SOG Environmental Finance Ctr
Guest author Susan Ancel is the Director of Water Distribution and Transmission with EPCOR Water Services Inc.
Recently, EPCOR Water Services Inc. (EPCOR) (in conjunction with its Regulator, the City of Edmonton City Council) reviewed the utility’s revenue requirements, and considered how it recovers the cost of public fire protection services provided by the water utility. The deliberation can provide insight to other utilities when they consider cost allocation and revenue recovery.
Mary Tiger is the Chief Operating Officer for the Environmental Finance Center and Project Manager for the Water Research Foundation Project.
Making the way to financial sustainability can feel like an uphill battle for utilities when stressed by unexpected weather, economic and demographic obstacles. However, getting a governing board in understanding of and agreement with financial goals can keep a utility on-track to achieve financial resiliency and avoid drastic adjustments in rates.
Mary Tiger is the Chief Operating Officer for the Environmental Finance Center and Project Manager for “Defining a Resilient Business Model for Water Utilities” Project funded bythe Water Research Foundation.
Water and wastewater utilities most commonly generate revenue by charging rates against a customer’s water use. When setting these rates, a utility balances multiple and, oftentimes, conflicting, objectives. With their rate structures, most utilities strive to collect adequate revenues for operations and system investment, promote the efficient use of water by its customers, and maintain affordability for basic levels of consumption. In particular, the goals of revenue sufficiency and conservation promotion present utilities with a conundrum[1]: when customers are more efficient with their water use or conserve, a utility’s sales base erodes. The Environmental Finance Center is researching alternatives to the classic water utility retail pricing; alternatives that would better align utility revenue stability and the promotion of efficient water use.
Doug Scott, Janice Beecher and Jeff Walker give ratings to the merit of affordability programs. The EFC sends a special thank you to Jeff, Jan and Doug for their participation and sense of humor!
Mary Tiger is the Chief Operating Officer for the Environmental Finance Center and Project Manager for “Defining a Resilient Business Model for Water Utilities” Project funded bythe Water Research Foundation.
Last week at the AWWA Annual Conference and Exposition (ACE) in Dallas, four adaptations to the classic utility business model “auditioned” before a panel of expert judges. Jan Beecher (Director of the Institute of Public Utilities at Michigan State), Doug Scott (Managing Director of Fitch Ratings’ US Public Finance Group), Jeff Walker (Director of Project Development for the Texas Water Development Board), and an audience of 40 utility officials and stakeholders evaluated the finalists based on the ability of each approach to:
Mary Tiger is the Chief Operating Officer for the Environmental Finance Center at the University of North Carolina.
Under the common residential water use pricing model, utilities face a trade-off between reliance on a stable base charge (a fixed fee no matter what a customer uses) and dependence on a variable volumetric charge (a rate applied to customer water use). With a higher base charge, utilities have a relatively stable and predictable revenue stream (dependent only on the number of customers and payments made) that better matches the expenses of the utility. However, when a utility collects more of its revenues from base charges, it diminishes one of its strongest ways to send a water conservation/efficiency message to its customers.
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