The Altoona Water Authority is considering rate structure changes that would increase costs for most customers, including elimination of the “free” water enjoyed by minimum users, coupled with a total increase of either $2.20 or $3.67 to their monthly bills, depending on how much they use.

The authority’s primary intent is to begin shifting revenues away from charges based on the amount of water used toward charges that are fixed from month-to-month, no matter how much a customer uses.

“(There’s an) urgent need for (a) reliable and dependable revenue stream,” stated consulting engineer Mark Glenn of Gwin Dobson & Foreman in a packet that accompanied a presentation to the authority board last week.

Currently, 50 percent of revenues come from charges based on water use and 50 percent from unvarying charges.

The mix has proven problematic because of a case of diminishing returns: when the authority has raised water rates, the additional income never meets expectations, because rate hikes move customers to conserve — and because increased conservation is occurring anyway, given modern attitudes and water-conserving fixtures.

Those under-estimations have resulted in a cumulative budget shortfall since 2010 of $3.2 million, while 725 additional customers have shrunk their usage to enter the minimum category over the last decade, according to the packet.

The problem wouldn’t exist if the authority’s costs were fully aligned with water production, because those costs would shrink commensurate with a reduction in demand.

But 75 percent of the authority’s costs are fixed, according to Glenn.

Costs vary with demand to an extent, but regardless of demand, employees who operate the water and sewer treatment plants, who manage the operation and look for leaks still need to be paid, as does debt service for capital projects, the city’s lease charges for use of the systems and engineers for designing projects to meet projected needs and regulatory requirements.

The ultimate goal is to bring the fixed charges from the current 50 percent of revenue to 75 percent — to match fixed costs — a shift that could take a decade, officials said.

The remaining 25 percent of charges would continue be based on water usage.

The authority will accomplish this by confining future rate hikes to fixed-charge increases, rather than increases to water-use charges, according to the packet.

The biggest change proposed last week that could go into effect in January is elimination of the minimum user category, which would bring the authority into conformance with most operators of large water systems, according to the packet.

That category is for customers who use up to 1,667 gallons, or 222.8 cubic feet.

The bills for all minimum users are currently identical, no matter how much of the “free” allotment they use.

If the authority board approves the recommended changes in December, there would be no more “free” allotment.

Instead, there would be a minimum fixed charge, based on the size of the entry pipe or meter — with higher charges for larger meters.

The recommended sewer charges would also go from the current flat fee that varies by meter size to a “declining block system” to match the setup for water rates.

In a declining block system, rates decline with increased volume — not steadily, but in chunks that represent ranges of water usage.

On the water side, for an authority customer’s first 1,667 gallons, the rate is less than for that customers’ next 2,333 gallons and even less for the next 26,000 gallons, and so on.

Long-term, the changes envisioned in the recommendations would also move toward correction of the current imbalance in rates, whereby residential users subsidize high-volume users — who receive 15 percent of the water, but contribute only 6 percent of the revenue.

The authority intends to move toward that correction by phasing out the declining rate blocks.

The target is a “flat usage rate,” the packet states — although General Manager Mark Perry expressed his belief that at least some discount for volume usage is appropriate, given the “economies of scale” that the authority realizes by providing large volumes to industrial customers.

There should at least be “equity” between residential and high volume users, according to the packet.

The recommended changes must also create “off-budget” revenue to fund capital projects and maintenance, which are needed constantly to keep up with regulations and deterioration of the system — much of it more than a century old.

The authority already began such a revenue stream earlier this year with the addition of a water capital surcharge.

If the board accepts the recommendations, users of up to 1,000 gallons — slightly more than 133 cubic feet — would pay $31.57 a month for water — $1 more than now.

They would pay $24.02 for sewer — $1.20 more than now.

Those users of up to 1,000 gallons would pay a total of $55.59 — $2.20 more than now.

Users of between 1,000 and 1,667 gallons would pay $32.24 for water — $1.67 more than now.

Those users would pay $24.82 for sewer — $2 more than now.

They’d pay a total of $57.06 — $3.67 more than now.

Those in the next block — those not in the minimum category, but who don’t exceed 4,000 gallons a month — would also pay $1.67 a month more for water — a total of $58.10.

Like those in the higher end of the minimum category, they’d pay $2 more for sewer — a total of $24.82.

The changes in both water and sewer rates for high-volume users depends on meter size and water usage and vary widely — although the increases generally would be higher for high-volume than low-volume users, according to the packet.

Mirror Staff Writer William Kibler is at 949-7038.