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Less Common Base Charge Structures

Base Charge on a Water Bill

Base Charge on a Water Bill

 

Base charges are critical for water utilities’ finances given that the majority of utility expenses are fixed in the short term and require a stable revenue source to pay for them despite decreasing demands. The most common practice is for utilities to set a constant base charge for each customer class or vary the base charge by meter size. Yet, this assumes that every residential customer with a 5/8″ meter places the same fixed costs on the water system. A few utilities have determined that this was not the case and have structured base charges more creatively, resulting in varying base charges among customers of the same customer class. This post describes some of the less common structures of base charges.

 

Continue reading Less Common Base Charge Structures

Water Funds: Financing FONAG in Ecuador

 

Ecuador_bridgeoverthePastazas2“For many people, food comes from a supermarket and water comes from a tap. But the truth is, the food and water that sustain us come from grasslands, forests, rivers, and lakes that depend on natural processes to be sustained themselves. Setting aside wild places alone are insufficient to protect nature. Lands and waters can sustain people and wildlife; modern conservation is about finding ways to do both.”

-The Nature Conservancy 2013 Annual Report

This post is part of a series following the experiences of students participating in the EFC’s Summer Environmental Finance program in Ecuador. This post was written by Megan Garrett.

The Nature Conservancy (TNC) has initiated a program to conserve the watersheds from which water is sourced, called Water Funds. These water funds exist all over the world, but have become especially popular in Latin America following the success of FONAG (Fondo para la Proteccion del Agua), the first ever water fund, located in Quito. These water funds are an interesting financial tool in preserving our water sources and surrounding environment. Continue reading Water Funds: Financing FONAG in Ecuador

Neutral is the New Green: Financing Carbon Offsets at Duke University

Carbon NeutralIf you’ve been on a college campus lately (or received your annual alumni donation request letter), you know that colleges and universities are increasingly focused on “green” initiatives that improve sustainability and reduce campus-wide energy use. While the EPA’s proposed 111(d) standards will make reducing carbon emissions a household phrase, many colleges have been working towards reducing carbon emissions on campus for years.

More than 675 colleges nationwide have become signatories of the American College & University Presidents Climate Commitment, a network of college and university presidents and chancellors dedicated to promoting sustainability efforts on college campuses.  Today, 22 colleges and universities in North Carolina are part of the commitment including UNC-Chapel Hill, Duke University and NC State.  Many of these colleges have established a goal of becoming carbon neutral and are taking actions to reduce carbon dioxide emissions in order to achieve a zero carbon footprint.  Since no college campus has found a way to reduce the use of fossil fuels on-site by 100 percent, becoming climate neutral on campus must be accomplished through the purchase of carbon offsets – investments in off-campus carbon reduction initiatives.  Continue reading Neutral is the New Green: Financing Carbon Offsets at Duke University

In the News: D.C. Water Considers First-Ever Century Bond by a Public Utility

DC-tunnel-infrastructure-waterThis post originally appeared on June 20, 2014 in GOVERNING Magazine Online.

Written by Liz Farmer

If Washington, D.C. is undertaking a project that will benefit – at minimum – the next three generations, then why make just one generation pay for it?

That question is the impetus for what would be a highly unusual move as D.C. Water and Sewer Authority contemplates offering a century bond this summer to help finance a major infrastructure project already underway. Century bonds, which are paid off over 100 years, are rare in the private sector and are mostly issued by colleges and universities. But it’s unheard of for a public utility to issue such a bond. Continue reading In the News: D.C. Water Considers First-Ever Century Bond by a Public Utility

Environmental Finance: Applied Abroad

Quito service projectThis summer, the Environmental Finance Center is taking its interest in how environmental projects are funded on the road through a three-week Applied International Environmental Finance program in Quito, Ecuador.  The EFC, in collaboration with TripleSalto –a nonprofit organization that generates integral solutions to social, environmental, and economic needs through strategic alliances - decided to sponsor this course based on growing interest in applied international environmental finance projects among current Public Administration, Public Health, and Environmental Engineering Masters students at UNC-Chapel Hill. Continue reading Environmental Finance: Applied Abroad

Watershed Finance: Promoting Watershed Protection Finance Strategies through Effective and Transparent Communication Tools

NC RiverThe challenges associated with designing and implementing water conservation finance strategies are multifaceted. First, stakeholders must agree on the initial environmental problem and forge an agreement of action. Second, participants must identify who should pay for protection efforts and where the money will come from. Third, local governments and utility mangers must be able to anticipate how different funding strategies will impact residents and non-residents. And fourth, officials must be able to communicate all of this information to stakeholders clearly, effectively, and transparently.

Nowhere are these challenges more at play than in efforts to clean up the Upper Neuse River Basin (UNRB) located in North Carolina’s piedmont region. Continue reading Watershed Finance: Promoting Watershed Protection Finance Strategies through Effective and Transparent Communication Tools

Taxing Toilet Paper —Wastewater Finance Savior or Regressive Burden?

Half_a_white_toilet_paper_rollMany government-owned wastewater systems in the United States are enterprise funds.  That is, they are business-like units within the overall government that should be self-sustaining, taking their revenue from the rates and fees charged to wastewater customers rather than from taxes.  Ideally, wastewater utilities base their rates and fees on the full cost of providing wastewater service, not just on operating expenses and routine maintenance costs.  Full cost rates and fees would also include taxes and accounting costs, contingencies for emergencies, and, perhaps most importantly, costs related to capital infrastructure—principal and interest on long-term debt and reserves for capital improvement. Continue reading Taxing Toilet Paper —Wastewater Finance Savior or Regressive Burden?

Utility Debt Risk

This is Part 2 of a 2 part blog post on utility financial risk. Part 1 focuses on utility revenue risk, and Part 2 focuses on utility debt risk.

Debt Risk

In our first blog post on utility financial risk, we discussed how debt risk in addition to revenue risk were significant contributing factors in the Energy Future Holdings bankruptcy, the largest bankruptcy of a leveraged buyout on record. While it is relatively rare for utilities to declare bankruptcy, it is not unusual for utilities to carry high levels of debt. In fact, utilities often have capital structures with high amounts of debt combined with highly rated credit quality, signaling that they have a strong ability to repay that large debt. Typically as debt levels increase, the risk and cost of bankruptcy increases, and credit quality decreases. The degree to which bankruptcy risk increases as debt increases varies between companies and industries. For most companies, there is a certain optimum level of debt where the company balances out the benefit of a tax shield and the risk/cost of bankruptcy. Determining this optimal capital structure is difficult for all companies, not just utilities.

Continue reading Utility Debt Risk

A Green Infrastructure Parking Lot – Questions and Ideas on Incentives for Stormwater Management

ParkingLotTo address the huge costs of stormwater management, communities across the nation are creating new programs to attract investment. But what are the key conditions and governing structure needed to encourage higher private investment in localized stormwater management? The EFC at UNC recently examined this question with a group of stormwater professionals from 31 states and Washington DC. Hosted by SESWA, the discussion focused on different communities’ approaches to folding incentives into a stormwater management plan. We took the perspective of a downtown parking lot owner, weighing our financial options as we sought to mitigate stormwater effects on our property. Would we install green infrastructure on our parking lot?

Continue reading A Green Infrastructure Parking Lot – Questions and Ideas on Incentives for Stormwater Management

$napshot: The Big Flush

WaterUseDuringHockeyGame_Edmonton

End of the period. Commercial break. Where’s the restroom?

In honor of the World Cup that began last night, we are re-posting a wonderful image that made quite a splash online a few years ago. EPCOR Utilities, Inc., the water utility that serves the City of Edmonton in Canada, tracked the water consumption in the city during the Canada-US Olympic gold medal hockey game in 2010, down to the minute. Continue reading $napshot: The Big Flush