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How much are North Carolinians paying for water and wastewater
service? How can water utilities set rates and rate structures that are in line with
their policy objectives and maintain financial stability? Are utilities recovering
sufficient revenue to cover their expenses? What are the financial practices,
policies, and experiences of utility managers and finance directors? What are some
indicators that utilities can use to self-assess their financial sustainability?
What can utilities do to plan for future capital costs?
After reviewing water and wastewater rates and rate setting practices
of nearly all of the local government owned and not for profit systems in North Carolina,
the EFC answer these questions by creating tools and documents, and providing training
to utilities and technical assistance providers.
Go to the main Rates and Fees webpage for a more comprehensive collection of reports, guidelines, tools and training materials on
water and wastewater rates and fees. The information below provides a sampling of information and documents related to financial management of water systems.
The EFC works with the North Carolina League of Municipalities (NCLM) to collect
rate schedules from nearly 500 local government and not-for-profit utilities across the state. These
utilities serve over 95 percent of all customers who are served by publicly owned utilities in North
Carolina. The rate schedules are used to determine what residential and commercial customers of
these utilities are billed for their water, irrigation and wastewater service at various consumption
levels. Information on rates and rate structures across the state are compiled into a Frequently
Asked Questions-type report and tables and shared among utility managers. This information can assist
elected officials and staff as they make decisions related to water and wastewater services during
budget preparations.
The annual reports and tables may be downloaded from the NC
Water & Wastewater Rates and Rate Schedules webpage. Download the rate
sheets of the participating utilities here.
In addition, we also create an inventory of the tap (or connection) fees and system
development charges ("impact fees") that are assessed by nearly 300 utilities in North Carolina.
A short report
and tables of tap fees and system development charges are available for download.
Click here for a link to our web page with tools, research results, training materials,
resources and everything you would like to know about water and wastewater rates.
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Utilities create long-term plans to rehabilitate, replace or install new assets in order
to ensure that their systems continue to operate and provide good service to their customers. Long-term capital
planning is vital for utilities of all sizes. The EFC has put together a webpage that brings together many
resources focused specifically on capital planning for drinking water and wastewater utilities. This webpage includes a reference guide written specifically on this subject.
Go to the capital planning resources webpage.
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Click here to download the results of the survey (834 Kb, pdf).
The EFC and the North Carolina League of Municipalities (NCLM)
conducted a statewide survey of the financial practices and
policies of North Carolina drinking water and wastewater utilities between November 2010 and January 2011.
277 local government owned and not-for-profit utilities participate in the survey (a 51% response rate). The purpose
of this survey was to identify trends and characteristics of utilities' financial policy and administration in North Carolina.
The questions in this survey include many commonly asked questions that utility personnel regularly ask their peers
and technical assistance providers. This survey included questions - many of which have never been asked on surveys -
on the following topics:
- Current meter reading and billing practices
- Meter reading and rounding
- Billing
- Collections
- Cutoff policies
- Adjustments and customer assistance
- Outside rates
- Current rates and fees practices
- Rate setting priorities
- Customer fees
- Revenues breakdown and use
- Transfers
- Sufficiency of revenues
- Finance policies
- The process of reviewing rates and rate structures
- Reviewing rates
- Interactions with governing body
- Reviewing rate structure design
- Capital improvement planning (and asset management)
- Paying for capital
- Sufficiency of funds
- Capital Improvement Plan (CIP) details
- Inventory of assets and Asset Management
- Resources
- Utility characteristics
- Type of utility
- FTEs
- System capacity
- Electronic mapping
- Requiring residents to connect to systems
- Outside customers
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A similar survey of financial management practices was conducted by the EFC in Georgia in 2010. Click here
to learn about common practices that Georgia utilities have adopted when it comes to topics such as debt collection practices.
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Tools: The EFC develops rate setting and financial management
tools that may be used by water utility managers and technical assistance providers. The
tools include models that support local benchmarking, asset management,
improved capital planning, and cash flow planning. All tools may be accessed for free
on the Tools webpage.
The tools include an updated version of the
EFC's popular Rates Dashboard, which allows each utility
to benchmark its rates and view indicators on its financial cost recovery, affordability and conservation
price signal of its rates. The Rates Dashboard also includes several financial performance indicators and benchmarks.
View YouTube video tutorials on how to use the Rates Dashboard. Other tools include a dashboard for using capital reserve funds to
avoid rate shock when rate increases are necessary, and a capital improvement planning (CIP) tool
for water and wastewater utilities.
Reports: The EFC produces reports that tackle the issue
of full cost pricing and using indicators to assess financial sustainability of water utilities. Two of these reports
are listed below. A third report discusses rate increases in North Carolina (published in a 2009
NC AWWA-WEA NC Currents journal). View more documents in the main Publications page. All documents are free to download.
Beyond the Operating Ratio
(pdf), by EFC research associate Sean Hughes
Current practice among investors, policy makers, and industry groups for identifying the
condition of physical capital in water and wastewater utilities includes the use of several key
financial ratios, such as Operating Ratio, Age of Plant, Fixed Asset Turnover and Infrastructure
Condition. However, these ratios are frequently misinterpreted by users of the data who are unaware
of the impact of inflation upon the ratios. This report explores distortions in key financial indicators.
The State of Full Cost Pricing: Full cost
pricing among public water and sewer utilities in the southeast (pdf), by EFC Project Director Andrew Westbrook
An examination of full cost pricing practices among utilities in the southeastern United States, including topics on
balancing the books, paying for debt, active debt, reserves, and case studies.
How Many Utilities in NC are Raising
Residential Rates, & By How Much? (pdf), by EFC Project Director Shadi Eskaf, in NC Currents 2009 Summer journal
Using 2009 rate survey data from 498 utilities, the EFC explores and explains utility rate increases in North Carolina.
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The EFC developed concise rate setting guidelines to assist utilities in designing
rate structures that take into consideration state and local policy goals and objectives. These guidelines
cover the S.L. 2008-143 state legislative requirements on water rate structures (based on the 2008 Drought Bill),
provide important lessons about the links between rates and consumption, and demonstrate a step-by-step
guide into assessing each component of a rate structure design to allow utility managers to optimize
their rate structures in a way to support their policy goals, such as encouraging conservation,
maintaining affordability, or creating incentives for businesses.
Click here to download the guidelines (777 Kb, pdf)
or here to listen to a recorded webinar on these guidelines. |
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The North Carolina State Water Infrastructure Commission (SWIC) adopted this
guidance document in November 2010, prepared in part by the EFC, which lists rate structure and billing options
that utilities can choose to implement in order to support water conservation in the long-term.
These are not mandatory, but provide options to water utilities facing water shortages.
Click here to download the guidelines (pdf),
or here to read more on utility rate setting for cost
recovery and conservation in NC. |
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A comprehensive list of presentations are available on EFC's main Events and Trainings page, under the
Drinking Water and Wastewater subheading. All presentations and recorded webinars are
free to download. A small sample of related presentations and trainings are listed below. Click on any of the links to access
copies of the presentations and resources.
Annual
Water and Wastewater Finance Workshop
Water Management Leadership Program, UNC Environmental Finance Center
Annually since 2009, Chapel Hill, NC
EFC's annual water and wastewater infrastructure funding strategies workshop
provides utility practitioners with new skills and up-to-date information on
infrastructure finance planning strategies and funding resources.
Topics in Financial Management of Water and Wastewater Utilities
UNC Environmental Finance Center course and Local Government Training Program at Western Carolina University
February 29, 2012, Lake Junaluska, NC
A one day course that included topics on rates, customer water use, utility financial performance benchmarks, and utility financial practices and policies.
Capital Improvement
Planning and Asset Management Workshop
EFC workshop organized by the Local Government Training Program
December 2, 2010, Asheville, NC
This one day workshop focused on water and wastewater capital improvement planning
and asset management and guided participants through the process of creating a
CIP and Asset Management Plan. Free software and tools were demonstrated.
Utility
Management in Hard Times (pdf)
NC Waterworks Operators' Association Advanced Day Training
September 22, 2010, Raleigh, NC
Jeff Hughes presented on finance and management strategies for water utilities in an economic recession.
Utility Rates 201
NC AWWA-WEA Finance and Management Committee and EFC workshop
February 23, 2010, Raleigh, NC
This seminar covered more advanced issues surrounding rate and fee setting affecting water and
wastewater utilities in North Carolina, including: financial indicators, designing rate structures,
forecasting demand, allocating costs and determining revenue requirements, developing rates,
using a rate model, and tap and impact fees.
Hot Topics in Water Finance and Governance
EFC workshop organized by the Local Government Training Program
October 22, 2009, Montreat, NC
Designing rate structures in North Carolina, monitoring utility finances, finding funding for
your source water protection, promoting conservation among utility customers, and avoiding
potential pitfalls in regional partnerships between water systems.
Water
Rate Setting Guidelines (recording)
Environmental Finance Center Webinar Series
June 25, 2009, online webinar
The EFC has produced new draft guidelines for water and wastewater utility managers on setting rates and designing rate structures
that support the objectives and policies of the utility. Essential information and step-by-step instructions on the overall design
of the rate structure were presented by Shadi Eskaf. Click here for a copy of the
powerpoint presentation.
State
of Rates: North Carolina's Water and Wastewater Rates in 2009
(recording)
Environmental Finance Center Webinar Series
May 1, 2009, online webinar
A presentation by Shadi Eskaf and Chris Nida (North Carolina
League of Municipalities) on current rates and rate setting practices
in North Carolina, demonstration of the Rates Dashboards, discussion
of rate structure designs, and explanation of new state law affecting
the choice and use of specific water rate structures. Click here
for the powerpoint
slides.
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The capacity of systems to provide service often comes down to their
ability to raise and manage the revenue needed to operate their facilities,
pay their staff and pay for capital improvements. Local systems are provided a lot of flexibility by the State of North Carolina in how they manage
their finances and, as a result, there is a wide variation across the state in the level
of financial management ranging from systems that are on the verge of bankruptcy to AAA
bond rated systems. The vast majority of state residents are served by government owned
systems in which local boards control the majority of financial management tasks ranging
from rate setting to capital planning. The
Local Government Commission
monitors the general financial well being of local governments, but plays a relatively
minor role in how local governments set rates and plan for capital. The
NC Utilities Commission
approves rates set by investor owned utilities that directly charge their customers for
water services (many in number but serving a relatively small percent of NC's population).
Utilities such as not-for-profit water corporations and small private systems such as
mobile home parks do not have their finances overseen by any statewide entity. Given the
decentralized responsibility for rate setting and financial management, the EFC believes
that direct assistance and training can have a major impact on how systems finance their
operations. The EFC continuously performs series of tasks to help utilities and technical assistance providers better
understand the financial capacity of local utilities, and provides direct training and
advising services to systems on financial planning and
rate setting techniques. View a comprehensive list of projects completed by the EFC in the Drinking Water and Wastewater section of the Projects page.
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