The Budget Committee referred the Item, together with the recommendations contained in the Staff Recommended Capital and Operating Budgets for Toronto Water to the November 12, 2012 Budget Committee Rate-Supported wrap-up meeting.

This report presents the recommended 2013 water and wastewater consumption rates and service fees arising from concurrent adoption of the recommended 2013 Toronto Water Operating and Capital Budgets.  Consistent with the funding strategy of 9% water rate increases until 2014, adopted by City Council in 2005, it is recommended that the Block 1 and Block 2 rates for all users and flat rate accounts be increased by 9% effective January 1^st, 2013.  In addition, this report recommends inflationary fee increases for certain water and wastewater services, reflecting cost recovery for these services, and the introduction of two new and four revised sewer related industrial waste surcharge agreement fees.

The City of Toronto Water and Wastewater Program (the “Program”) is currently fully funded on a ‘pay-as-you-go’ basis through a combined water and wastewater rate without any reliance on borrowing/debenture financing.  The property tax supported budget is not impacted by adoption of the recommendations contained in this report.

Based on the recommended 2013 Toronto Water Operating and Capital Budgets, the updated consumption forecast, and Council's adopted water rate structure, a rate increase of 9% for 2013 in the paid-on-or-before due date (which represents a 5% discount from the paid-after-due-date rate) is required for Block 1 domestic-use consumers, and Block 2 industrial process-use consumers, both effective January 1st, 2013. 

As shown in Chart 1 below, the recommended rate increase impact on an average home consuming 300 m3/year, billed at the Block 1 rate, will be 9% or $67 over the calendar year (from $747 in 2012 to $814 in 2013).  The impact of the 9% increase on a commercial customer and an industrial customer at Block 2 rate with annual consumption of 100,000 m³ will be $22,400 and $16,088 respectively, the latter reflecting a 30% discount over Block 1 rates for eligible industrial consumers.  As well the rate increase impact on a large industrial consumer of 1,000,000 m³ on Block 2 rate will be $157,254.

Chart 1 – 2013 Water Rate Impact

In addition, the recommended inflationary increases of the water and wastewater service fee set out in Appendix C are expected to generate additional revenue of approximately $285 thousand in 2013, as reflected in Toronto Water's 2013 Operating Budget.

In 2011, the City had industrial waste surcharge agreements with 154 companies and recovered approximately $8.5 million in costs.  Implementation of the staff recommended changes to the City's industrial waste surcharge program, as set out in the Recommendations section of this report, would result in an estimated annual increase in revenue of $3.6 million (from $8.5 million to $12.1 million) into Toronto Water's Operating Budget phased in over a six-year period achieving full cost recovery by 2018.

If, however, staff's recommendations, as amended by the Public Works and Infrastructure Committee and detailed later in this report, are implemented to modify the Type 1 Formula so that the calculation of surcharge fees be applied only to the highest exceedance parameter, with no phase-in, this would result in an estimated annual increase in revenue of $0.7 million (from $8.5 million to $9.2 million) for 2013 and achieving approximately 76% of full cost recovery estimated at $12.1 million.  There would be no further phase-in of surcharge fees and they would not be amended until Council purposefully does so in future.