Utility Rate Philosophy
Provide our ratepayers with simple, fair and budget driven water and sewer utility rates.
- Simple to understand and administer.
- Fair for all ratepayers.
- Adjusted annually to the budget, and the latest customer and consumption data.
How Utility Rates Work
The City utilizes a Base + Consumption rate structure for both water and sewer rates. The concept behind this rate structure is to generate enough revenue to cover the cost of maintaining the systems, regardless of customers consuming water or putting wastewater into the sewer, with flat base rates; and generating the remainder of the required revenue through consumptive charges to cover the variable costs of production and delivery of water, and treatment of wastewater. The base rates are an equal distribution across all customers, and consumptive rates charge each customer based on individual consumption.
Water and sewer loans are a separate component of utility rates. Loans are distributed equally in the same manner as base rates as a flat monthly fee per meter multiplier based on meter size.
Base/Consumption Rate Splits
The current water rate splits base and consumption 77%-23%, and the current sewer rate is split 70%-30%. Ideally the base/consumption split would put all fixed costs on the base rate, and all variable costs on the consumptive rate. However, the base/consumptive splits are somewhat subjective. There are different revenue and conservation models using various methodologies to split the costs differently between the base and consumptive rates. With a relatively small water system, the City has two basic goals in regards to the base/consumption split; ensuring our base rates generate enough revenue to minimally maintain the systems with base rate revenue; and to be fair to all customers with a consumptive rate which reflects the costs of individual usage.
An annual water budget of $100,000 would require $77,000 in revenue be generated by the base rate and $23,000 in revenue be generated by the consumptive rate. The base revenue requirement is divided by the number of billed meter multipliers from the previous 12 months to determine the base rate. If 3600 multipliers were billed then the base rate would be $77,000 / 3600 = $21.39 per meter multiplier. The consumptive rate is similar except the revenue requirement is divided by billed consumption from the previous 12 months. If 18,000,000 gallons were billed then the consumptive rate would be $23,000 / 18,000,000 = $0.00183 per gallon; or $1.83 per thousand gallons.
Distribution of base rates and loans are based on the size of the water service’s meter. A cost model is used for water rates; while a capacity model is used for sewer rates. Both cost and capacity ratios are recommended by American Water Works Association, and City commissioned water and sewer rate studies, which were adopted by City Council in 2012 and 2015 respectively.
The size of meter required is dictated by Oregon State Building Code based on several factors. The majority of meters in Vernonia are 3/4" meters, which simply pay the base and loan rates. For larger meters the rates are multiplied by meter multiplier. If the water base rate is $20 and the water loan rate is $5, a 2" meter is billed ($20 * 2.9) + ($5 * 2.9) = $72.50 fixed water rate.
Water Consumption Rate
Water consumption is billed in 100s of gallons based on a rate per 1000 gallons metered.
Sewer Consumption Rate
Sewer consumption is billed in 100s of gallons on a rate per 1000 gallons metered based on the previous winter average (Nov-Feb) for each customer. New customers without a previous winter average are billed for 4900 gallons, which is the average 3/4" meter monthly average for all customers. The 3/4" monthly average is computed each February. The average is rounded up to the nearest 100 gallons and goes into effect for March billing along with winter averages.
Key Dates & Timeframes
The fiscal year begins July 1st and ends June 30th.
The revenue year for utility billing begins August 1st and ends July 31st. Charts and other data products on this site for example may show water consumption data for May 2019, which is the billed month; meaning that amount of water was consumed in April 2019. The revenue year data is used to track the rate performance of a year's utility rates.
The sewer consumption year is March 1st to February 28th (or February 29th for leap years). Sewer consumption over this 12 month period is used to calculate next year's sewer consumption rate.
The monthly billing period begins on the first day of each month and ends on the last day of the month. The bill you receive, and is dated the 1st of the month, are the charges you accrued from the previous month.
Who & How Rates Are Set
City Council is ultimately responsible for setting utility rates. In June of each year Council votes to update utility rates as adopted in the Master Fee Schedule which go into effect on July 1st, the beginning of the City's fiscal year. However, a considerable amount of work, public participation and scrutiny proceeds the adoption of updated utility rates.
Confidently setting utility rates which will perform as expected begins with accurate data. Every month City Staff collects and computes over 60 data points which are used to monitor current rate performance, set quality utility rates for the coming year, and analyze trends. The main purpose of this site is to make that information easily accessible not only to decisions makers, but to the ratepayers as well.
Around March of each year City Staff begins preparing the proposed water and sewer budgets, analyzing the past year’s usage data, and calculating proposed rates to inform Council and the Budget Committee during the budgeting process.
In April and May the Budget Committee convenes to review the City’s proposed budget for the next fiscal year. The budget process involves Staff, Council and Budget Committee working on a final proposed budget for Council to vote on and adopt. For the purposes of setting utility rates two key pieces of information come from the final budget. The amounts of the water and sewer budgets, and any additional operating and facilities reserves revenue Council chooses to generate over the next fiscal year.
With the budget numbers, last year’s water/sewer statistics, and state of the current budget as the fiscal year winds down in hand, Staff calculates rates to present to Council for adoption.
Council can also convene the ad hoc Utility Rate Review Committee to review the proposed rates, as well as make rate structure and other rate related recommendations to Council. The Utility Rate Review Committee played a key role reviewing and recommending some small but key changes to our rate structures in the last several years, which made our rates simpler and more fair to all ratepayers.
The charts and data products herein are intended for City Staff and Council to review water and sewer statistics for determining utility rates and to monitor rate performance.
All this information is public record and made easily accessible here, however some of it is provided with little or no context.
There are subtleties and other factors which the City takes into account concerning utilities rates which may not be included here.
Use and promote this information at your own risk.