader position from 0.75 FTE to full time.

Using existing approved 2010 budgets pre-authorized payments would be further promoted and existing utility billing software would be developed and tested to ensure eBilling and monthly billing are ready for implementation in early 2011.

New Initiative - Accelerated Meter Replacement

Depending on Committee discussion a new initiative would be prepared for a project to accelerate meter replacement. The current program replaces 500 meters per year until all remaining old generation residential meters are replaced. It is proposed to replace all of the remaining 2,100 residential meters in 2011.  The 2,100 meters could be purchased and installed for approximately $744,000, at a 10% discount.

The replacement program for commercial and industrial properties would continue over the next seven years at an approximate cost of $225,000. Many of the commercial meters are larger and more expensive to replace.

Alternatives to accelerating the meter replacement program are to not proceed with monthly billing or to create one additional utility billing position. If a billing position is added, the costs for the initiative would increase by approximately $55,000 per year.  Monthly utility billing without accelerated meter replacement would be $98,550 in 2011 and $111,400 in 2012; which translates to $1.04 per customer per month.
Attachments
Chart - Utility Costs

City Council and Committee of the Whole agendas and minutes are posted on the City of Spruce Grove website for information purposes only. These agendas may be changed at the discretion of Council by the addition or deletion of items. Anyone reviewing the draft agenda should do so on the understanding that it is subject to change by Council.

All attachments are in PDF format, and require the Adobe Acrobat Reader plug-in for viewing.

Audio from the most recent City Council and Committee of the Whole meetings are available via podcast on the City of Spruce Grove website.



AgendaQuick©2005 - 2020 Destiny Software Inc., All Rights Reserved