HomeMy WebLinkAboutFIN-09-121 - Tankless Water Heater / ASV Rental Rate ReductionsREPORT
REPORT TO:
Finance & Corporate Services Committee
DATE OF MEETING:
September 14, 2009
SUBMITTED BY:
Dan Chapman, General Manager of Financial Services
PREPARED BY:
Sharon McDonald, Manager, Utilities Programs
WARD(S) INVOLVED:
All
DATE OF REPORT: September 9, 2009
REPORT NO.:
FIN-09-121
SUBJECT:
TANKLESS WATER HEATER/ASV RENTAL RATE
REDUCTIONS
RECOMMENDATION:
THAT the rental rate for anti-scald valves be reduced from $2.00 per month to $1.00 per month
(plus GST) effective October 1, 2009;
AND FURTHER THAT the rental rates for tankless water heaters be reduced to the following
monthly rates (plus GST) effective November 1, 2009:
53-DVN - $28.00
66-DVN - $29.50
74-DVN - $31.00
BACKGROUND
Building Code Regulation 23/04 was amended September 1, 2004 specifying that the maximum
hot water temperature supplied to fixtures in residential homes not exceed 49 degrees Celsius.
The change was introduced to reduce the danger of scalding and applies to new homes as well
as when there are alterations made to existing plumbing systems, including the replacement or
new installation of a water heater. Detailed analysis has demonstrated that it is financially
feasible to reduce the current rate for the rental of anti-scald valves (ASV) by extending the
program to cover all rental water heater units installed or replaced by Kitchener Utilities.
Tankless water heaters were added to the rental water heater program in May of 2008 and, to
date, Kitchener Utilities has 79 installed. While many customers have inquired about these
tanks, limited numbers follow through with the installation due in part to the cost of the units.
The rental rate reductions proposed in this report will support increased usage of tankless water
heaters by customers of Kitchener Utilities.
é ó ï
This report precedes Council’s normal deliberation on user fees and charges as it is desirable to
implement the rate reductions prior to launching a fall marketing campaign for tankless water
heaters, funded through a grant from Natural Resources Canada.
REPORT:
Anti-Scald Valve Rental Rate Reduction
To assist customers with complying with Anti-Scald Legislation, KU developed an anti-scald
valve plan that allowed customers options for compliance. Customers could have a valve
installed on the hot water heater by KU and pay a monthly rental fee, they could arrange for a
plumber to install an anti-scald valve on their hot water heater or have them install thermostatic
mixing valves at each of their hot water faucets and showerheads.
Approximately 20% of KU customers are not renting a valve nor is there any way of ensuring
that they have complied with the legislation and installed one on their own. As the rental water
heater provider, it is the Utility’s responsibility to ensure that the rental tanks comply with the
legislation. The most efficient and economical way to do this is to make it mandatory for all new
installations and replacements to include an anti-scald valve. This will ensure that KU remains
compliant with Ontario Anti-Scald Legislation and reduces the risk of scalding, thus increasing
the safety of KU customers. With increased volume and reduced maintenance costs, it is
possible to reduce the monthly rate on the anti-scald valves while still recovering the costs of
the program.
Tankless Water Heater Rental Rate Reduction
Despite considerable interest, there is relatively low take-up for tankless water heater rentals
currently. This is due, at least in part, to the higher rental rates for these units, currently in
excess of $30 a month where the standard tank style water heater rental rates range from about
$10 - $20 a month. There is a substantial price difference between the tankless and tank style
water heaters.
Earlier this year, KU surveyed current tankless rental water heater customers and responses
showed the following:
73% of Customers choose to go tankless as they are “enviromentally friendly”;
88% of Customers said their tankless water heater met their expectations; and
78% of Customers would also recommend a tankless water heater to friends or family.
This demonstrates that current customers are generally satisified with their tankless rental water
heaters.
In order to encourage and assist customers to moving to a more environmentally friendly tank,
the rates have been reviewed and have been decreased to narrow the gap between these and
other tanks. This is made possible by extending the amortization period of the tanks to
correspond with the warranty period for the tanks currently purchased by Kitchener Utilities.
é ó î
Kitchener Utilities has applied for funding from Natural Resources Canada, ENERGY STAR
division to promote the tankless water heater program via bill inserts and radio ads. The
funding application has been approved internally and is currently being drafted for final review.
This marketing program will be launched this fall and it would be desirable to have implemented
a lower rate structure in advance of those communications being issued.
The following rate changes are recommended effective November 1, 2009:
Model # Existing Rate Proposed Rate
53- DVN $32.00 $28.00
66 - DVN $33.50 $29.50
74 - DVN $35.00 $31.00
FINANCIAL IMPLICATIONS:
The anti-scald rate change will result in a temporary decrease in revenue of approximately
$130,000 which will be made up in future years as the program becomes mandatory. The
tankless rate change is anticipated to increase annual revenue by $110,000 with the addition of
approximately 300 new customers.
ACKNOWLEDGED BY: Dan Chapman, General Manager of Financial Services & City Treasurer
é ó í