WATER DEMAND COMMITTEE
ITEM:		DISCUSSION ITEMS
2.	DISCUSSION OF REBATE PROGRAM INCLUDING WATER SAVINGS AND REBATE EXPENDITURES
Meeting Date:			April 5, 2011	Budgeted:	N/A
From:			Darby Fuerst,	Program/	N/A
			General Manager	Line Item No.:
Prepared By:			Stephanie Pintar	Cost Estimate:	N/A
General Counsel Review: N/A
Committee Recommendation: N/A
CEQA Compliance: N/A

SUMMARY: The following report summarizes the various aspects of the District-administered Rebate Program.

History

In February 1996, the Board of Directors approved an Action Plan for Water Supply Alternatives. One alternative that was revisited was a toilet replacement refund program. On January 11, 1997, the District began accepting applications for the Rebate Program with an initial Rebate (refund) Account of $164,000. During the first five months of the program, refunds were available only for replacement of high flow toilets with Ultra-Low Flush Toilets (ULFT) in Residential homes and apartments. In June 1997, California American Water received approval from the California Public Utilities Commission (CPUC) to match the District’s Rebate Account fund. Also in June 1997, the Board approved funding to continue the program, and in July 1997 the program was expanded to Non-Residential Users. Water saved by the Rebate Program is not reused and is set aside to help the District meet long-term water conservation goals. Water saved through this program also helps the community as it strives to keep water use below the goal set by the State Water Resources Control Board (SWRCB) in its 1995 Water Rights decision (WR No. 95-10).

Administration of the Rebate Program has been conducted by the District since its inception. Administration by the District is viewed as a critical component of the program to avoid double-counting of water savings and to avoid issuing Rebates for required retrofits. Modifications to the program are reviewed and supported by both California American Water and by the CPUC’s Division of Ratepayer Advocates (DRA). Since the 2009-2011 General Rate Case (GRC), the DRA has been involved in both the funding of the Rebate Program and in review of proposed modifications. MPWMD has an agreement to provide DRA with copies of ordinances that modify the Rebate Program at least 20 days prior to consideration by the Board.

The Rebate Program has been expanded six times between 2003 and 2011. The following bullets summarize the Rebate Program changes:

· Ordinance No. 110 (adopted September 30, 2003) -- Expanded the Rebate Program to include Rebates for High Efficiency Dishwashers, Clothes Washers, Dual-Flush toilets, Instant-Access Hot Water Systems and Rainwater Cisterns.

· Ordinance No. 127 (adopted January 25, 2007) -- Added Rebates for High Efficiency Toilets (HET) and Zero Water Consumption Urinals. The ordinance also expanded the program to the entire District. California American Water funded Rebates within its service area boundaries, and MPWMD funded non-California American Water Rebates.

· Ordinance No. 129 (adopted August 20, 2007) – This ordinance added the Rebate Program to Regulation XIV, Water Conservation. This ordinance also amended the Rebate Program amounts and added Rebates for Irrigation System retrofits.

· Ordinance No. 139 (adopted May 21, 2009) -- This ordinance amended the Rebate Program to disallow both a Rebate and a Water Credit for Qualifying Devices. Prior to agreeing on the conservation budget in the California American Water GRC for 2009-2011, DRA raised concerns about funding the Rebate Program with ratepayer dollars when an applicant could potentially receive both a Rebate and a Water Credit that could be used to offset additional water demand.

In the January 15, 2009, Settlement Agreement for the 2009-2011 conservation budget, MPWMD agreed to track and report on the amount of Rebate savings reinvested as Water Credits during years 2009-2011. MPWMD agreed to revise its Regulation to disallow both a Rebate and a Water Credit if the amount of Water Credits reinvested amounted to 0.5 acre-feet per year. This agreement was made as a condition to future CPUC authorization for funding for the Rebate Program. Early in 2009, it became apparent that action was needed to quell “double dipping.” Ordinance No. 139 put an immediate halt to the problem before the action trigger was reached.

· Ordinance No. 140 (adopted November 16, 2009) – Ordinance No. 140 expanded the Rebate Program to include Lawn removal, Synthetic Turf, High Efficiency Urinals, Pint Urinals, Rotating Sprinkler Nozzles, Water Brooms, High Efficiency Commercial Clothes Washers, Cooling Tower Conductivity Controllers, air-cooled ice machines, and X-ray film processor recirculation systems. Other amendments to the Rebate Program included the deletion of Rebates for ULFT (1.6 gallon-per-flush toilets), and increases in current Rebate amounts for High Efficiency Toilets, Water Efficient Clothes Washers and Zero Water Consumption Urinals. The ordinance also modified the District’s Washing Machine criteria to use a Water Factor, which is the national standard for determining water efficiency.

The Lawn removal Rebate was added as a component of Ordinance No. 140. The first reading of the ordinance was delayed one month to allow the Water Demand Committee to review and clean up the definition of Lawn. Staff was asked to give an update about the program to the Board after several months. In May 2010, staff requested additional funding for the Lawn Rebate based on high application levels. The request was reviewed by the Administrative Committee on May 7, 2010, including information that the program was going to be rolled into the Rebate Program when the funding for the “Cash for Grass” program was expended. On May 17, 2010, the Consent Calendar item to increase funding of the Lawn Rebate program included a summary of the program and was approved by the Board. The May 17, 2010, staff report is provided as Exhibit 2-A.

· Ordinance No. 144 (adopted August 16, 2010) included new Rebates for numerous Non-Residential retrofits including High Efficiency Connectionless Steamers, High Efficiency Commercial Dishwashers, Dry Vacuum Pumps, Graywater Irrigation Systems, Cooling Tower pH/Conductivity Controllers, retrofitting of continuous water flow medical steam sterilizers with water tempering devices, Cistern storage capacity increased from 3,000 to 25,000 gallons with an added eligibility condition that the Site must have sufficient roof area to provide the runoff to fill the Cisterns during a normal water year and an increase in the maximum Lawn Rebate from 2,000 to 5,000 square-feet. In addition, Rebate amounts were increased for Pint Urinals (from $250 to $300), Rotating Sprinkler Nozzles (from $0.50 to $4.00 with a minimum purchase of ten), Water Efficient Ice Machines (from $450 to $500), and X-ray film processor recirculation systems (from $2,000 to $3,500). The ordinance also increased the time for which an application can be submitted from 90 days to 120 days from the date of purchase of Qualifying Devices. Finally, the ordinance exempts California Non-Profit Corporations from the twenty toilet Rebate limit on Non-Residential Qualifying Properties.

· Resolution 2011-03 (adopted January 27, 2011) suspended receipt of Lawn removal Rebate applications while new guidelines were developed to improve the effectiveness of the program. This suspension was appropriate given the fact that the District was holding Rebate applications at that time pending approval of additional funding from the CPUC.

· Resolution 2011-04 (adopted February 24, 2011) reinstated the former Lawn removal Rebate program and adopted guidelines for implementation by ordinance (see Ordinance No. 148).

· Resolution 2011-07 (adopted March 21, 2011) reestablished the suspension of the acceptance of Lawn removal Rebate applications pending future funding. By this time (March 2011) funding for Rebates in the California American Water system was nearly expended and the Board desired to keep the smaller Rebates funded, rather than having to close the program down because of the large Rebates given for Lawn removal. This suspension also allows time for implementation of the new guidelines and provides time for program evaluation.

· Ordinance No. 148 (pending adoption April 18, 2011) amends Rule 141, Water Conservation Rebates, to implement the new and additional policies related to Lawn removal Rebates adopted by the District’s Board in Resolution 2011-04. It also amends Rule 141 to address unavailability of funds in a Rebate Account. Ordinance No 148 also amends portions of the Rebate Program to strengthen conditions of approval, clarifies that Sites must comply with applicable District rules before Rebates are issued, disqualifies Qualifying Devices mandated by local, State or Federal water conservation programs, reorders language related to Ultra High Efficiency Toilets in Rule 141-C, and deletes reference to a list of Weather Based Irrigation Controllers maintained by the District. This ordinance also clarifies deed restriction requirements allowing access to water records for recipients of Weather Based Irrigation Controller Rebates, Lawn removal Rebates, and Synthetic Turf Rebates.

Rebate Program Funding

Until the 2009-2011 Conservation Budget approved in the California American Water GRC, the Rebate Program was jointly funded with California American Water. The District has always administered the program; as part of its administration, the District tracks the retrofits and water savings that occur. From the inception of the program in 1997 until the 2009-2011 GRC, MPWMD budgets included 50 percent of the rebate funds as being reimbursable by California American Water. For example, MPWMD would budget $100,000 in its fiscal year budget: $50,000 from MPWMD’s revenue and $50,000 from California American Water. Beginning with the 2009-2011 GRC, California American Water funds all Rebates within its service areas, funded through a conservation surcharge on the customer’s bill.

The current Rebate Program is funded through several mechanisms: The CPUC approved a $924,925 Rebate budget for the 3-year period of the GRC Conservation Budget (2009-2011) for California American Water customers; the District budgeted $25,000 for non-California American Water Rebates from its own funds for Fiscal Year 2010-2011; the District received $45,000 in funding in the 2009-2011 GRC for a “Cash For Grass” program; and the City of Seaside provides incentives in addition to the District’s Rebates, with a specific amount per retrofit that is reimbursed to the District. The District administers the entire local Rebate Program and tracks the retrofits and water savings that occur, utilizing its extensive property database to verify eligibility.

DRA has direct involvement and oversight on budgets approved by the CPUC. DRA also reviews funding requests from California public utilities and makes recommendations to the Administrative Law Judge overseeing rate requests. The DRA’s recommendations hold considerable weight with the CPUC, which serves as the approving body for decisions on these matters. MPWMD has been involved in at least the past three rate cases as a both a collaborator and regulator of California American Water regarding its water conservation budget and rate design requests.

With the approval of the 2009-2011 GRC, MPWMD’s and California American Water’s conservation programs now have separate funding through a conservation surcharge on the water bill. This collaboration in funding essentially encourages a partnership with California American Water on all conservation programs. District staff communicates daily with California American Water to coordinate activities and reporting. This partnership has continued with collaboration in the 2012-2014 GRC Conservation Budget, which includes $1.6 million for MPWMD conservation programs and $2.1 million in Rebate funds, as well as additional funding for California American Water conservation programs. DRA has recommended approval of these amounts after analyzing cost/benefit and water savings information. This information is provided as Exhibit 2-B.

MPWMD staff was directly involved with the development of the California American Water 2012-2014 GRC budget currently under consideration by the CPUC and was closely involved in the budget proposed and approved in the previous GRC. Projections of future participation levels are based on 2010 program participation (as reported in the monthly Water Conservation Program Reports) and on Rebate Program components that have not yet been fully communicated to Non-Residential customers. This information was used to propose a three-year budget of $2.151 million, which has been supported in testimony by the DRA.

Rebate eligibility requirements within the District are particularly stringent, which is the main reason the District insists on administering the program. Properties subject to retrofit requirements for Water Permits, Change of Ownership or Use, or other District mandates are not eligible for Rebates. The District has the unique ability to track this information, and utilizes its extensive database and inspection process to verify Rebate eligibility and track water savings. Deed restrictions are required for Lawn removal Rebates, Weather Based Irrigation Controllers and Synthetic Turf. Future implementation of expanded Lawn removal Rebate processes, as well as the expanded use of deed restrictions allowing public access to water records will increase the effectiveness of the District’s program.

Rebate Program Outreach

Rebate Program participation expanded dramatically in October 2009 when California American Water began its rebate outreach campaign. In examining statistics reported by the MPWMD, the average number of applications per month before the campaign began was 99. After a direct-mail Rebate Program brochure was sent in the Fall of 2009, the number of applications processed by the district rose to 200 in the month of October 2009, with a high volume of applications received in November (224) and December (145) 2009. During 2009, MPWMD received 1,545 Rebate Program applications. Participation in the program nearly doubled in 2010, with 2,743 applications received.

Ongoing outreach during 2010 resulted in continual increases in participation levels. By January 2011, approximately ten applications were being received each day, and the District was approving between $60,000 and $80,000 in Rebates every month. At the end of 2010, the funds approved by the CPUC in the 2009-2011 GRC were essentially expended. Fortunately, the parties had agreed to supplemental funding in the event that the program was overly successful, and California American Water was able to file an Advice Letter and receive an additional $250,000 for the Rebate Account. MPWMD participation was instrumental in gaining this approval (Exhibit 2-C).

The majority of applicants learn about the Rebate Program through California American Water's advertising. Over 90 percent of applicants become aware of the program as a result of California American Water’s and the District’s outreach programs – either because of newspaper advertising, through direct-mail rebate brochures that are sent to all California American Water customers each year or through staff contacts at local outreach events. Local vendors and PG&E provide the remaining referrals.

Rebate Program Participation

Participation in the Rebate Program has increased with recent (2010-2011) outreach efforts by California American Water and by regular communication through local retailers, wholesalers and other related businesses. As of the end of February 2011, over 9,650 Rebates amounting to almost $2 million have been issued. This has resulted in water savings of nearly 310 acre-feet for each year that the savings occur (with most retrofits resulting in 10-15 year savings). The Rebate Program is summarized in the Conservation Program Report found in the Board of Director’s meeting packet. Table 2-1 is a summary of Rebates processed in the California American Water service areas during the first two years of the 2009-20111 GRC. A copy of the most-recent Rebate Program report (through February 2011) is presented as Exhibit 2-D.

TABLE 2-1

Rebates Issued to California American Water Customers in 2009 and 2010

Type of Appliance	2009 Actual Rebated Amount	No. of Retrofits	Rebate per Appliance	Potential Rebate	Estimated Single-Year Water Savings
SFD ULFT	$9,370.29	95	$100.00	$9,500.00	2.185
SFD-HET	$47,716.12	323	$150.00	$48,450.00	9.690
SFD ULF Dishwasher	$15,625.00	125	$125.00	$15,625.00	0.375
SFD ULF WM-18 gallons	$106,950.00	535	$200.00	$107,000.00	8.025
SFD ULF WM-28 gallons	$4,950.00	33	$150.00	$4,950.00	0.495
IAHW Systems	$4,185.00	22	$200.00	$4,400.00	0.110
On Demand	$1,500.00	14	$100.00	$1,400.00	0.070
Cisterns	$4,671.25	16		$4,671.25
Smart Controllers	$2,630.00	19	$120.00	$2,280.00
Residential Zero Water Urinals	$400.00	2	$200.00	$400.00	0.020
Residential Rain Sensors	$50.00	2	$25.00	$50.00
Residential Soil Sensors	$25.00	1	$25.00	$25.00
MFD ULFT	$1,293.46	13	$100.00	$1,300.00	0.299
MFD-HET	$3,150.00	21	$150.00	$3,150.00	0.630
MFD ULF Dishwasher	$250.00	2	$125.00	$250.00	0.006
MFD ULF WM-18 gallons	$3,600.00	18	$200.00	$3,600.00	0.270
MFD ULF WM-28 gallons	$150.00	1	$150.00	$150.00	0.015
CII ULF	$100.00	1	$100.00	$100.00	0.023
CII HET	$5,617.20	42	$150.00	$6,300.00	1.260
CII WM-18 gallons	$1,200.00	7	$200.00	$1,400.00	0.105
CII Smart Controllers	$250.00	1	$150.00	$150.00
CII Zero Water Urinals	$200.00	1	$200.00	$200.00	0.092
Rebate Refund to CAW	-$500.00				-0.053
Total Dollars Rebated	$213,383.32	1,294		$215,351.25	23.617
Type of Appliance	2010 Actual Rebated Amount	No. of Retrofits	Rebate per Appliance	Potential Rebate	Estimated Single-Year Water Savings
SFD ULFT	$1,800.00	18	$100.00	$1,800.00	0.414
SFD-HET	$141,724.14	752	$200.00	$150,400.00	22.560
SFD HE DW	$45,875.00	367	$125.00	$45,875.00	1.101
SFD HEW 5.0 or less Water Factor	$205,950.00	830	$250.00	$207,500.00	13.363
SFD ULF WM-28 gallons	$1,200.00	8	$150.00	$1,200.00	0.129
IAHW Systems	$5,447.61	28	$200.00	$5,600.00	0.140
On Demand	$1,100.00	10	$100.00	$1,000.00	0.050
Cisterns	$13,736.25	32		$13,736.25	0.000
Smart Controllers	$2,250.00	16	$120.00	$1,920.00	0.000
Residential Zero Water Urinals	$0.00	0	$200.00	$0.00	0.000
Residential Rain Sensors	$515.00	13	$25.00	$325.00	0.000
Residential Soil Sensors	$25.00	1	$25.00	$25.00	0.000
Lawn Removal & Replacement	$128,781.61	72		$125,255.86	10.700
Rotating Sprinkler Nozzles	$60.50	51	$0.50	$25.50	0.000
MFD ULFT	$120.50	1	$100.00	$100.00	0.023
MFD-HET	$74,760.83	445	$200.00	$89,000.00	16.105
MFD HE DW	$3,750.00	17	$125.00	$2,125.00	0.051
MFD HEW 5.0 or less Water Factor	$7,825.00	35	$250.00	$8,750.00	0.564
MFD Rain Sensors	$0.00	1	$25.00	$25.00
MFD ULF WM-28 gallons	$1,250.00	9	$150.00	$1,350.00	0.145
MFD HEW Common Laundry	$0.00	0	$450.00	$0.00	0.000
CII ULF	$75.00	1	$100.00	$100.00	0.023
CII HET	$20,483.32	190	$200.00	$38,000.00	7.932
CII HEW	$18,112.00	10	$250.00	$2,500.00	1.166
CII HE DW	$250.00	2	$125.00	$250.00	0.006
CII Smart Controller	$1,070.00	3	$120.00	$360.00
CII Zero Water Urinals	$3,300.00	11	$200.00	$2,200.00	1.013
CII Rotating Hose Nozzles	$55.00	40	$0.50	$20.00	0.000
Rebate Refund	-$1,625.00				-0.144
Total Dollars Rebated	$677,891.76	2,963		$699,442.61	75.341
CAW Courtesy Rebates (Outside MPWMD Jurisdiction)
Type of Appliance	2010 Actual Rebated Amount	No. Approved	Rebate per Appliance	full rebate amount	Estimated Water Savings
HE DW	$625.00	5	$125.00	$625.00	0.015
HEW	$6,950.00	27	$250.00	$6,750.00	0.451
HET	$4,073.77	22	$200.00	$4,400.00	0.550
IAHW	$200.00	2	$200.00	$400.00	0.010
Cisterns	$25.00	1	$25.00	$25.00	0.000
Lawn	$15,363.53	4		$15,363.53	2.045
Smart Controllers	$370.00	3	$120.00	$360.00	0.000
Total	$27,607.30	64			3.071
Summary
Type of Appliance	2010 Actual Rebated Amount	2009 Actual Rebated Amount	2010 CAW Courtesy	2009 CAW Courtesy
SFD ULFT	$1,800.00	9,370	$0.00	$525.00	$11,695.290
SFD-HET	$141,724.14	47,716	$4,073.77	$750.00	$194,264.030
SFD HE DW	$45,875.00	15,625	$625.00	$500.00	$62,625.000
SFD HEW 5.0 or less Water Factor	$205,950.00	106,950	$6,950.00	$2,500.00	$322,350.000
SFD ULF WM-28 gallons	$1,200.00	4,950	$0.00	$0.00	$6,150.000
IAHW Systems	$5,447.61	4,185	$200.00	$300.00	$10,132.610
On Demand	$1,100.00	1,500	$0.00	$0.00	$2,600.000
Cisterns	$13,736.25	4,671	$25.00	$0.00	$18,432.500
Smart Controllers	$2,250.00	2,630	$370.00	$220.00	$5,470.000
Residential Zero Water Urinals	$0.00	400	$0.00		$400.000
Residential Rain Sensors	$515.00	50	$0.00		$565.000
Residential Soil Sensors	$25.00	25	$0.00		$50.000
Lawn Removal & Replacement	$125,255.86		$15,363.53		$140,619.390
Rotating Sprinkler Nozzles	$60.50		$0.00		$60.500
MFD ULFT	$120.50	1,293			$1,413.960
MFD-HET	$74,760.83	3,150			$77,910.830
MFD HE DW	$3,750.00	250			$4,000.000
MFD HEW 5.0 or less Water Factor	$7,825.00	3,600			$11,425.000
MFD Rain Sensors	$0.00	150			$150.000
MFD Lawn Removal & Replacement	$3,525.75				$3,525.750
MFD ULF WM-28 gallons	$1,250.00				$1,250.000
MFD HEW Common Laundry	$0.00				$0.000
CII ULF	$75.00	100			$175.000
CII HET	$20,483.32	5,617			$26,100.520
CII HEW	$18,112.00	1,200			$19,312.000
CII HE DW	$250.00				$250.000
CII Smart Controller	$1,070.00	250			$1,320.000
CII Zero Water Urinals	$3,300.00	200			$3,500.000
CII Rotating Hose Nozzles	$55.00				$55.000
Rebate Refund	-$1,625.00	-500			-$2,125.000
Total Dollars Rebated	$677,891.76	213,383	$27,607.30	$4,795.00	$923,677.380

Rebate Approval Rate

Rebate applications are approved when specific qualifications are met that are outlined in Rule 141. During 2009 and 2010, approximately 75% of the applications received were approved. This percentage has been consistent through the two year period. Rebates were denied primarily for the following reasons: Lack of receipts; ineligibility due to retrofit requirement; ineligibility to due unapproved appliance; and purchase outside of eligible dates.

Rebate Program Staffing

Increased participation in the Rebate program has had impacts on staff as the District administers the Rebates issued throughout the District. However, the District has mostly been able to accommodate the existing program, and the new database (after data migration is completed) will assist with staff’s ability to process and issue Rebates. The District’s direct involvement in the administration of the program ensures that program savings are tracked and are not double-counted in another District program or in any program administered by California American Water. In 2010, the program was administered by a full-time Conservation Technician with assistance from other Water Demand Division staff. Rebate checks are prepared by the District’s accountant and California American Water is periodically invoiced for Rebate reimbursement. No Rebate Program staff costs or overhead are paid by the conservation surcharge: This agreement ensures continued support by DRA for administration and oversight by the District. In mid-2010, a temporary service employee was added to assist with Rebate processing and database system data migration.

Lawn Removal Rebates

Lawn Rebates have been a topic of discussion at three of the Board meetings held in 2011. Concerns initially were raised about the program administration resulting from a need to clarify the process. This was addressed with the adoption of Resolution 2011-04 and will be codified in the District’s Rules by Ordinance No. 148. Questions regarding geographic participation have also been asked. A spreadsheet listing the locations of properties that have had Lawn removed for a Rebate is shown as Exhibit 2-E. Participation in the Lawn Rebate has been throughout the District, with more applications being received from areas in the unincorporated County areas. Generally, these areas have higher water use than Sites located in the boundaries of incorporated Jurisdictions.

Conclusion

Saff believes that support for the Rebate Program should continue to be a top priority of the District’s. The Rebate Program is popular, produces cost-effective and measurable results, and educates the community about conservation in residences and businesses and about numerous possible outdoor water saving retrofits. The Rebate Program is supported by the CPUC and DRA and results in real water savings that help the community achieve compliance with local regulatory restrictions.

RECOMMENDATION: The Water Demand Committee should receive and discuss the Rebate Program Report.

EXHIBITS

2-A Staff Report from May 17, 2010

2-B DRA Recommendation on Rebates for GRC 2012-2014

2-C Request by MPWMD and CPUC Approval of Supplemental Funding for Rebates

2-D February 2011 Monthly Conservation Report

2-E Lawn Rebates Issued by APN

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