Jeff Hughes is the Director of the Environmental Finance Center.
I’ve come to the opinion that rate structures, particularly those that are designed to promote conservation and water efficiency, may be getting a bad rap or at least getting more than their fair share of the blame for utility budget woes. The stories and complaints tend to go like this – “We changed our rate structure a few years ago and ever since have seen budget shortfalls that have required unplanned for rate increases. Our board is unhappy, our customers are unhappy, the papers are making fun of us and we still don’t have the revenues we need. Damn rates!!”
Guest author Peiffer Brandt is Chief Operating Officer at Raftelis Financial Consultants.
“With our concerted conservation efforts, our focus on local water supply development, and the recession . . . we’re selling a lot less water than we originally anticipated,” said Maureen Stapleton, General Manager of the San Diego County Water Authority on July 26th. This is by no means a challenge unique to San Diego County—trying economic times and declining per capita usage have required utilities across the country to take a number of steps to maintain financial sufficiency.
The Water Works Board of the City of Birmingham (Board) has been particularly successful in combatting these challenges through the use of financial goals and policies, which guide the financial operations of the utility. As noted in a previous post, there are a number of different approaches available to utilities. Implementing and following the policies described below has helped the Board to not only maintain financial sufficiency, but to improve its financial situation such that it received a ratings upgrade from Moody’s during nationally and regionally challenging financial times.