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Water System Capacity Development Support: |
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Financial Management: Sustainable Finance and Rate Setting Support 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 some indicators that utilities can use to self-assess their financial sustainability? 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 answered these questions by creating tools and documents, and providing training to utilities and technical assistance providers. _____________________________________________________ Inventory of current water and wastewater rates The EFC worked with the North Carolina League of Municipalities (NCLM) to collect rate schedules from 498 local government and not-for-profit utilities across the state. The sampled utilities serve over 95 percent of all customers who are served by public owned utilities in North Carolina. The rate schedules were 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 were compiled into a Frequently Asked Questions 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 report and tables may be downloaded from the NC Water & Wastewater Rates and Rate Schedules webpage. Download the FY2008-09 rate sheet of any of the 498 utilities here. In addition, we have also created 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. Back to top Benchmarking tools and reports on rates and financial sustainability Tools: The EFC developed a few 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. 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 produced two reports that tackle the issue of full cost pricing and using indicators to assess financial sustainability of water utilities. A third report discusses rate increases in North Carolina (published in the NC AWWA-WEA NC Currents journal). All three documents are free to download.
Back to top Guidelines for NC Water Systems: Designing Rate Structures that Support Your Objectives
Back to top Presentations and training materials on rates and rate setting A comprehensive list of presentations and training materials, including recorded webinars that you may access freely, will be listed here soon. All of the presentations are currently listed on the EFC's main Events and Trainings page, under the "Water and Wastewater" subheading. A few of the presentations and trainings are listed below:
Back to top Background: Why focus on financial management? 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 bonded 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. |
