Is Your Water/Wastewater System's Rate Structure Adequate?
One of the major challenges for water and wastewater systems in the current environment is achieving a rate structure that meets the needs of both the ongoing operations of the system and also is adequate to fund system improvements that are imminent. System infrastructure in the United States is generally designed to last 60 to 80 years and many of our systems are nearing their limits. The EPA estimates that over the next 20 years, $335 billion will be needed for replacements and improvements to the nation's water and wastewater systems.1 Even though studies show 95% of American voters value water over any other service they receive and 63% of Americans would support an increase of 11% on average, many municipalities fear the public outcry that might result over rate increases.
With limited availability of federal money and insufficient rate structures, many systems find themselves patching problems rather than making the major system improvements that are necessary to maintain the integrity of their infrastructure. The EPA predicts that the cost of water-related services could as much as quadruple over the next two decades to fund unavoidable system improvements. A thorough and properly conducted rate study can help systems to design their rates in a way that allows the utility to achieve its goals and hopefully avoid the public outcry as is being experienced in DeKalb County, Georgia where a proposal is on the table that would nearly double water bills for its citizens by the year 2014.2
You may find yourself overwhelmed with the process of trying to perform a rate study and structure of your rates such that they will be adequate to fund ongoing operations and future system improvements. The American Water Works Association has published a manual entitled Developing Rates for Small Systems to help guide you through the process. The guide walks small systems through gathering data, developing a financial plan, analyzing a pattern of revenue increases, and arriving at a final design for a rate structure that will allow the system to meet its operating goals as well as its longer-term system improvement goals. We at EGP PLLC have resources available to assist you in determining if your current rate structure is adequate and determine the rate structure necessary to adequately fund ongoing operations and future system improvements.
At EGP PLLC, we have a history of serving water and wastewater systems, both large and small. If you would be interested in finding out how we can help guide you through the rate setting process, please feel free to contact us at 501-374-2910.
- First Research Industry Profiles: Water & Sewer Utilities Quarterly Update 11/8/2010
- Gregory M. Baird, "Water Affordability: Who's Going to Pick Up the Check?," American Water Works Association Journal, December 2010 Volume 102 Number 12.
