The Department of Water and Power (DWP) serves the City of Los Angeles and some small adjacent areas and is the one of the largest municipal utilities in the nation. The City’s increasing block rate developed from of a Citizens Blue Ribbon Committee in 1993 and was widely noted for several innovative features — a seasonal increasing block rate structure based on marginal cost pricing principles, elimination of fixed charges (resulting in a 100 percent commodity-based revenue generation), an intensive home survey program that accompanied the roll out of rates, rate adjustment mechanisms to balance revenue, and an ongoing public involvement and outreach program. This latter public involvement process brought about the evolution from a generic block rate structure — where each block is defined by a fixed amount of water — to adoption of a rate structure in 1995 that uses information on lot size, weather zone, and household size to define block size.
The DWP rate structure has been widely seen as a success that helped flatten water demand in spite of a growing population and economy. DWP’s rate structure has maintained required utility revenues, reinforced incentives to use water efficiently, and has achieved broad customer acceptance within a major metropolitan area having a diverse customer base.
Download the full case study below, and visit FinancingSustainableWater.org for more information on utility rate structures.
Image credit: "Los Angeles with San Gabriel Mtns," USDAgov © 2014, used under an Attribution-ShareAlike 2.0 Generic license: https://creativecommons.org/licenses/by-sa/2.0/