Friday, April 13, 2018

An ethical obligation in the rate structure of a public utility or Lebanon, Indiana Utilities seeks a water rate increase in 2018

The Lebanon Utilities is seeking to have the City Council modify the rate schedule to allow for a rate increase to pay for proposed projects primarily to accommodate increased water and sewer usage demands. The City Council met on Monday 09 April 2018 where the ordinance proposal was heard on first reading. I provided the only public comment which I was asked to put into writing. So here is basically what I had to say.

First, I rise in support of the proposed water utility projects and the desired funding increases although there is a caveat. In a historical sense, even inclusive of an increase, delivery of water to our homes is a bargain compared to carrying buckets to the community tap and risking contracting cholera. Contemporarily though it is still a small price for the average water customer.

My concern tonight is that the overall revenue or average bill does not reflect what I propose is a fundamental error in the rate structure. The current rate scheme is based upon the private for-profit goods supplier model. That is it considers a base transactional cost and then discounts volume; the goal being higher consumption. While this is a common profitable tactic employed by the corporate community I contend that a public utility, a member of the public trust, has an ethical obligation to follow a different model.

Two models are in practice which encourage conservation. One is the flat per unit approach. That is where one unit price is set. The price which each customer pays is directly proportional to usage. The customer using twice as much pays twice as much; ten times as much pays ten times as much. This is comparable to the sales tax approach to taxation.

The other model is punitive based scheme designed to have a greater influence on behaviour. Under this approach the median user may pay a median rate while those who use less pay a progressively lower per unit rate. On the upper end the rate would progressively increase. Those who place the greatest strain on the system pay the highest rate. This is the mode that produces greatest conservation. This is comparable to the federal income tax approach to taxation which discourages and penalizes productivity and income growth.

Our current pricing structure, being just the opposite of that, places and added burden on the poor or youth who are less likely to use automatic dishwashing machines, lawn watering systems, or other opulent uses of water and may even do laundry off site. In effect those who conserve or use moderate amounts of water are taxed to support the wasteful or opulent users. Utilities, just as with all other goods suppliers, are an energy dependent agent. Thus, to some degree it is a polluter which diminishes quality of life for all to some extent. I therefore suggest that you adopt a new pricing structure that encourages conservation.

I propose that a single per unit rate be applied and if water supply or treatment resources should suddenly become overtaxed in the future before upgrades can be implemented then a progressive rate structure could be temporarily imposed to further promote conservation.

I do not object to expansion or rate increases but I do not feel that those who place the least burden on the system should be disproportionately burdened to subsidize those who do.

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