1. (1) A water conserving pricing structure is an important demand management tool that provides incentives to consumers to reduce average or peak water use, or both. Conservation pricing reflects the fact that water is a precious resource that should be used in an economically efficient manner. Such pricing includes:

   1. (i) rates designed to recover the full cost of providing service, including a reasonable rate of return on investment; and

   2. (ii) timely billing based on metered usage.

      Such pricing is also characterized by one or more of the following components:

   3. (iii) rates in which the unit price of water per class of customer (residential, industrial, etc.) is constant within each class regardless of the quantity of water used (uniform rates) or increases as the quantity of water used increases (increasing block rates);
   4. (iv) seasonal rates or excess-use surcharges to reduce peak water demands during summer months; or
   5. (v) rates based on the long-run marginal cost or the cost of adding the next unit of water supply to the system.

2. (2) A nonconserving pricing structure is one that provides no incentives or disincentives to consumers to reduce water use. Such pricing may be characterized by one or more of the following components:

   1. (i) rates in which the unit price of water within any one class of customer decreases as the quantity of water used increases (decreasing block rates);
   2. (ii) rates that involve charging customers a set fee per unit of time regardless of the quantity of water used (flat rates);
   3. (iii) pricing that does not reflect the full cost of providing services; or

   4. (iv) pricing in which the typical bill is determined mainly by a minimum charge and metered usage has little impact on the total bill.

      (c) Criteria

3. (1) All purveyors are encouraged to evaluate alternative pricing structures with the objective of adopting a water conserving pricing structure.

4. (2) A purveyor seeking approval under section 3.8 of the compact for a new or expanded water withdrawal and whose proposed total withdrawal equals or exceeds an average of one million gallons of water per day shall include in its water conservation plan submitted as part of the application, an evaluation of the feasibility of implementing a water conserving pricing structure and billing program. A purveyor may limit the evaluation to less than its entire system upon application and a determination that a review of its entire system is not necessary. The evaluation shall, at a minimum, consider:

   1. (i) the potential change in the quantity of water demanded for customer classes and their end uses of water during both peak and non-peak periods stemming from alternative water conservation pricing structures;
   2. (ii) the potential revenue effects of the alternative pricing structures;
   3. (iii) any legal or institutional changes necessary or desirable to implement a water conservation pricing structure; and
   4. (iv) how conservation pricing could be coordinated with other conservation programs and measures to reduce both average and peak water use.
5. (3) The requirement set forth in paragraph (2) of this subdivision shall be waived if the purveyor either documents it has adopted a water conserving pricing structure or is in the process of implementing such a pricing structure in accordance with a commission schedule or a schedule established by the appropriate state public utility commission.
6. (4) The Executive Director, on or before June 30, 1993 and annually thereafter, shall review the effectiveness of the retail water pricing activities hereunder to determine their adequacy in promoting and supporting water pricing that encourages water conservation. The results of such review and recommendations, if any, shall be submitted to the commission for its consideration.

(a) Policy.

It shall be the policy of the Delaware River Basin Commission to promote and support retail water pricing that encourages conservation.

(b) Definitions.