There are two basic options of formulating water rate, either the flat rate or the  metered rate.

1. FLAT RATE

Flat rate is a fixed monthly charge for the water service paid independently on the amount of water used, usually applied to unmetered connections. A flat charge is usually the first of water rates for a newly formed water district. It is based on such factors as the number of residents, number of rooms, number of plumbing fixtures, or other such physical features. For commercial establishment, water charge is based on the number of employees, the square-meter area of structure, the number of livestock, the number of recreational facilities, or other different items as the basis of charge. However, this practice is now being discouraged as it encourages wasteful usage of water.

2. METERED RATE

It is generally accepted that the charging for water in proportion to the amount and characteristics of use, and hence in proportion to cost, is more equitable than charging on a flat rate basis. Metering of service connections has long been recognized as the economical and equitable procedure for arriving at the appropriate water charges. Metered rates are imposed on the basis of the actual volume of water consumed for a billing period.

The prescribed rate structure consists of two components, namely, the minimum charge (MC) and the commodity charges (CC).

a. Minimum Charge (MC). This is also known as the service charge or the demand charge. Minimum charge is fixed depending on the size and the classification of service connection (customer class) and should cover the first 10 cu.m. of water consumption. The MC is established to cover fixed costs required to carry on vital water supply functions not directly connected with production and distribution.

The MC is set in accordance with the following criteria:

(1) The MC should be within the ability to pay of the low income users. It is established that a 10 cu.m. is enough to supply the domestic water need of low income users. Hence, the MC for 1/2" residential should not exceed 5% of the average monthly family income of the low income group. In extreme cases where the MC exceeds the 5% of the average monthly family income, any of these two methods may be resorted to:

a) The MC may be halved to reduce the water bills of those consuming water not exceeding 5 cu.m. per month,

(b) A 3/8 in. connection may be used where the flow is regulated to give about a gallon per minute. The MC for this size of connection is equivalent to 40% of that of the 1/2 in. connection.

(2) The MC varies in proportion to the size of the meter such that the bigger the size of the meter, the higher the MC. This is accomplished through the application of capacity factor, also known as equivalent meter and service ratio, a way of reflecting the cost of providing the facilities to meet the demands of the consumers.

b. Commodity Charge (CC. Commodity charge is the amount charged per cu.m. in excess of the minimum charge (first 10 cu.m.) and computed to cover expenses related to production, distribution, and all other costs not recovered from the MC.

The CC is set in accordance with the following criteria:

(1) Volume after the first 10 cu.m. should be divided into quantity blocks of 10 cu.m., with number of blocks of not less than three.

(2) The unit price (cost per cu.m.) per block should increase as consumption increases. The unit price per block within a schedule (according to size and classification of connections) should be in ascending order, i.e. ascending quantity block rate structure.

(3) The incremental increase between blocks could either be at a uniform, increasing, or decreasing trend depending on how the market will react, the cost of alternative water supply, and the relative affluence of large consumers. An irregular or inconsistent incremental increase between quantity blocks should be avoided.

(4) The MC should be uniform per classification of service connection (customer class), regardless of the meter size.

3. COMPUTATION OF FLAT RATE

The following guidelines for computing flat rates (unmetered connections) must be observed:

a. Flat rate should be computed based on the actual average consumption of metered 1/2" residential connections times the existing metered rates (minimum charge + commodity charges) for said connections, using the following formula:

FR = AC x MR

Where:

FR = Flat Rate
AC = Average consumption of metered 1/2" residential connections but not lower than the national industry averages as follows:

(1) Small WDs - (1,1000 connections)
Average consumption, which is equal to or greater than 21 cubic meters times the existing metered rates.

(2) Medium WDs - (1,001 - 5,000 connections)
Average consumption, which is equal to or greater than 23 cubic meters times the existing metered rates.

(3) Large WDs - (above 5,000 connections)
Average consumption, which is equal to or greater than 30 cubic meters times the existing metered rates.

MR = Metered rates (minimum charge + commodity charges)

b. As a priority to metering, the water district should start with big users and those in high pressure areas.

4. CLASSIFICATION OF SERVICE CONNECTIONS

Water service connections are classified into three customer classes. Based on this classification, conversion factors are assigned and used in arriving at the corresponding water rates. The conversion factors are to be multiplied to the residential rates, both to the minimum and commodity charges.

The commercial class was deemed too general in classification and the districts found it difficult to deal with the various concessionaires regarding consistency in implementation. This led to the sub-classifications of commercial class with assigned lower conversion factors.

5. SUB-CLASSIFICATIONS OF COMMERCIAL CLASS

Classification Conversion Definition
Factor

Commercial 2.0

• Rest houses
• Hotels, lodges and the likes
• Hospitals, whether private or public
• Cafeterias managed by cooperatives, corporations, etc.
• Ice cream parlors
• Beer houses
• Bars, night clubs and disco pads
• Restaurants
• Gasoline stations
• Bus stations and/or terminals
• CHB and concrete products manufacturers
• Theaters
• Carenderias
• Confectioneries and bakeries
• Ice plants
• Private schools
• Boarding houses
• Billiard halls and other games and entertainment places
• Any residential user who sells or supplies water toothers

Commercial-A 1.75

• Photo services
• Dental and medical clinics
• Warehouses
• Groceries
• Gift shops
• Offices, including government banks
• Drugstores
• Wholesale and retail outlets
• Furniture shops
• Fish and meat stalls in public markets with individual water meters
  

Commercial-B 1.50

• Sari-sari stores
• Vulcanizing and repair shops
• Other premises utilized for selling foods or services including premises used for living quarters
  

Commercial-C 1.25

• Apartments whose owners assume payment of water bills using one central water meter