Water Rate Presentation 9/26/16

Article 1: “All proposed Changes to Water Rates Must be Approved by a Majority Vote of Town Meeting Before They Take Effect.”

  • State law specifically says that the water commissioners are subject to all lawful bylaws that the town may impose. Passing this article would not create a separation of powers issue.
  • Town officials say that other towns don’t have their Town Meetings approve water rates, so why should Shrewsbury?
  • Answer: Because no other towns have water rates where residential rates are so much higher than commercial rates, as I will demonstrate.
  • Almost all other MA towns have residential rates no higher than commercial rates.
  • The right question is – What justifies Shrewsbury having higher residential than commercial rates, unlike all the other towns?

Why this Article is Needed

  • Current residential rates are not just and not equitable.
  • The top commercial rates are too low to encourage more water conservation by larger commercial users.
  • Water bills have become a significant cost to residents, so water rates need more public scrutiny.
  • The original reason for raising residential rates higher than commercial rates – to meet the state standard – no longer applies. The town has been below the 65 gallon target since 2007.

Why Rate Differences

  • Shrewsbury has been below the limit since 2007. (At 53-55 RGPCD for several years)
  • Original reason has not applied for many years
  • But Selectmen have continued to maintain large differences between residential rates and commercial rates when they set new rates.
  • Residential rates were set higher than commercial rates starting in 2003 in order to get residential consumption under the state limit of 65 RGPCD.

Future Rate Increases

  • No reason to continue the current large rate disparities – Future rate increases should increase commercial rates faster than residential rates in order to reduce the disparity.
  • But – the Town Manager recently told selectmen he would ask for more rate increases next year.
  • His suggested rate scenarios would continue the current, large residential/commercial rate disparities.
  • Selectmen seemed satisfied with his scenarios.
  • Town Meeting should want to pass this article before this next round of rate increases.

How to Assess whether Shrewsbury’s Water Rates are Equitable?

  • Compare Shrewsbury’s rate structure to other towns
  • Compare Shrewsbury’s own residential and commercial rates at different consumption levels



Town Comparison Points (Towns Selected by Town Manager)

  • These other towns’ top residential rates are equal to their top commercial rates.
  • These towns have state water restrictions similar to Shrewsbury *
  • Shrewsbury’s top residential rate of $14.00 is substantially higher than every other town.
  • The average of top residential rates for these other towns is $6.93. Shrewsbury’s top residential rate is $14.00 (twice as high).
  • The most important point: These towns’ residential and commercial rates are equal at every rate level, not just the highest rate level.


  • On this chart, All residential and commercial rates of other towns are equal.
  • And to emphasize, ALL residential rates of these other towns are EQUAL to their commercial rates at ALL consumption levels.

Town Comparison Points

  • Shrewsbury’s top commercial rate of $4.30 is lower than the other towns, and substantially lower than most.
  • The average of the other towns’ top commercial rates is $6.93, which is 60% higher than Shrewsbury’s top commercial rate.
  • Shrewsbury could increase its top commercial rate substantially and increase revenues significantly without putting the town at a competitive disadvantage.
  • 80% of Massachusetts towns have the same water rates for residential and commercial customers (per Tighe&Bond survey).
  • Many of the other 20% have lower residential rates than commercial rates.
  • Mr. Morgado has not disputed these facts.
  • The selectmen have been silent.

How to Assess whether Shrewsbury’s Water Rates are Equitable?

  • The second way: Compare Shrewsbury’s own residential and commercial rates at different consumption levels


Shrewsbury’s Rates at Different Consumptions

  • Shrewsbury’s residential rates are higher than commercial rates at every consumption level, excluding the base charges for 0 -5,000 gallons
  • Implied effective rates for residential and commercial users at 0 – 5,000 gallons are substantially higher than the top commercial rate of $4.30.
  • Residential Rates for consumption in the 26 – 60,000 gallon range is $6.90 per thousand, which is 60% higher than the top commercial rate of $4.30.
  • The Residential Rate even for low consumption in the 6 – 25,000 gallon range is 12% higher than the Commercial Rate ($3.70 vs $3.30)
  • Over 700 commercial water bills paid a rate of only $4.30/1,000 in the 26,000 – 3 Million gallon range.
  • Almost 4,000 residential water bills paid a rate of $6.90/1,000 in the 26 – 60,000 gallon range, 60% higher than commercial.
  • Selectmen have no explanation.

Water Rate vs Water Bill

  • Mr. Morgado always focuses on water bills because residential water bills are higher than commercial water bills only above 28,000 gal.
  • But that is only because the base charges have been set higher for commercial than for residential users.
  • These base charges appear to be arbitrary (See one of the next slides)
  • The major influence on customer behavior regarding water consumption is the rate that must be paid for an additional 1,000 gallons.
  • The base charge is a fixed charge. It cannot be reduced by consuming less water, unless one wants to disconnect from the water system. It has little influence on consumption decisions.
  • So the conservation focus should be on the incremental water rate for every additional 1,000 gallons, not the total water bill.



Base Charges (see Point 3 in above letter)

  • Finance Committee members and other town officials have claimed that there is justification for the base charges.
  • But they have provided no hard evidence
  • How they develop the base charges, or
  • Why the commercial base charge should be higher than the residential base charge.

Water System Competency

  • Some Town Meeting members have stated that Town Meeting is not competent to vote on water rates.
  • But Town Meeting does vote on other, more complicated water articles, such as tonight’s water treatment plant articles.
  • If a thorough knowledge of a subject was necessary for a Town Meeting member to vote on an article, most members would have to recuse themselves on many articles.

What about selectmen competency? Selectmen have

–Repeatedly failed to ensure accurate reporting to the state on the town’s water system

–Not developed policies and procedures for the entire water system

–Not tried to enact more equitable rates

–Failed to resolve the Manganese problem before it became a major issue.

–Not adequately addressed  the unaccounted water problem, which increased from 21% in 2007 to 35% in 2016 – 1/3 of all pumped water is wasted. *

–Note: Reducing unaccounted water would have reduced pumping levels substantially, thus probably reducing the severity of the Manganese problem.

Improving the Water System

  • Reasonable people will agree that the selectmen could have managed the town’s water system better.
  • Town Meeting members should become more involved in water system issues.
  • Having Town Meeting review and consent to future water rate increases is a good start.

Summary: What are equitable water rates?

  • Almost all other MA towns think that equitable means residential rates no higher than commercial rates.
  • Shrewsbury does not.
  • In terms of reviewing Shrewsbury’s rate structure, rates should be equal for residential and commercial users unless there are compelling reasons for different rates.
  • Shrewsbury’s compelling reason no longer applies.
  • By both measures, Shrewsbury’s rates are NOT EQUITABLE

Water Rate Article

  • Please give this article your serious consideration, and please vote YES.
  • Thank you.

Postscript: No town official has refuted any of the hard data in this presentation. The Town Manager’s slides at Town Meeting did not refute them, and he has not distributed his slides to Members, as promised. Why not?

Posted 10/11/16 by John Lukach