Cost-of-Service Rates

Denver Water runs on revenue. We are not a tax-supported utility, and our charter prohibits operating for profit. The rule is simple: Charge rates that cover service costs. Building a rates program that follows that rule is not so simple. Denver Water approaches the task by identifying some specific customer classes and then determining the cost of providing service for each class. Based on that determination, rates are adjusted.

A huge impact on the cost of service is peak usage. "Peak usage" means the largest amount of water the system is asked to provide all at once. The system cannot be built to provide average use; it must be capable of satisfying peak need. It's a bit like buying a car. We'd like a small, gas-efficient city car, but if we also want the muscle for freeway driving, the endurance for off-road recreation, and room for a garage sale furniture item, that economy car won't do, unless we plan to have two cars.

Of course, we can't install an entire second water delivery system for peak use. The cost would be astronomical. So the system, from storage and treatment to the tap, is built for the summer day when everybody needs a lot of water. And that is a cost of service, building and supporting a system that uses half of its water delivery during the hottest three or four months of the year.

High consumption is a big factor in water costs, because the rates are structured to encourage low water use. But peak use is an even bigger factor. Two households the same size might have roughly the same year-round indoor use. But the one with five or six times as much landscape to water may demand infrastructure considerably larger and more expensive than the other.

The lowest rates we can sustain. It's a mandate and a responsibility. And our rates remain among the lowest in the region. But high water demand will always be expensive, so use only what you need.