Tag: financial performance

Are Utilities that Need to Raise Rates Actually Raising Rates?

What happens if a water utility collects less in revenues than it pays in expenditures in one year? It will raise some alarms, but some utilities might be able to weather that shortfall by dipping into their reserves and bounce back the following year. But what happens if a water utility collects less in revenues than it pays in expenditures in three consecutive years? That is probably a strong indication that the rates it is charging its customers are too low. Assuming that expenses cannot be significantly reduced, a rate increase is almost certainly necessary. So are utilities in this position raising rates the following year, or are there obstacles that may be chronically preventing the adoption of rate increases? In this post, I analyze ten years of financial and rates data from hundreds of North Carolina utilities to explore this question.

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Small Water Systems with Financial Difficulties are More Likely to Violate EPA Regulations

One hazard that water utilities with financial difficulties face is an increased risk of falling out of compliance of federal requirements and drinking water regulations. Violating regulations often triggers enforcement actions (and sometimes fines) by the state primacy agency, adding to the time and expense of running the water system. This can be extra troublesome if those utilities are already financially constrained. We analyzed national and regional data and found that unfortunately, there is statistical evidence that correlates small water systems’ financial difficulties and some types of violations.

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