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Oro Medonte

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​Water Rates FAQs

Facts:

  • The majority of residents in Oro-Medonte are on private wells.
  • There are residents who are on a privately-owned/operated water systems.
  • There are residents who are on Municipally-owned/operated water systems.
  • The Township has operational control over 13 water systems located across the municipality.

Are the Township water systems inspected by the Ministry of the Environment and Climate Change (MOECC)? How do our systems rate?

Yes, all systems are inspected annually at a minimum. We proudly report that Township systems received a 100% inspection rating in 2016 from the MOECC, who strictly govern operational legislation. To date, the Township has never received any Director or Provincial Orders to Comply, been prosecuted or investigated for any drinking water infractions, or received monetary fines. We will continue to remain diligent in providing safe and reliable drinking water to our customers in an environmentally conscious and sustainable manner.

Who does this water rate structure change affect?

The Township of Oro-Medonte operates several water systems across the municipality. This rate structure change only applies to those residents on municipal water systems.

Our municipal water systems are user-pay, full cost-recovery systems. This means that only system users pay for the service, not the general taxpayer.

I live in Horseshoe Valley, but pay $800 per year as a flat fee for water? Will this rate change affect me? Why am I billed differently?

The water supply in Horseshoe Valley is provided by the municipality for those residents who live in Zone 2 (Horseshoe Highlands). Skyline Utilities (a private utility) provides water services for those residents living in Zone 1, which are predominantly those on the north side of Horseshoe Valley Road.

The Township does not set the water rates for residents in Zone 1, but does act in a collection capacity for those homes with water service provided by within Zone 1. Any rate changes for Skyline customers would be at the discretion of Skyline Utilities.

Will my water bills go up?

Water bills will increase for most of our customers. Given the continued use of a variable rate in the new structure, the increase will vary in amount from customer to customer and is dependent on how much water you use.

To estimate your rate impact, please use the online estimator tool.

When would the proposed new rates be implemented? When would the proposed new rate structure affect my payment responsibility?

The proposed rate structure was recommended for implementation beginning July 1st, 2017. This means that the new combined rate structure will first appear on third quarter water bills, which are issued near the end of October. This provides up to 8 months notice to customers of the new rates and structure.

The last rate increase was January 1st, 2016.

What triggered the change in the water rate structure? Why change the structure?

The current rate structure is not sustainable. The changes recommended to the rate structure ensure the Township’s water systems have a stable, sustainable funding mechanism in place to provide customers with a safe, reliable water supply.

Like many municipalities in the province, Oro-Medonte is faced with a significant infrastructure funding shortfall. The Township’s water infrastructure renewal requirements are currently $1.3-million per year, but the fees charged to users only generates $530,000 in funding. This means that the systems are currently underfunded from a capital perspective.

Likewise, the operational deficit as reported demonstrates that the current rate structure does not adequately support realized operational costs.

As a result of the Walkerton inquiry, the municipality (including members of Council, licensed operators, and senior staff) have a legislated and highly regulated responsibility to supply and deliver a safe, reliable water supply and provide for sustainable services.

Why add a fixed rate operating component to the rate structure?

All users are afforded equal access to the system. Under the new rate model all users would pay an equal amount for this service as a portion of their water bill. The fixed operating charge covers a portion of the costs of operating the system on a day-to-day basis. Approximately 80% of the operating costs are incurred regardless of consumption.

The use of a fixed operating component will better enable operating expenses to be met. The use of a fixed operating component also reduces our customers’ risk to cover future operating shortfalls due to low consumption levels. We have had consumption shortfalls in the past that have triggered variable rate increases in 2015 and 2016.

Why have staff recommended a 50% fixed operating rate in the new structure? Why not a 20% fixed cost?

Approximately 80% of the operating costs are incurred regardless of consumption. These costs are related to customers' access to usage, not the amount of water consumed. As the fixed rate increases, consumption rates decrease and vice versa.

Following the presentation by KPMG on January 9th that included feedback from those in attendance, staff conducted a deeper financial analysis of users' consumption levels and assessed the risk associated with various ratios for the fixed operating component.

Although, KPMG has stated that an 80% fixed rate provides the least consumption risk and would in fact most closely meet operational cost targets, staff did not believe an 80% fixed rate would best match the Township's strategic objectives or best serve our customers.

Based on the analysis conducted by staff, a 50% fixed operating rate for was recommended for 2017 as it strikes a balance between financial stability and supporting conservation.

Where did KPMG come up with this Fixed + Variable Operating Model?

The rate model was developed based on guidance provided by the American Water Works Association, a North American industry group that provides best practice recommendations for water and wastewater issues.  Specifically, the KPMG recommendations are based on the guidance provided in the publication "M1: Principles of Water Rates, Fees and Charges".

KPMG's experience includes the development of recommended water rate structures and long-term financial plans required under Ontario Regulation 453/01 for more than 20 municipalities.

The incurrence of operating deficits in the past reflects the risks associated with the Township's current rate structure, which exposes the Township to so-called consumption risk by virtue of determining billings based solely on consumption.  The recommended model is intended, among other things, to manage this risk.

I like to conserve water. How will this new rate structure support my conservation efforts?

The rate structure endorsed still includes a variable consumption rate, which means customers will continue to pay for what they use. Under the proposed new rate structure, the variable rate cost is lowered to $1.45 per cubic meter from the current $2.44 per cubic meter (2016). This means that users will pay less for their volumetric portion of their bill. The reduced variable rate charge still supports conservation and fiscal sustainability and is in accordance with the recommendations by KPMG.

Why are operational costs increasing? Is the Township doing anything to monitor and control costs?

All municipal water systems operate in accordance with the Standard of Care, provincial legislation, and drinking water licensing and permits. Together, these documents and regulations provide the environmental governance for all systems and operations, and distinctly control the operational requirements.

Independent of provincial legislative requirements, Environmental Services has made a number of improvements. These include:

  • Submission of grant applications;
  • An external assessment of efficiency opportunities;
  • Utilizing technology for efficiencies, such as:
    • Increased use of remote system monitoring to reduce staff costs.
  • Implementing operational improvements:
    • the installation of variable speed pumps;
    • improved procurement strategies to manage the efficiency and environmental sustainability of the services we provide and the use of outside laboratory services; and
    • Continuous monitoring of costs.
  • The funding of new development though development charges and agreements.

What kind of maintenance activities do the operators perform? What are the provincial legislations around water operations?

The operation of the municipal drinking water systems is highly regulated by several Acts & Regulations. The main documents governing operations for water systems are as follows:

  • Safe Drinking Water Act, 2002, S.O. 2002, c.32 (‘SDWA’)
  • Ontario Regulation 188/07: Licensing of Municipal Drinking Water Systems
  • Ontario Regulation 169/03: Water Quality Standards
  • Ontario Regulation 170/03: Drinking Water Systems
  • Drinking Water Quality Management Standard

Regardless of consumption, Township licensed water operators are responsible for the several monitoring operational responsibilities, including but not limited to:

  • Chlorine Residuals – bi-weekly
  • Bacteriological Testing – weekly
  • SCADA Equipment Calibration - every 72 hours
  • Chemical Testing – quarterly
  • Alkalinity and Lead Testing – bi-annually
  • Alarms – weekly
  • Well Head Inspections – bi-weekly
  • Turbidity – monthly
  • Flushing programs
  • Hydrant and Valve Maintenance programs
  • Flow Meter Calibration program
  • Generator Maintenance program
  • Reservoir Maintenance
  • Standpipe Maintenance
  • Pressure Gauge Checks and Control Valves

Why is water more expensive in Oro-Medonte than most of our neighbouring municipalities and cities?

Due to the large geographic area served, the number of systems in operation, the MOECC classification of each municipal water system, and corresponding legislative requirements for each system, economies of scale for water delivery in Oro-Medonte is very challenging.

Our municipal water systems are user-pay, full cost-recovery systems. This means that only system users pay for the service, not the general taxpayer.

In Oro-Medonte, water services and systems should not be compared to traditional urban centres due to the volume of users we serve. In fact, only 20% of our residents are on municipal water, while the rest are serviced privately.

The per-user cost of operating a system tends to be lower when there are more users on a system. In Oro-Medonte, each system – regardless of consumption – requires regular testing, maintenance, repair, and upgrades to the infrastructure. With so many systems requiring all of this work and the relatively low number of users, the overall program costs will become higher.

I understand part of the new rate structure includes payment of an operational deficit. Will you please explain what this deficit is related to, how much it is, and how long will it take to recover?

The existing operational shortfall of $350,000 is mainly attributed to wetter than anticipated summers, commodity and utility price increases, increased legislative requirements, and a suspension of water rate increases between 2011 and 2014.

After five years, the current $350,000 operational deficit will be recovered. Given that the municipal water systems are user-pay, full cost-recovery systems, the rates for our customers are defined by operational costs and capital funding/asset management requirements. Any future operating deficits would need to be recovered by users.

This is why a fixed operating component is important.

By utilizing a fixed operating component, the revenue risk associated with operational shortfalls are reduced, thus reducing the possibility for additional deficits to be incurred. More specifically, by using a 50% fixed operating component, the risk associated with deficit potential is less than using a 20% fixed operating component. As stated by KPMG, an 80% fixed operating component is optimal from a cost perspective.

Why is the Municipality charging customers for an operational deficit from earlier years?

Municipal water systems are classified as user-pay, full cost-recovery systems. The operational deficit accumulated is strictly related to the municipal water system and cannot be transferred to the general tax levy.

The Township of Oro-Medonte is not unique to the user-pay, full cost-recovery system – these systems are in place across Ontario.

Our goal is to operate the water systems as a break-even operation while maintaining adequate capital requirements in compliance with Provincial legislation.

Will the Water System Financial Plan be updated? Customers would like to see the longer-term vision for water rates.

Yes, it will. An updated financial plan is a prudent step to a long-term vision for our Municipal water systems. Once completed, the plan will be placed on our website and will illustrate the longer-term financial plan for municipal water systems.