“They also serve who only stand and wait” A Water Case  

By
Branko Terzic

The headline of an article in in the Washington Post on September 2, 2015 prompted me consider what the late Professor James Bonbright author of Principles of Public Utility Rates  would make of the situation. The headline was:  

“D.C. water reconsiders fee residents decry as punitive: “Some in homes with fire sprinkler could pay $1,000 more a year”  

The article explained that the issue before the District of Columbia water system was a question of cost allocation and rate design. Homes built in 2008 and after are required to have internal sprinkler systems for fire protection and older homes were exempt from the requirement. The installation of a residential fire protection system requires the water utility to provide a larger pipe (1 ½ inches to 2 inches in diameter) from the home to the main in the street than the prior standard ¾ inch service pipe for older homes. It would seem logical that the larger pipe is more expensive to install and it is further expected that at the time of a fire a greater portion of the street main would be used when connected to a larger pipe.  

One complaint was about the size of the new fees initially calculated by the city water department. I have no opinion on the level of charges as that would require an independent cost-of-service study.  

The other complaint seems to be that some customers or politicians don’t believe a different fee should be charged customers with residential fire protection service from that of the charge to customers without fire protection. On that I have an opinion and so did Bonbright.  

In “Principles” Dr. Bonbright observed: 

“Of all of the many problems of rate making that are bedeviled by unresolved disputes about issues of fairness, the one that deserves first rank for frustration is that concerned with the apportionment among different classes of consumers of the demand costs or capacity costs- those costs of service that are regarded as a function of required plant capacity and not rate of input in kilowatt-hours, cubic feet of gas, tone miles of traffic, etc. [BT: or gallons of water] 

Lets review why a separate fee for fire protection service makes sense refereing to Bonbright. 

Firstly “fire protection” service is a different service than that of the provision of potable water. It certainly requires a larger investment in the main to home service pipe (and possibly a larger meter). It may or may not require a larger allocation of mains. A competent cost of service study would answer questions about the level of cost differences between the two services. 

Secondly, there is a complaint that it is “unfair” that fire protection customers should pay more because “in all likelihood, these sprinklers will never go off” thus not incurring any cost. However, “fire protection” is a service even if a customer does not experience a fire and there is a higher fixed cost in pipes incurred. Just by being available it provides a service. To not pay because one does not have a fire, would also apply to the fire-burglar alarm system installed by a private contractor. As in “Sorry, we are not paying the monthly bill because the alarm did not go off.” 

The “fire protection” service is provided by the sprinkler system being connected to a water distribution system which, on a 24 hours a day/ seven days a week basis, must have both the capacity (size of pipes) and water availability in quantities to fight a fire. 

Thus this “allocation of capacity” issue has a parallel in today’s debates about “stand by charges” for electric residential customers with solar panel installations.   Bonbright would have known what to do. 

P.S. The title comes from the last lines of the sonnet "When I Consider How My Light is Spent"  John Milton (1608–1674).