Article of Interest

Wastewater Rates — Is it Time to Fine Tune Your System?

One of the keys to sustainable utility operations is sound financial management. Based on our review of dozens of user charge systems, we often find that utilities do not set the rates high enough to adequately fund maintenance and system replacement (depreciation). While most facilities were built with state and federal grants, these funding programs have greatly diminished, necessitating utilities to build system replacement costs into user rates.

An area that often needs fine tuning is the allocation of costs among the various user groups. In many user charge systems, the allocation of costs can be inequitable for one or more groups. Working with communities in rethinking their rate structure, we have often found that a correction of inequities can generate more revenue, without a rate increase. High volume users may have been undercharged because of an outdated, or ill informed, rate structure that didn’t factor in the true impact of the user characteristics. We have also seen highly variable users and seasonal users undercharged because their rate does not include a “readiness to serve” component and does not allocate a year  round, fixed cost proportional to usage.

Sewer systems are also an area of inequitable rate charges. Infiltration (groundwater) and inflow (surface water) represent “high capacity use” with an associated cost that is ultimately passed on to all users. Whether you have large leaking private systems or smaller private I/I sources like homeowner sump pumps and roof leaders, there are creative rate strategies to encourage removal of extraneous sources of water. Strategies have also been developed to manage fats, oils and grease (FOG) discharges and various hauled wastes.

Addressing combined sewer overflows (CSO) is another important issue communities are now facing, with huge expenditures looming. To pay for sewer separation, some  communities are instituting stormwater fees whereby property owners pay proportional to the amount of stormwater their property generates (for example, based on amount of impervious land area). This system alleviates some of the burden on sewer rate payers  and allocates it to those more directly responsible for the stormwater.

In addition to the standard user charge system, many utilities have in place connection or ‘buy-in’ fees, impact fees, and/or betterment assessments to recover the costs of  providing service for new customers. For utilities without such fee systems, this is another area that should be explored as appropriate, especially in this era of reduced grants for infrastructure work. For the many communities that have such systems in place, often the rates are not sufficient to cover the true costs. Understanding the true cost of providing new service can also help utilities develop beneficial public-private partnership arrangements, which we also see increasingly used for the development of new infrastructure.

The bottom-line is, with the increasing cost of sustainable operations, it is prudent practice to regularly review the adequacy of your rate systems and explore whether there is a need to fine-tune existing systems or implement new ones. Wright-Pierce assists utilities throughout New England in establishing financial systems for responsible utility management.