Irvine Ranch Water District's Allocation Based Rate Structure – The Foundation of a Successful Water Use Efficiency Program

Irvine Ranch Water District (IRWD) is a recognized leader in water use efficiency as evidenced by the District's pioneering water recycling program which began in the late 1960's. Water resource stewardship has been a hallmark of IRWD since its inception. The District set an aggressive tone to promote the efficient use of all water resources beginning in the late 1980's and into the drought of the early 1990's. This effort, which included intensive communication with the various customer groups and some of the first home water audit and ultra low flush toilet programs in the state, culminated in the adoption of an allocation-based tiered rate structure by the IRWD Board in 1991.The rate structure was instituted to promote the efficient use of water, and is designed to provide customers a significant economic incentive to use the proper amount of water required to serve indoor, landscape, commercial/industrial and institutional demands. This is accomplished by setting a customized “allocation” for each customer account that is based upon a variety of factors such as: irrigated area, daily weather characteristics, number of residents, industrial or commercial business type, and other more unique characteristics such as the presence of a pool, livestock or specialized industrial equipment. Water is then sold to customers under a five tier structure based upon their monthly allocation which varies for landscape use relative to weather patterns. Customers using water within their allocation purchase water in the lower two tiers (including a below cost first tier) and are rewarded with very low water bills. Customers using in excess of their allocation also purchase water in one to three steeply ascending upper tiers, resulting in relatively high water bills and a strong pricing signal for excessive use. IRWD's 2009 commodity rates for each of the five tiers are shown in Table 1.