The information in this blog is not intended to be legal advice. Postings are for informational purposes only and cannot replace specific legal advice from an attorney.

Monday, March 14, 2011

Water Conservation Rate Structures in Ordinance

What’s all this buzz about a conservation rate structure and city water? The idea is, the more water you use, the more you pay. A state law tries to make conserving water pay -- and using water cost you more.[i] The law currently requires public water suppliers in the metro area, serving more than 1,000 people, to include a “conservation rate structure” in city ordinances dealing with water rates.

So how does a conservation rate structure work? It’s up to the city water system. Conservation is the key but cities can use a variety of approaches to achieve it.

So what goes into water rates to begin with? To make this a little more fun, think of buying a Twins baseball ticket. Some of your money goes for maintenance and operation of the stadium, a bit of the price of each ticket goes to a sales tax to pay for the stadium itself – and then you pay extra for the best seat in the house.

In the same way, city water rates use volume charges to cover operation and maintenance of the system and a base rate to cover infrastructure costs.[1] After that, a city may use block rates (like that Twins ticket in that primo section behind home plate) where higher water usage puts you into a higher cost bracket for all the water you use. Just as Twins tickets may run a little higher because fans are paying for that new stadium, city water rates vary if a new water plant is being planned or built or paid off.

What are some ways to set a conservation rate? Cities may use a seasonal rate to encourage conservation in the summer when usage skyrockets due to lawn watering. Seasonal rates might include a surcharge or an added fee to discourage constant watering. And, those fees or surcharges might disappear in the winter.

Cities must also consider the number of residential units in an apartment building. Water usage to an apartment building is divided by the number of residential units. If the average amount of water used by each apartment is higher than a residential home, those users, or that building, will pay more too.

Why was this law passed, how is it enforced and when does it take effect? The law seeks to eliminate the practice of charging less the more water you use, which of course, encourages consumption not conservation. Currently, a metro city water system serving more than 1,000 people must have a conservation rate structure in place before it requests approval from the state Department of Health to construct a new public water supply well or requests an increase in the authorized volume of water appropriation. The need to have a conservation rate structure kicks in for all remaining city water systems (including greater Minnesota) serving more than 1,000 people on Jan. 1, 2013.


  1. Another popular option for conservation rates are increasing block rates. The more you use, the more it costs per gallon.

    I like the analogy of the Twins Tickets. Another analogy I’ve borrowed from the Mayor of Edina is the “Sane Lane” theory: Highways are (hopefully) built to meet rush hour demand, which is an expensive prospect. The state’s “sane lanes” use the MNPass to charge drivers for the privilege of free flowing traffic during rush hour. It’s a way of getting those who need or want more lanes to help pay for them.

    Similarly, a water system has to be built to meet peak summer demand for water, driving up infrastructure costs. The cost of building the water system is usually more than half of your total water bill. After all, nobody actually pays for water. Your water bill reflects the cost of pumping it, treating it, and delivering it to your faucet. An increasing block rate ensures that people using more water on hot summer days help pay for the cost of making it available.

    Some cities also prefer an increasing block rate because it keeps the cost of essential indoor water use lower. There is a summary of conservation rates on the Ehlers website.

  2. Thanks, Jessica. Interesting points and the Sane Lane analogy is excellent.