Water Rate Harmonization and Universal Metering in the
Former Cities of Toronto and Etobicoke
The Works Committee recommends the adoption of the following recommendations Nos. (7) and (10) embodied in
the joint report dated June 30, 1999, from the Commissioner of Works and Emergency Services and the Chief
Financial Officer and Treasurer:
"(7)the effective date for the first year water and sewer rates (of the four-year phase-in plan) for the former Cities
of East York, Etobicoke, North York, Scarborough and York, be amended by changing the words "Effective
September 1, 1999" to read "Effective November 1, 1999", to coincide with implementation of the new water billing
system;" and
"(10)due dates for water billing be set at the discretion of the Treasurer, at least 21 days after the billing dates;"
The Works Committee reports having deferred consideration of the remainder of the report until its next meeting,
scheduled to be held on September 8, 1999, for consideration as a deputation item.
The Works Committee submits the following joint report (June 30, 1999) from the Commissioner of Works and
Emergency Services and the Chief Financial Officer and Treasurer:
Purpose:
To respond to Council's request for a report on funding and implementation options available for the water meter
conversion program and the implications on water rates in the former City of Toronto.
Funding Sources, Financial Implications and Funding Impact:
All options presented in this report continue to provide full funding for the water and wastewater program through the
water and sewer rates. The 1999-2000 water and sewer rates for the former Cities of East York, Etobicoke, North York,
Scarborough and York have already been adopted by Council (a four-year phase-in to the competitive rate structure), and
as such, will not be affected by any of the options discussed in this report.
Funding in the amount of $21.0 million for the conversion of flat-rate accounts to metered service for the former City of
Toronto is contained in the 1999-2003 Capital Works Program previously received by Council, however, this amount was
held in reserve pending a resolution on an appropriate Universal Metering strategy. New funding sources for this
conversion, such as that available through the deferral of decreases that would be realized by former Toronto water
customers and/or a rate increase specific to flat-rate customers, will have a favorable impact on the 1999-2003 Capital
Works Program Budget.
Recommendations:
It is recommended that:
(1)with respect to the implementation of the Universal Metering Program, a voluntary program be implemented over a
four-year period to convert the remaining 85,000 flat-rate accounts in the former City of Toronto and 1,500 flat-rate
accounts in the former City of Etobicoke, subject to the following conditions:
(i)the City install water meters free of charge to homeowners and provide one water efficiency kit per home;
(ii) as an incentive to installing a water meter, the flat-rate customers in the former City of Toronto and the former City
of Etobicoke be eligible for a $60.00 subsidy towards the installation of a low-flow toilet;
(iii) on January 1, 2004, the rate charged to flat-rate customers in existence at that time be increased by 100 percent, and
by a further 100 percent in each successive year; and
(iv) effective January 1, 2004, any flat-rate customers that have not voluntarily participated in the meter conversion
program be required to pay for the cost of the water meter if the customer then so chooses to convert to a metered service;
(2)with respect to funding the Voluntary Meter Conversion Program:
(i) the rate charged to flat-rate customers in the former City of Toronto and the former City of Etobicoke be increased by:
-5.0 percent effective January 1, 2000;
-a further 10.0 percent effective January 1, 2001;
-a further 15.0 percent effective January 1, 2002;
-a further 20.0 percent effective January 1, 2003; and
-a further 100.0 percent effective January 1, 2004, and a further 100.0 percent in each subsequent year;
(ii) the rate decrease that would be realized by former City of Toronto's metered customers under the phased-in
competitive rate structure be deferred for a period of three years, and effective November 1, 2002, the harmonized
competitive rate structure be applied for metered customers in the former City of Toronto; and
(iii) the anticipated new revenue from the former City of Toronto, in the amount of $14.6 million from the three-year
deferral of decreases respecting metered customers, and $11.6 million from the increases in flat-rate charges, be used to
fund the Universal Metering Program ($21.0 million), and the balance be used to fund an incentive program directed at
facilitating the conversion of residential flat-rate customers to metered service ($5.2 million or approximately $60.00 per
residential flat-rate customer), and such an incentive program to include consideration of a subsidy towards low-flow
toilets;
(3) a list of flat-rate customers requesting conversion to metered service be established on a first-come basis and tendered
as a priority each year;
(4) the following be established as mandatory water meter installation criteria for the City to install a free of charge meter
where no meter exists:
(i) homeowners who take out a plumbing permit to upgrade their household plumbing;
(ii)new home construction; and
(iii) purchasers of properties which are on a flat-rate billing system agree, as a condition precedent to receiving a
clearance letter from the City at the time of property ownership transfer, to having a water meter installed; and
(iv) as a condition of the City's Water Service Connection Repair Program, flat rate customers agree to having a water
meter installed;
(5) Council redirect the provision of $21.0 million contained the 1999-2003 Capital Works Plan of the Water and
Wastewater Program respecting Universal Metering to providing funding to the City's water efficiency programs, and that
the Commissioner of Works and Emergency Services report to the Works Committee in the fall of 1999 on a Water
Efficiency Plan for the new City and the use of these funds;
(6)the Commissioner of Works and Emergency Services and the Chief Financial Officer and Treasurer prepare an annual
report to the Works Committee and the Policy and Finance Committee on the annual progress and financial impact of the
Voluntary Universal Metering Program, and recommend any modifications to the financing and/or implementation plan
described herein;
(7)the effective date for the first year water and sewer rates (of the four-year phase-in plan) for the former Cities of East
York, Etobicoke, North York, Scarborough and York, be amended by changing the words "Effective September 1, 1999" to
read "Effective November 1, 1999", to coincide with implementation of the new water billing system;
(8)a public awareness program be carried out over a four-year implementation period of the Universal Metering Program
at an estimated cost of $100,000.00 to inform homeowners of the benefits of a metered water supply and the metering
incentives, described herein;
(9)the Chief Financial Officer and Treasurer report to the Works Committee in the fall of 1999 regarding joint meter
reading and billing opportunities and financing options for automated meter reading technologies;
(10)due dates for water billing be set at the discretion of the Treasurer, at least 21 days after the billing dates; and
(11)the appropriate City officials be granted the authority necessary to give effect thereto.
Council Reference:
At its meeting of April 26 to 28, 1999, during consideration of water rate harmonization, Council adopted
Recommendation No. 233 of Report No. 8 of The Strategic Policies and Priorities Committee, respecting the phasing-in of
the competitive rate structure for all of the former cities with the exception of the former City of Toronto, with the
following amendment:
"The Commissioner of Works and Emergency Services and the Chief Financial Officer and Treasurer be requested to
submit a joint report to the Works Committee, for subsequent submission to Council by the end of July 1999, on all
funding options for the meter conversion program, such report to also consider the issue of freezing water rates in the
former City of Toronto."
This report also addresses issues raised by the Works and Utilities Committee and the Toronto Community Council
respecting the implementation of the Universal Metering Program as contained in the October 19, 1998 report from the
General Manager of Water and Wastewater Services, "Universal Metering Program", to which the responses to these
motions are summarized in Appendix A along with appropriate responses.
Comments/Background:
This report presents options for funding the Universal Metering Program. The key decision to be made is who should pay
for the cost of converting the 85,000 flat-rate customers in the former City of Toronto and the 1,500 flat-rate customers in
the former City of Etobicoke to metered service. Funding may be provided via:
(1) the Capital Works Program, whereby water customers from all of the former municipalities share in the cost of meter
conversion;
(2) flat-rate customers, whereby increases to the flat rate charges would be used to obtain the required funding;
(3) metered customers in the former City of Toronto, whereby the decreases that would be entitled to these customers
under water rate harmonization would be deferred, and the surplus revenue would be used to fund the conversion program;
and
(4) a combination of flat-rate customers and metered customers, whereby a combination of increases in flat-rate charges
and a deferral of decreases that would be realized by former Toronto metered customers would be used to provide the
necessary funding.
Although each of these options is viable, various stakeholders have raised concerns with respect to each of the options.
With respect to funding the Universal Metering Program from the Capital Works Budget, stakeholders from all of the
former municipalities except Toronto have expressed concern that it was unfair for them to share in the cost of converting
the former City of Toronto to metered services, as the cost of meters in their municipalities were paid by the residents
historically through higher development fees.
With respect to funding through increases in flat-rate charges, stakeholders expressed concern that this would require
sizeable increases in these charges, which may result in a hardship to some customers, and further that, while some
customers may wish to accelerate the timing of their conversion in order to avoid the rate increases, the logistics involved
in such a large conversion program may result in customers having to wait for a significant period of time to receive a
meter.
With respect to funding from metered customers in the former City of Toronto, these customers have indicated that this
approach is punitive, as they have, in the past, voluntarily installed water meters and should not be punished by deferring
the decreases they would otherwise be entitled to under rate harmonization. A contrary view is that, had amalgamation not
taken place, all customers in the former Toronto, metered and unmetered, would have shared in the cost of conversion for
the rest of the customers.
The combination approach attempts to balance the interests and concerns of both the metered and unmetered customers in
the former City of Toronto.
Universal Metering in the former City of Toronto:
A customer on a flat-rate account is generally charged in accordance with the number of rooms and fixtures installed in the
building, or in some cases, on a per-building basis. Flat-rate accounts predominate in the former City of Toronto, within
which there are approximately 85,000 flat-rate accounts verses 46,000 metered accounts. Generally, flat-rate accounts are
scattered throughout the former City of Toronto with the exception of the former communities of Forest Hill and Swansea
which have a higher concentration of metered customers. The former City of Etobicoke also has a few remaining flat-rate
accounts (less than 1,500), which is not significant compared to its 66,000 metered accounts. These accounts are generally
located in the older part of the City, south of Lake Shore Boulevard between Royal York Road and Kipling Avenue.
A preliminary review of the billing data indicates that the average annual flat-rate bill is $348.00 whereas the average
annual bill for metered residential customers is $286.00. Over the years, the rate charged to flat-rate water users has
increased in proportion to rate increases for metered customers.
In 1990, the former City of Toronto adopted a policy of universal water metering whereby all new buildings and buildings
where the water service or the plumbing in the basement is being replaced are to be metered. The City also installed free of
charge water meters and provided a water efficiency kit to homeowners who voluntarily requested a water meter. Further,
homeowners were required to install water meters as a condition of the City's Water Service Repair program. The
Universal Metering Program has been promoted through an ongoing education program to make homeowners aware of the
benefits and cost saving opportunities which can result from a metered water supply. Since 1990, approximately 23,000
water meters have been installed under these programs. The former City of Etobicoke had no formal program for meter
conversion, however, the City installed approximately 30 to 50 meters per year for flat-rate customers who requested it.
The estimated average cost for each water meter retrofit installation including a water efficiency kit amounts to $247.00
including GST, and based on current prices, the estimated total cost of retrofitting the 85,000 remaining buildings on
flat-rate billing amounts to approximately $21.0 million.
In November 1998, the General Manager of Water and Wastewater Services reported to the Works and Utilities Committee
on the program of Universal Metering as part of the service leveling process across the new City of Toronto. The report
recommended the mandatory metering of all buildings in the former City of Toronto with a five-year implementation plan.
The report further recommended that the flat-rate charges be increased by 100 percent for customers who have received
adequate notice (minimum three written notices and have been provided with sufficient time to arrange for the mandatory
installation of a water meter but continue to refuse to cooperate), and that the flat-rate charges be increased an additional
100 percent every three months thereafter.
While the Committee endorsed the program, a number of questions were raised and the report was referred to the Toronto
Community Council for consideration, which in turn raised additional questions particularly regarding the use of incentives
such as water efficiency initiatives. Further, the Community Council discussed the feasibility of further cost sharing
incentives under the Water Service Repair Program for the private side portion of the water service which would result in
additional meter installations. City Council at its meeting of June 9, 1999, approved a harmonized Water Service Repair
Program, in which substandard water service connections are replaced at no cost to homeowners within the road allowance.
Under the harmonized program, homeowners are responsible for the cost of repairing the private side portion of their water
service.
Funding in the amount of $21.0 million for the conversion of flat-rate accounts to metered service for the former City of
Toronto was requested under the Universal Metering Project in the 1999-2003 Capital Works Program. At the time of the
capital budget review, the strategies for water conservation and universal metering were yet to be finalized, and the Budget
Committee recommended that the expenditures earmarked for 1999 be put on hold until a formal direction in this matter
was set by Council.
Water Rate Harmonization:
The report from the Chief Financial Officer and Treasurer, dated March 22, 1999, provided a comprehensive review of the
current practices and rate structures respecting the water and wastewater program, and an analysis of a number of options
to provide a harmonized rate across the new city. The report recommended the competitive pricing structure (Option 3).
Addendum (1), dated March 31, 1999, provided additional options respecting water rate harmonization in response to the
motions raised by the Community Councils at their meetings of March 26 to 30, 1999. In particular, a four-year phase-in of
the competitive pricing strategy was presented.
Addendum (2), dated April 12, 1999, provided further options regarding the water rate harmonization initiative, which
addressed issues raised respecting funding for the conversion of flat-rate (unmetered) accounts to metered services, in
response to the discussions of the Budget Committee at its meeting of April 6, 1999. The options presented in that
addendum included funding the Universal Metering Project through a rate increase specific to flat-rate water users, funding
the project through a two-year deferral of the decreases that water customers in the former Toronto would realize under rate
harmonization while the competitive rate would be phased-in over two years for all other users, and funding the project
through a four-year deferral of decreases for the former Toronto while phasing-in increases and decreases for all other users
over a four-year period.
Funding Options Respecting Universal Metering:
In general terms, the water rate setting process is premised upon the objective that the program remain fully self funding
with a high degree of financial stability for both operating and capital needs over the long term. The approach taken with
respect to the harmonization of the differing rates of the former municipalities was that the anticipated revenue increase
from those former municipalities whose rates would increase under harmonization would be balanced with the anticipated
revenue decreases from those municipalities who would be experiencing rate decreases under harmonization (i.e., the
exercise would be revenue neutral).
Council at its meeting of April 26 to 28, 1999, during consideration of the matter of water rate harmonization, adopted the
phasing-in over four years of the competitive rate structure for all of the former cities with the exception of the former
Toronto, leaving open the option for funding the Universal Metering Program from the deferral of the decreases that would
be realized by the former Toronto under rate harmonization. Having adopted the rates for the other cities, the monies
available from the deferral of Toronto's decreases is now fixed. Table 1 shows the potential funding available from the
deferral of Toronto's decreases. For example, deferring the decreases for one year would result in the accrual of
approximately $2.4 million in surplus funds; two years would result in the accrual $7.3 million in surplus funds; three years
in $14.6 million; and a deferral of three-and-one-half years would accrue in the order of $21.0 million, which would be
sufficient to fund the entire Universal Metering Program.
Table 1
Potential Funding Available from the Deferral of former Toronto's Metered Customer Decreases ($000's)
No. of Years Decrease12345
Deferred
Four Year Phase-In of Incremental Incremental Incremental Incremental Incremental
Harmonized Rate Impact Impact Impact Impact Impact
Sep/99-Sep/00 Sep/99-Sep/01 Sep/99-Sep/02 Sep/99-Sep/03 Sep/99-Sep/04
East York(435)(435)(435)(435)(1,741)
Etobicoke212212212212847
North York(17)(17)(17)(17)(70)
Scarborough2,9752,9752,9752,97511,899
York(304)(304)(304)(304)(1,217)
Incremental/Annual Impact2,4302,4302,4302,4309,719
to City
Toronto Incremental/Annual(2,430)(2,430)(2,430)(2,430)(9,719)
Decreases Deferred
Cumulative Revenue Impact *2.4307,28914,57824,297**34,016
*Interest not accrued as it is anticipated additional revenue would be expended as incurred to cover the costs of Universal Metering.
**Assuming 3.5 year deferral to the harmonized rate for the former City of Toronto instead of four years would result in the accrual of $20,682,223,
which would be sufficient to fund the Universal Metering Project
It should be noted that the above analysis is premised on the deferral of the decreases that is to be realized by former
Toronto's metered customers. Another source of funding is potentially available through increasing the rates charged to
flat-rate customers. Table 2 shows the potential funding available from increases to former Toronto's flat-rate charges. For
example, a 15.0 percent annual increase in the flat-rate charges will provide an additional $21.2 million in revenue to the
City over the projected four years that it may take to phase-out flat-rate accounts. The recommended 5 percent incremental
annual increase in flat rates will provide an additional $11.6 million in revenue. Such an approach will result in the average
flat-rate bill increasing from the current $348.00 to approximately $554.00 in the fourth year.
Table 2
Potential Funding Available from Rate Increases on Toronto's Flat-Rate Customers Assuming 4 Years to Implement
Conversion ($000's)
Funding Available from
Rate Increases on Flat
Rate Customers over the
4-Year Implementation
Period
Year1234
CumulativeCumulativeCumulativeCumulativeFundingFundingFundingFunding
ImpactImpactImpactImpact
Sep/99-Sep/00Sep/99-Sep/01Sep/99-Sep/02Sep/99-Sep/03
No. of Conversions* 10,000**25,00025,00025,000
Projected Number of75,00050,00025,0000
Flat-Rate Accounts Remaining
Annual Increase to Flat-Rate Charges:
Option B 5% per annum 1,3923,6215,6786,616
Option C 10% per annum 2,7847,35211,67113,690
Option D 15% per annum 4,17611,19017,98821,246
Option E 20% per annum 5,56815,13824,63829,309
Variable Rate Increases:
Option F 5% 1st year, 1,3924,7639,04711,630
10% 2nd year, 15% 3rd year
20% 4th year,***
Option G 20% 1st year, 5,56815,13820,88022,794
20%2nd year, 0% 3rd year
0% 4th year,****
*Assumes a planned and orderly conversion of flat-rate accounts to metered service over a 4-year period, and that flat-rate customers continue to pay
the increased flat-rate charges until meter conversion.
**Assumes 10,000 customers converted in start-up year of program.
***Rate increases in each successive year.
****Councillor Prue moved a motion at Council's meeting of April 26, recommending that conversion be implemented over two years, to be funded
from a two-year deferral of former Toronto's decreases ($7.2 million from column 2 of Table 1, and a 20% per annum increase in flat-rate charges over
the two-year implementation plan ($15.1 million from column 2 above), for a total of $22.0 million.
The above analysis is premised upon a planned and orderly conversion of flat-rate accounts to metered service over a
four-year period. It is noted that some customers may wish to accelerate the timing of their conversion in order to avoid the
rate increases. Such an acceleration would have a direct negative impact on the projections of incremental revenue from the
rate increase, and a further indirect impact through higher conversion costs associated with a more demographically
fragmented response to conversion.
It is recognized that in spite of the flat-rate charge increases referred to in Table 2, there may be a small percentage of
customers who will resist installation of a water meter. To reach closure with respect to Universal Metering and achieve
full participation, it may be necessary to significantly increase flat-rate charges for the few remaining customers. In the City
of Niagara, which recently adopted a mandatory metering program, customers who refuse the installation of a water meter
are subject to a 300 percent increase in their flat-rate charge. The withdrawal of the offer of a free meter after a
well-advertised cut-off date would be further encouragement for customers.
Table 3 below shows the potential funding available from a combination of rate increases on flat-rate customers and the
deferral of the decreases that would be realized by metered customers in the former Toronto. Combinations that
approximately result in the $21.0 million required for the Universal Metering program included:
-funding solely from the deferral of decreases that would otherwise be realized by former Toronto's metered customers,
which would mean former Toronto's metered rate would remain at the current level for three-and-one-half years, before
moving to the lower harmonized rate; or
-funding from a 5.0 percent per annum increase in the flat-rate charges in combination with the deferral of the decreases
for a three-year period for former Toronto's metered customers; or
-funding from a 10.0 percent per annum increase in the flat-rate charges in combination with the deferral of the decreases
for a two-year period for former Toronto's metered customers; or
-funding solely from a 15.0 percent per annum increase in the flat-rate charge over the four year implementation plan; or
-funding solely from increases of 20.0 percent in flat-rate charges for the first two years; or
-some other combination, such as that moved by Councillor Prue at the Council meeting of April 26, whereby funding
would be obtained through a 20.0 percent per annum increase in flat-rate charges over the first two years, in combination
with the deferral of former Toronto's metered customers decreases for two years (this motion assumes that meter
conversion would be over an accelerated two year plan).
Table 3
Potential Funding Available from a Combination of Rate Increases on Flat-Rate Customers* and the Deferral of Decreases
of Metered Customers ($000's)
No. of Years Deferral of Decreases011.522.533.545.5
for Former Toronto's metered
customers
Annual Increase in Flat-Rate Charge
Option A 0% (i.e. Funding from02,4304,8597,28910,93414,57819,43824,29738,875
Deferral of Decreases of
metered accounts
Option B 5% 6,6169,20411,63414,06417,70821,35326,21231,07245,650
Option C10%13,69016,49818,92821,35825,00228,64733,50638,36652,944
Option D15%21,24624,34226,77229,20232,84636,49141,35046,21060,788
Option E20%29,30932,76835,19837,62841,27244,91749,77654,63669,214
Variable Rate Increases:
Option F 5%, 10%, 15%, 20%**11,63014,06016,49018,91922,56426,20931,06835,92850,506
Option G 20%, 20%, 0%, 0%**22,79425,20027,60030,10033,70037,40042,20047,10061,678
*Assumes that implementation of meter conversion occurs over four years regardless of deferral option.
**Flat-rate charge increases in each successive year
Universal Metering Implementation Options and Issues:
Implementation options fall into two general categories, i.e., voluntary programs and mandatory programs. The following
presents numerous options respecting the rolling-out of the Universal Metering program and implementation issues.
(A)Voluntary Programs:
Voluntary programs depend on the good will of the customers towards converting to metered service. Voluntary customer
participation may be facilitated through financial motivation, such as through increases in the flat-rate charges, or through
incentive programs. The following sections provide a description of several voluntary implementation programs.
(1)Status Quo:
This approach continues the 1990 policy adopted by the former City of Toronto whereby all new buildings and property
owners who undertake plumbing upgrades are required to install a water meter along with those participating in the Water
Service Repair program. In addition, homeowners are encouraged to voluntarily install a meter all of which is done at no
cost to the homeowner. Historical experience suggest that approximately 2,000-4,000 conversions per year may be
achieved, notwithstanding any other policy interventions such as rate increases specific to flat-rate customers. At this rate,
the funding requirement would be approximately $500 thousand to $1.0 million per year, and it would take more than 25 to
40 years to achieve universal metering.
(2)Voluntary with Incentive Program:
This approach utilizes financial motivation and/or incentives to increase the voluntary participation rate. One means to
motivate flat-rate customers to convert to metered service would be to increase flat-rate charges. It is recommended that the
flat rates increase incrementally each year from 5 percent to 20 percent over the four-year metering program. Such
increases should not be punitive to those flat-rate customers who wish to accelerate their conversion, but may have to wait
due to the logistics involved in coordinating such a large number of conversion. One approach to alleviate this concern
would be to establish a priority list of flat-rate customers requesting conversion, and as such, those customers who are
more motivated to convert may avoid some of the rate increases.
Incentives are another means to encourage conversion. Many incentives are available in this respect, including providing a
full or partial subsidy towards a low-flow toilet, or a subsidy towards the repair of deficient water service (i.e., lead or
galvanized pipes) on the private side of a customer's property.
The Works and Utilities Committee at its meeting in November 1998, in considering the Universal Metering Program,
requested, among other things, a report on the issue of the use of incentives such as free water saver kits and/or low-flow
toilets to reduce water use, and on opportunities to combine Universal Metering with the Water Services Program.
Of the 85,000 flat rate customers in the former City of Toronto, approximately 33,000 have been identified as substandard
and in need of replacement. The Harmonized Water Services Program recently adopted by Council provides for the City to
replace/repair substandard services on the road allowance, and to advise the customer of a competitive quote for the
repair/replacement of the private-side water service. In the past, this section of upgrade has been totally funded by the
homeowner. The average cost of the upgrade on the private portion of the water service ranges from $800.00 to $1,000.00.
An incentive program whereby the City subsidizes the full cost of repairing the water services on the private side would
achieve a greatly accelerated Water Service Repair program and consequently an accelerated water meter installation
program, however, the implications of such a fully subsidized program is prohibitive due to the cost (estimated at $33.0
million in the former Toronto). A more modest subsidy program may be considered whereby the homeowner pays a flat fee
of $500.00 for upgrading the private portion of the water service, and the City provides a subsidy of approximately
$400.00. This subsidy program will require further funding of approximately $13.2 million and necessitate a longer
deferral of the harmonized rate for the metered customers in the former City of Toronto. Legal Services has advised that
the Municipal Act and Public Utilities Act provide authority to implement a cost-sharing program for upgrading the private
portion of the water service, providing the City obtains a consent waiver from the property owner and a warranty and
indemnification provision from the contractor undertaking the work.
It is estimated that the remaining flat-rate customers in the former Cities of Etobicoke and Toronto, which are
approximately 53,500, may have a reasonably adequate supply of water and consequently may not be interested in the
private side water service repair incentive. Alternatively, the City may choose to install a low-flow toilet for these
homeowners as an incentive to installing a water meter. A number of Canadian municipalities (City of Barrie, Durham
Region, Region of Waterloo and City of Victoria) have implemented low-flow toilet change-out programs as a water
efficiency initiative. Low-flow toilets are required in all new home construction under the current Ontario Plumbing Code
and Ontario low-flow toilet manufacturers are required to meet the standards established by the Canadian Standards
Association, which exceeds other manufacturers such as ASTM. These cities have found that the complaint frequency
regarding the operation of low-flow toilets which are CSA approved is less than 1 percent. The cost of a CSA standard
low-low toilet is approximately $300.00 per toilet, or approximately $15.6 million for the remaining flat-rate customers.
These major incentive programs will require additional funding in the amount of approximately $29 million. One possible
source of funding is to defer the rate decreases in the former City of Toronto for 5.5 years, plus a four-year increase in
flat-rate fees would generate funding in the amount of $50.5 million. This funding would be sufficient to fund the $21
million cost of universal metering and the $29 million in major incentives. Alternatively, the $21.0 million which has been
held for Universal Metering in the 1999 Capital Budget plus a 3.5 year deferral in the rate decrease, combined with a
four-year increase in flat-rate fees will provide sufficient funding for the major incentive programs.
This deferral of decreases will, however, have an impact on the four-year water rate harmonization strategy which Council
has adopted, and further may be considered an unfair hardship on the former City's metered customers to defer the water
rate decrease for a longer period to fund the major incentive programs. Consequently, the three-year rate deferral for the
former City of Toronto metered customers is being recommended along with a four-year 5 percent per annum increase on
the unmetered customers' rates as the financing strategy. This funding option will generate approximately $26.2 million,
thus providing funding for the Universal Metering Program and a further $5.2 million towards a water efficiency incentive
program. The additional revenues will be sufficient to provide a $60.00 incentive for flat-rate customers to install an ultra
low flush toilet. Flat-rate property owners will be eligible to apply for this incentive by showing a proof of purchase receipt
for the ULF toilets. This incentive is consistent with that offered under the Ultra Low Flush Program for the
multi-residential sector which has been recommended under a separate report on this agenda.
(B)Mandatory Programs:
A mandatory program assumes that customers cannot be sufficiently motivated to convert to metered service, and that
mandatory conversion would be enforced by by-law. Mandatory conversion programs have been utilized by other cities.
The Region of Niagara recently adopted a by-law requiring that their 24,000 flat-rate customers be metered within one
year. Customers who refuse entry to permit conversion, after sufficient notice is given, will be subject to a flat-rate charge
increase of 300 percent.
If a mandatory program is adopted, then incentives may be considered as unnecessary. Thus any of the funding options
described in the previous section that provide the necessary $21.0 million in funding may be used.
As previously discussed, the former City of Toronto enforced a minimum mandatory program whereby new home
construction, homeowners undertaking plumbing upgrades and homeowners participating in the water service repair
program were required to have a meter installed. It is proposed that these mandatory requirements continue, and further
that purchasers of homes which are currently on a flat-rate system agree to allow the City to install a water meter, free of
charge, as a condition of the City providing a clearance letter at the time of ownership transfers.
Installation of Water Meters Evenly Throughout all Neighbourhoods:
One means to ensure that water meters are installed evenly throughout all neighbourhoods is to specify that work be
undertaken in designated geographic areas with a large number of installation crews, with first priority given to customers
on a waiting list. It may be possible to assign one or more crews per Ward for those Wards which have a large number of
flat-rate properties. The 1,500 flat-rate customers in Etobicoke could be included with the crew responsible for the Toronto
High Park Ward, which has a large number of existing metered properties throughout the Swansea area. In the past,
approximately five to seven contracts were called annually under the former City of Toronto Water Service Repair
Program, and the same number could be called for the meter conversion; there may also be opportunities to combine
contracts for both programs. The number of flat-rate customers by geographic area is estimated as follows:
Geographic AreaEstimated Number of Flat-Rate Customers
Ward 19 and part of Ward 212,400
Ward 20 9,010
Ward 2113,300
Ward 2212,600
Ward 23 and 2413,250
Ward 2510,870
Ward 2615,070
Total86,500
Billing Due Dates and Meter Reading:
The existing water by-law for the former City of Toronto allows an early payment discount if the account is paid in full one
calendar month from the due date and the due date is the last day of the month in which the account is billed.
Most water billing systems in the other former municipalities allow customers between 15 and 21 days to pay and qualify
for the discount.
With the new water billing system, the billing of accounts will be done evenly throughout the month. In order to
accomplish this, the existing by-laws must be amended to allow for flexible due dates within the existing cycles, and to
allow the former City of Toronto water customers at least 21 days to pay the bill in full to qualify for the early payment
discount.
With respect to meter reading, the Finance Department and Works and Emergency Services Department are jointly
investigating a full range of meter reading and billing options and automated meter reading technologies, and will prepare a
service rationalization report for a harmonized meter reading system(s) which will be presented to the Budget Committee
and the Works Committee in the fall of 1999.
Conclusion:
This report presents various funding and implementation options available for the water meter conversion program for
flat-rate customers in the former Cities of Toronto and Etobicoke. Funding may be achieved by the deferral of the
decreases that the former City of Toronto customers would have realized under water rate harmonization and/or by rate
increases specific to flat-rate customers. The amount of funding depends on the length of term that the decreases are
deferred and on the degree of increases to flat-rate charges.
Implementation can be made through a voluntary or a mandatory program. Participation rates in voluntary programs may
be increased through the use financial motivation and/or incentives. One means to motivate flat-rate customers to convert
to metered service would be to increase flat-rate charges. However, such increases should not act as punitive measures to
those customers who wish to accelerate their conversion, but may have to wait due to the logistics involved in coordinating
such a large number of conversions. Establishing a priority list based on first-come first-served, and ensuring that meters
are installed evenly throughout all neighbourhoods can alleviate much of this concern.
Incentives are another means to motivate customers in a voluntary program. Incentives can include a subsidy towards water
efficient low-flow toilets, or a subsidy towards the repair of deficient water service on private property. Offering the full
cost of these incentives would be prohibitively expensive for the City's water customers. Mandatory programs render
incentives as unnecessary, as conversion would be mandated by by-law.
This report recommends a voluntary program with modest subsidies and escalating increases to the flat charges as an
appropriate means to achieve the necessary participation. Such a program would be entirely funded by former City of
Toronto water customers through a three-year deferral of the decreases that would be realized by their metered customers
under water rate harmonization, in conjunction with escalating increases in flat-rate charges. It is believed that, as flat-rate
charges escalate, most customers will be motivated to convert as their awareness of the benefits of metered service
increase.
To successfully implement this type of voluntary metering program, it will be necessary to initiate a comprehensive public
education program explaining the benefits of the "User Pay" principle and the opportunities to reduce water charges
through indoor and outdoor water conservation practices. Further, the communication program will explain the water
efficiency measures contained in the recommended program along with the sign-up procedures for having a meter installed.
Contact Names:
Joe Farag
Director - Development Policy and Research, Finance Department
Tel: 392-8108
Appendix "A"
The Works and Utilities Committee at its meeting of November 4, 1999, in considering the report from the General
Manager of Water and Wastewater entitled "Universal Metering Program", requested, among other things, a further report
on the following issues:
(1)"undertake a comparative study of alternative strategies to achieve the greatest efficiency for the funding of $21.0
million; and report back thereon to the Works and Utilities Committee in January 1999; and
(2)"report to the Committee on the following:
(i)the use of incentives such as free water saver kits and/or low-flow toilets to reduce water use;
(ii)the installation of water meters evenly throughout all neighbourhoods during each phase of the program, instead of
designating one specific area for each year;
(iii)past practices in other municipalities;
(iv)background information on the cities mentioned as examples in the report, including information on the water rates
before and after installation of the water meters;
(v)information regarding the amount paid by the average consumer in various cities outside of the City of Toronto for
water;
(vi)a retrofit program for older meters in the City of Toronto, including the number of water meters in question, retrofit
options and cost implications;
(vii)the cost per litre of the water that the Region of York pays the City of Toronto; and
(viii)the communication dated November 3, 1998, from Ms. Anne Dubas, President, Local 79, Canadian Union of Public
Employees."
Further, City Council at its meeting of December 16 and 17, 1998, endorsed the recommendations from the December 9,
1998 Toronto Community Council meeting, which considered the Commissioner of Works and Emergency Services
October 19, 1998 report on Universal Metering, and requested the Commissioner of Works and Emergency Services to
report on the following [Report No. 16, Clause No. 67(i)]:
(1)requested the City Solicitor to report to the Toronto Community Council on whether small towns and villages which
were amalgamated into the former City of Toronto can keep their flat-rate bill as part of previous agreements;
(2)requested the Commissioner of Works and Emergency Services to report comprehensively to the Toronto Community
Council on:
(a)the impact of the proposals set out in the report (October 19, 1998) from the General Manager, Water and Wastewater
Services, on the former City of Toronto's Water Pressure Improvement Grant System;
(b)the potential long-term loss in the revenue and the impact on the other former municipalities of the proposals set out
in the report (October 19, 1998) from the General Manager, Water and Wastewater Services;
(c)the advantages, if any, of the former City of Toronto program as it relates to (i) voluntary participation; (ii) the value
to the City of upgrading old and ageing water pipes; (iii) on the savings inherent in the reduction of ruptures, given the
replacement of piping on City property; and (iv) the health benefits of replacing old lead piping with copper; and
(d)on a budget to supply one-third of the households with water meters, and a budget for water upgrades;
(3)requested the Commissioner of Works and Emergency Services to advise the Toronto Community Council when
water efficiency measures, such as low-flow toilets and water saver kits, will be provided universally to every household
across the City; and
(4)requested the Commissioner of Works and Emergency Services to advise senior citizens of the potential benefits of
accepting water meters.
With respect to item (1) above, I can advise that the City Solicitor will respond directly to the Toronto Community Council
and Works Committee on this issue. Further, action has been taken by staff to advise senior citizens of the benefits of
accepting water meters as requested under item (4). Item (2) (c) was reported on to the Works and Utilities Committee as
part of my April 30, 1999 report entitled "Harmonized Residential Water Service Connection Repair Program."
Further, City Council at its meeting of March 2, 1999, adopted the 1999-2003 Capital Works Program which among other
things recommended that:
(1)"Although a policy decision regarding the Universal Metering Program is still subject to Council approval, funding
($21.0 million) to be retained in the estimates. Authorization to spend is however, contingent upon final Council approval."
(2)"It is further recommended that the Commissioner of Works and Emergency Services be requested to submit a report
to the Works Committee, prior to the 2000 budget process, on the number of meter conversions that have been requested in
1999 and the ability of staff to respond to such requests."
Response to Other Issues Not Addressed in this Report:
(i)Universal Metering Program Impact on Water Pressure Grant Program:
City Council at its meeting of December 16 and 17, 1998, adopted the recommendations from the December 9, 1998
Toronto Community Council meeting which among other things, requested the Commissioner of Works and Emergency
Services to report on the impact which a mandatory Universal Metering proposal would have on Toronto's Water Pressure
Improvement Grant System otherwise known as the Water Service Connection Repair Program.
Homeowners who participated in the Water Service Repair Program are required to agree that the City install a free of
charge water meter as a condition of having their water service repair upgraded. Should Committee choose to adopt a
mandatory Universal Metering Program whereby the meters would be installed systematically throughout the former City,
then the requirement for homeowners to install a meter at the time of the water service repair upgrade would no longer
apply. In the event that Committee chooses a mandatory Universal Metering Program, there would continue to be a need to
upgrade the ageing water services located within the street allowance thus ensuring an adequate supply of high quality
drinking water to the street line at each property.
(ii)Retrofit Program for Older City Meters:
Generally, the meter installations for each of the former Cities and Scarborough Public Utilities Commission have received
routine maintenance either through contracted services in the case of York, or by city crews assigned to meter maintenance
within the operating divisions of the former Cities or within the Finance Departments. The former Cities of Etobicoke and
Toronto and the former Scarborough Public Utilities Commission each had dedicated crews for meter maintenance and a
dedicated meter maintenance shop. Meter maintenance in each of the former cities and Scarborough Public Utilities
Commission was generally concentrated on the larger commercial meters which measured the majority of the water
consumed and consequently necessitated the highest level of maintenance. Residential meter maintenance was generally
limited to replacing faulty meters and changing out the very old style residential meters which were no long repairable or in
some cases were no longer recording an accurate volume of water.
In the case of the former City of Etobicoke, a complete meter change-out program took place in the early 1990's for all of
the residential metered customers.
A further evaluation of the maintenance requirements, particularly for the older residential meters, will be considered under
the needs assessment evaluation of the Water and Wastewater Division.
(iii)Past Practices in Other Municipalities:
The majority of the residential water meters installed in North York, Scarborough, York, East York and parts of Etobicoke
were installed by developers at the time of the original housing developments. All of the former cities and the Scarborough
Public Utilities Commission had in place by-laws requiring a mandatory water meter installation with all new home
construction.
(iv)Long Term Loss in Revenue:
The average residential flat-rate bill in the former City of Toronto is $348.00 and the average residential metered bill is
$286.00. The lower revenue of approximately 15 percent from the metered customer is due primarily to a greater incentive
to conserve water due to the user pay principal. Further, this reflects the reduced household water use due to the water
efficiency kits installed in each home at the time of the water meter installation.
This reduction is consistent with the following municipalities which have undertaken Universal Metering Programs in the
past:
Pre Metering Post Metering %Charge
(Litres/Capita/Day) (Litres/Capita/Day)
Lemington 627563-10
Port Colborne 777689-11
Kingston 1,003748-25
Brockville 889752-15
Given the variability of what these cities have experienced in water conservation due to metering programs, my previous
report estimated a range of 5 percent to 15 percent in reduced water use due to a fully metered system, or across the new
City, this would represent a .3 percent to 1 percent reduction in water use.
The former Metro Toronto Council, in 1996, established an objective of reducing the average day water demand by at least
15 percent by the year 2011. The reduction in water use due to the metering program in the former City will contribute to
the 15 percent target. Further, the long-term water rates will reflect the reduced water use which the former Metro and new
City have established as the 2011 targeted water use reduction.
(v)Water Rates in Various Cities Outside the City of Toronto:
City $/M3
1.Peel Region0.8100
2.Toronto1.0308
3.Halton Region 1.2200
4.Durham Region 1.2900
5.(a)York Municipalities Using Toronto Water
(i) Markham 1.1021
(ii) Vaughan City 0.9730
(iii) Richmond Hill 1.2650
5.(b)York Municipalities Not Using Toronto Water
(i) East Gwillimbury1.2500
(ii) Newmarket1.2643
(iii)Aurora1.1070
(iv)Whitchurch/Stouffville 1.1420
(v)King City1.5403
(vi)Number of Meter Conversions Requested in 1999 and Ability of Staff to Respond:
The estimated number of meter conversions for 1999 will be approximately 2,500. This number is lower than previous
years where 3,500 to 4,000 meters per year have been installed. The estimated number of meters to be installed is made up
from both voluntary meter installations where homeowners request a meter installation, and meters installed as a
requirement of a plumbing upgrade or water service repair installation. An annual contract is called each year for the meter
installations under the voluntary program. City crews have generally installed the meters required due to new home
construction. Contractors have installed meters required under the Water Service Repair and Plumbing Upgrade Programs.
Staff are available to respond to these requests in 1999.
(vii)Region of York Water Agreement:
The former Metro Toronto supplied water to Region of York on a wholesale basis at 19.5 cents per cubic metre. This rate
is adjusted annually to reflect the current operating cost for producing water, an allowance for depreciation of capital assets
and a replacement allowance. The current agreement was executed on September 14, 1998. In addition to the charges for
water use, there is a cost-sharing provision requiring the Region of York to pay a share of any infrastructure required to
produce and deliver water to the York Region customers based on the proportion of anticipated use. York Region sells the
water to its local municipalities who distribute it to their customers at the following rates:
Markham .97 $/M3
Vaughan1.10 $/M3
Richmond Hill1.26 $/M3
The agreement indicates that both York Region and the City will apply best efforts to implement water efficiency programs
as approved by their respective Councils.
(viii)Response to November 3, 1998 Communication from Local 79 Regarding Meter Reading:
In a communication to Councillor Betty Disero, Chair of the Works and Utilities Committee, Local 79 outlined the services
provided by their membership in carrying out the meter reading function for the former City of Toronto Finance Revenue
Section. The communication further urged the members of the Works and Utilities Committee to reject the staff
recommendation to review opportunities for joint water meter reading and billing with Toronto Hydro and Consumers Gas,
or alternatively, to consider a phone-in meter reading system.
At the present time, the Finance Department and Works Department are jointly investigating a full range of meter reading
and billing options and automated meter reading technologies for each of the former cities and the former Scarborough
PUC, and will prepare a service rationalization report for a harmonized meter reading system(s) which will be presented to
the Budget Committee and the Works Committee in the fall of 1999.
The Works Committee also submits the following communication (May 4, 1999) from the City Clerk:
City Council, at its Special Meeting held on April 26, 27 and 28, 1999, adopted, as amended, Clause No. 1 contained in
Report No. 8 of The Strategic Policies and Priorities Committee, headed "1999 Operating Budget".
In so doing, Council referred the following motion to the Works Committee for further consideration and report thereon to
Council:
Moved by Councillor Prue:
'That:
(1)Recommendation No. (233) of the Strategic Policies and Priorities Committee, be amended by:
(i)deleting the words "four-year deferral" from the first paragraph and inserting in lieu thereof the words "two-year
deferral", so that such paragraph shall now read as follows:
"(233)the recommendations to provide for a harmonized water rate structure embodied in the report (March 22, 1999)
from the Chief Financial Officer and Treasurer, entitled "Harmonization of Water and Water Pollution Control Rates", be
adopted, subject to striking out Recommendations Nos. (1) and (4), and inserting in lieu thereof the following paragraphs
in order to provide funding for the Universal Metering Project through a two-year deferral of the decreases to which former
City of Toronto water users would realize under any harmonization initiative, while phasing-in increases and decreases for
all other users over a four-year period, as described in Section (3) in the report (April 12, 1999) from the Chief Financial
Officer and Treasurer, entitled 'Water Rate Harmonization - Addendum (2)':";
(ii)inserting after the words "Toronto shall be" in Part (1)(ii), the words "increased by 20 percent per year for a two year
period effective July 1, 1999" (Schedules "B", "C" and "D" to be amended accordingly), so that such recommendation shall
now read as follows:
"(ii)effective September 1, 1999, the combined water and sewer rate in the former City of Toronto for metered customers
for accounts paid on or before the due date shall be $1.03083 per cubic metre, and the rate charged to flat-rate customers in
the former City of Toronto shall be increased by 20 percent per year for a two-year period effective July 1, 1999 as set out
in Schedules "B", "C" and "D" of City of Toronto By-law No. 356-1998;"; and
(iii)deleting Recommendation No. (233)(1)(iv) and inserting in lieu thereof the following:
"(iv)effective September 1, 2001, the rate charged to metered customers in the former City of Toronto shall be the
appropriate phased-in competitive rate structure for the former City of Toronto;"; and
(2)the Clause be amended by adding thereto the following:
"It is further recommended that the Commissioner of Works and Emergency Services be requested to submit a report to the
Works Committee, prior to the 2000 budget process, on the number of meter conversions that have been requested in 1999
and the ability of staff to respond to such requests." '
A copy of the aforementioned Clause No. 1 of Report No. 8 of The Strategic Policies and Priorities Committee, in its
entirety, is available through this office. Please direct enquiries in this regard to 392-4737.
