Guest Post By Nicholas Smith of Raftelis
A new fiscal year typically means new water and wastewater rates for utilities in Florida. Florida utilities have long relied upon small and predictable annual rate increases to ensure their rates are sufficient to cover the cost to serve their customers. In setting rates, Florida utilities have always depended on careful financial analysis. Although COVID-19 has complicated this norm — Florida utilities can still proceed with rate changes, but it is best to proceed with some enhanced strategy. With universally high unemployment rates and utility governing bodies more concerned about affordability than ever, research by Raftelis shows utilities are moving ahead with rate increases, but they are looking for more data than before to support their decisions.
The water industry is facing unprecedented capital needs, needs which will largely be recovered through increased rates. Sitting between public utilities and the public are governing boards trying to make the right decision for their community and the utility. What information do governing boards need to approve a water rate increase? What are the most effective methods of communicating the need for a rate increase?
The road goes on forever, and the party never ends. ~Robert Earl Keen
The Environmental Finance Center has partnered with Arcadis, Raftelis Financial Consultants, ICMA, and Stratus Consulting to get to the bottom of what meaningful communication between water utilities and their governing boards regarding rates and finances looks like. What do the boards want to know? How do they want to know it? It’s easy in a research project to want to focus on measurable results. If you do ‘x’, then you’ll achieve ‘y’. But it’s not that easy with communication.
We spent a week interviewing water utility staff and their governing board members in the Southeast last month, and their insight on the topic should be no surprise to anyone that has been involved in any relationship. Below are some of the insights shared by board members on effective strategies about how staff can foster their support for rate increases.
A $napshot is a graphic revealing an interesting environmental finance finding accompanied by a short post. This $napshot was created by Shadi Eskaf.
Changes to Rates and Revenues among 566 Utilities
While revenues usually rise as water and wastewater rates increase, revenues generally rise slower than rates. The graphs show how 566 utilities in three states changed rates over a three or four year period, and the subsequent change to annual revenues in the same time period. Four observations can be made. Continue reading