Water Utility Finances: Best Practices for Setting Rates, Financing Capital Improvements and Achieving Stakeholder Support

Water and wastewater utilities are having difficulties meeting their budgets while operating within their current financial framework. The concerns for many can be summarized as rising costs, uncertain revenues, and lack of public recognition of the reasons for both. Stakeholders do not fully appreciate the value of water services. Rate structures need to evolve to better stabilize and enhance revenue. Capital Improvement Programs need to represent industry best practices. Opportunities to incorporate practices from other industries need to be evaluated. Affordability assistance programs need to be developed to address rate increases.

Research Area Objectives

1. Provide products that will help bridge the communication gap between utilities and their stakeholders so that utilities can gain support for needed rate increases and funding needs
2. Stabilize and enhance revenue through rate setting to deal with reduced and fluctuating demand
3. Decrease life cycle and triple bottom line costs through capital improvement funding best practices
4. Evaluate and determine applicability of financial practices and efficiencies from outside the water industry
5. Increase awareness, effectiveness, and opportunities for water affordability assistance programs

Research Area Project Timeline and Value

Rate Approval Process Communication Strategy and Toolkit

• Timeline: Q1 2013–Q2 2016
• Total Project Value: $639,000
• Research Area Objectives: Communications, Rates, Affordability, CIP Funding, Outside Industry

Best Practices for Identifying, Prioritizing, Funding, and Resourcing Capital Improvement Programs

• Timeline: Q1 2013–Q3 2016
• Total Project Value: $282,000
• Research Area Objectives: Communications, Affordability, Outside Industry

Customer Assistance Programs for Multi-Family Residential and Other Hard-to-Reach Customers

• Timeline: Q1 2015–Q3 2017
• Total Project Value: $435,000
• Research Area Objectives: Communications, Rates, Affordability, Outside Industry

Identifying and Evaluating Opportunities for Reducing Variability of Utility Revenues

• Timeline: Q1 2015–Q3 2016
• Total Project Value: $371,000
• Research Area Objectives: Communications, Rates, Affordability, Outside Industry

New and Emerging Capital Providers for Infrastructure Funding

• Timeline: Q4 2015–Q4 2016
• Total Project Value: $215,000
• Research Area Objectives: Rates, CIP Funding, Outside Industry

Challenges and Practical Approaches to Water Reuse Pricing

• Timeline: Q3 2016–Q3 2018
• Total Project Value: $510,000
• Research Area Objectives: Communications, Rates, CIP Funding

Cumulative Project Value for Research Area (to date): $2,452,000

Projects Funded Outside of the Research Area Program that meet a Research Area Objective

Steering Innovation in Water Utility Finance and Management: A Water Research Foundation Leadership Forum

• Year Completed: 2013
• Funding Program: EO
• RA Objectives: Communications, Rates, Affordability, CIP Funding

Defining a Resilient Business Model for Water Utilities

• Year Completed: 2014
• Funding Program: RAC
• RA Objectives: Communications, Rates, Affordability, CIP Funding

Water Utility Economic Impact Analysis

• Year Completed: 2014
• Funding Program: EO
• RA Objectives: Communications, Rates, CIP Funding

Rate Restructure Communication Workshop

• Year Completed: 2014
• Funding Program: EO
• RA Objectives: Communications, Rates, Affordability, Outside Industry

Rates Handbook: Case Studies on Utility Rates and Financing Challenges

• Year Completed: 2014
• Funding Program: EO
• RA Objectives: Communications, Rates, Affordability

Common Approaches to Measuring Uncertainty in Capital Planning

• Year Completed: 2016
• Funding Program: Partnership (UKWIR)
• RA Objectives: CIP Funding

Evaluation of Customer Information and Data Processing Needs for Water Utility Planning and Management

• Year Completed: 2016
• Funding Program: TC
• RA Objectives: Rates

Opportunities in Affordability Assistance to Low Income Customers of Water and Wastewater Service

• Year Completed: 2016
• Funding Program: EO
• RA Objectives: Communications, Rates, Affordability, CIP Funding, Outside Industry

Alternative Project Delivery Performance Evaluation and Decision Support Tool for Water and Wastewater Capital Projects

• Year Completed: 2018
• Funding Program: EO
• RA Objectives: Rates, CIP Funding

Incentives for Green Infrastructure on Private Property: Lessons Learned

• Year Completed: 2018
• Funding Program: EO
• RA Objectives: Rates, CIP Funding

Key

EO = Emerging Opportunities

RAC = Research Area Council

TC = Tailored Collaboration