Water meter replacement program, Microeconomics

Water Meter Replacement Program:

Typically water providers install meters at each service address, read meters monthly and charge customers according to their usage. In residential settings, where flow rates are low compared to commercial customers, most meters are positive displacement (PD) meters. These meters operate by allowing a specific amount of water to physically displace a measuring component, thereby moving a piston or oscillating disc that, in turn, moves a magnet that drives the register.While these devices are simple, because they are mechanical devices they slow down as they become worn or become encrusted with minerals or debris. Thus, it is well known that these types of meters become less accurate over time and under-report water usage. While it is technically possible to clean a meter, given that labor costs to install a meter exceed the cost of the meter, it is not economically feasible to disconnect the water service, remove the meter, install a temporary meter, clean the old meter, and then remove the temporary meter and reinstall the original meter. Thus, the decision that municipalities face is simply whether to replace the meter. In order to determine whether, or more specifically when, replacement is justified, a financial analysis should be done to assess the costs and benefits and most importantly, critically evaluate the return on the utility's invested capital.

Lakewood Village is a (Type-A) General Law Municipality located in Denton County on a peninsula of Lewisville Lake north of Dallas. The Town was incorporated in 1977. The development of the town occurred in two stages, the original "village" starting in the 1970's and the Shores of Lakewood Village, a subdivision of custom homes created in 1997. Neither area is built-out, that is, new custom homes are currently being built in each part of town. It is not uncommon to find new and old houses adjacently located.

In late 2011, the Town began the process of identifying, prioritizing, and allocating funds for capital expenditures in fiscal 2012. At this time it was pointed out that many of the water meters for the houses built in the Town's first stage of development were thirty to forty years old, and thus far out of warranty. As a result, the Town decided to undertake an economic analysis to evaluate the financial viability of a meter replacement program. The goal of the study was twofold. First, develop a model to estimate how much water and associated revenues were being lost due to inaccurate meters. Second, assess whether the recoverable revenues were sufficient to pay back the required capital expenditures in a timely manner and generate an acceptable return on investment.

Posted Date: 2/21/2013 12:14:09 AM | Location : United States

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