1、Advocacy Communications Conferences Education and Training c Science and Technology Sections The Authoritative Resource for Safe Drinking WaterSM Developing Rates for Small Systems AWWA MANUAL M54 First Edition American Water Works Association Science and Technology AWWA unites the drinking water co
2、mmunity by developing and distributing authoritative scientific and technological knowledge. Through its members, AWWA develops industry standards for products and processes that advance public health and safety. AWWA also provides quality improvement programs for water and wastewater utilities. MAN
3、UAL OF WATER SUPPLY PRACTICES-M54, First Edition Developing Rates for Small Systems Copyright O 2004 American Water Works Association All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recordin
4、g, or any information or retrieval system, except in the form of brief excerpts or quotations for review purposes, without the written permission of the publisher. Project Manager and Technical Editor: Mary Kay Kozyra Production Editor: Carol Stearns Library of Congress Cataloging-in-Publication Dat
5、a. Developing rates for small systems.- Ist ed. p. cm. - (AWWA manual ; M54) 1. Water supply-Rates. I. American Water Works Association. II. Series. ISBN 1-58321-308-2 TD491.A49 no. M54 HD44561 363.610688 628. 1 s-dc22 2004043713 Printed in the United States of America American Water Works Associati
6、on 6666 West Quincy Avenue Denver, CO 80235-3098 ISBN 1-58321-308-2 Printed on recycled paper Contents List of Figures, v List of Tables, vii Acknowledgments, ix Introduction, xi Chapter 1 Customer Account and Usage Data, 1 Introduction, 1 Customer Information, 2 Importance of Customer Records, 2 Cu
7、stomer Classes, 7 Wholesale Customers, 9 Unmetered Accounts, 9 Chapter 2 Preparing a Financial Plan, 11 Overview of the Financial Planning Process, 11 Development of the Financial Plan, 12 Summary of the Financial Plan, 19 Establishing Target Reserve Balances, 20 General Overview of Industry Standar
8、ds, 20 Chapter 3 Determining a Pattern of Revenue In-reases and Test-Year Revenue Requirements, 25 Introduction, 25 Evaluating the Sufficiency of Revenues Projected Under Existing Rates, 26 Determining Revenue Requirements in the Context of a Plan of Rate Evaluation of Alternative Plans for Determin
9、ing Revenue Adjustments, 27 Revenue Adjustments, 26 Chapter 4 Rate Design, 33 Introduction, 33 Rate or Pricing Objectives, 34 Rate Design Concepts, 35 Rate Evaluation, 39 Chapter 5 Special Considerations, 41 Public Involvement, 41 Regulatory Approval of Rates, 43 Rate Change Phase-in, 43 System Deve
10、lopment Charges and Funding of Capital Facilities, 44 Rates by Customer Class, 44 Appendix A Alternative Cash Flow Plans, 47 Glossary, 51 Index, 57 List of Manuals, 59 . 111 This page intentionally blank. Figures 4-1 Rate design objectives, 34 4-2 Alternative rate forms, 36 4-3 Example of evaluation
11、 38 5-1 Water bill vs. inflation graph, 42 V This page intentionally blank. Tables 1- 1 1-2 1-3 1-4 1-5 2-1 2-2 2-3 2 -4 3-1 4- 1 4-2 5- 1 A-1 A-2 A-3 Number of customers by meter size, 4 Number of annual water bills sent to customers by meter size, 4 Water use by meter size (1,000 gal), 6 Current
12、rates, 6 Revenues by customer type and meter size, 7 Projected rate revenue, 13 Summary of projected O a system that predominately serves only a single class of customers, e.g., resi- dential accounts; limited system peak-day and peak-hour data; and limited or nonexistent bed asset data. Regardless
13、of size, water systems with these and other similar characteristics will likely benefit from this manual. So while this manual is generally written for systems serving a limited population, any system having one or more of the characteristics listed above may also find it useful. At the same time, t
14、his manual may not be applicable for many water systems. Systems with a rapidly growing or diverse customer base, those with a large industrial customer or customer base with significant outside city or wholesale service arrangements, or those with contracts requiring cost-of-service-based rates sho
15、uld refer to Manual M1 for guidance in financial planning, cost allocation methods, and rate design. Systems seeking to materially modify their rate design approach would also benefit from the information contained in Manual M1. This manual contains five chapters and an appendix: Chapter 1: Customer
16、 Account and Usage Data-discusses the importance and use of system and customer account and usage data in the rate-set- ting process and begins a case study that presents this type of data for an example small utility. Chapter 2: Preparing a Financial Plan-discusses the types of costs often encounte
17、red in a small water utility, the establishment of reserves, and the process of developing a projection of costs and the compilation of a cash flow statement for use in projecting the need for future revenue adjustments. Continuing the case study, this chapter calculates revenues from current rates
18、based on the customer and usage data contained in the previous chapter. Chapter 3: Determining a Pattern of Revenue Increases and Test-Year Rev- enue Requirements-discusses the process of determining revenue requirements and presents alternatives (as part of the case study) for increasing revenues,
19、with consideration given to the use of reserves and the impact on customers. Chapter 4: Rate Design-discusses considerations and alternatives in the design of rates and illustrates a rate-design option based on the case study developed in the previous chapters. Chapter 5: Special Considerations-pres
20、ents and discusses a variety of issues associated with the rate-design process, including public involvement, the xii regulatory process for approval of rates (for investor-owned and some government-owned utilities), system development charges, and rates by customer class. Appendix A: Alternative Ca
21、sh Flow Plans-presents complete alternative cash flow plans. xiii This page intentionally blank. Chapter 1 Customer Account and Usage Data INTRODUCTION Appropriate water rate setting should embrace the concepts of fairness, equity, and cost causation. These concepts are applicable to both the utilit
22、ys customers and to the utility itself. First, water rates should be structured so that each class of customer and, to the extent practicable, the individual customers within each class are paying their appropriate share of the cost incurred by the utility in providing service to those customers or
23、classes. Also, the utility should try to avoid situations in which one customer or customer class is unnecessarily subsidizing another. In accomplishing these rate-setting objectives, it is necessary to ensure that the rates are based on accurate customer information and data. Second, the total reve
24、nue that is collected by the water utility should be reflective of the cost of operating the utility. To meet this objective, a utility should only collect revenues sufficient to meet its revenue requirements and satisfy its bond covenants and other legal or self-imposed financial performance measur
25、es. In addition, stable rate revenue over the long run enhances a utilitys overall financial integrity. For the water utility to successfully meet these goals when setting water rates, it must have a good foundation of customer account and water usage data on which to establish those rates. At a min
26、imum, in order to promote fairness and equity in the rates, the utility must know the number of customers being served and the amount of water being consumed within a given year or billing cycle. The utility must also know the overall revenue requirements to effectively operate the water utility (se
27、e chapter 2). Additional customer information may serve to improve the utilitys ability to enhance the fairness and equity of its rates and charges, e.g., water use by class and meter size. This chapter discusses a utilitys customer base, the specific customer informa- tion a water utility should co
28、nsider in order to calculate water rates and charges, and how that information should be applied. This chapter also introduces the example utility that will serve as the case study throughout this manual. 1 2 DEVELOPING RATES FOR SMALL SYSTEMS CUSTOMER INFORMATION Accurate customer data are critical
29、 for establishing supportable water rates that are fair and equitable to customers and that will generate sufficient revenue for the utility. Further, good records are necessary to adequately assess the impact of alternative rate structures on issues such as revenue sufficiency and stability, indivi
30、dual customer or customer class equitability, and conservation goals and objectives. By far the most significant source of revenue for most water utilities is that produced from water sales. The application of a well-designed rate structure to the number of bills andor metered water usage produces t
31、he revenues needed to sustain the utilitys financial well-being. The primary source of customer information is the utilitys customer billing system. Much of the information that is necessary to produce a utility bill is the same information that is required to establish water rates. The development
32、of a rate structure can be hampered by inaccurate customer billing records, resulting in rates that do not generate sufficient revenue to meet the utilitys revenue requirement, satisfy its bond covenants, and provide fair and equitable charges to its customers. In the absence of adequate or accurate
33、 customer records, the utility should make an investment to improve its customer information before moving forward with a comprehensive rate review. Prior to such an investment, however, the utility should attempt to identify various shortfalls and problems with their existing customer records. Poss
34、ible short-term improvements could include a customer profile survey, the re-creation of records, or verification of information and other methods, dependent on the particular shortfalls in the utilitys customer database. It is also critical to understand the limitations of the existing billing syst
35、em in implementing alternative rate structures. Rate structures that require information that is not currently maintained in the existing database or that cannot be entered economically or efficiently should not be considered unless plans exist to modify the billing system. As previously stated, it
36、is likely that much of the information necessary to calculate water rates is contained and available within the utilitys billing system. However, accessing that data in a timely and cost-effective fashion may not be possible. It is important that, as part of the rate-study process, ample time is all
37、owed for the identification, extraction, compilation, and review of the customer data from the electronic database. There may be technical challenges in each step of this process that slow access to this information. These technical issues should be identified and corrected if possible. Once retriev
38、ed from the database, this information should be reviewed and audited for accuracy and reasonableness. This data will be the foundation of the utilitys water rates, and errors in the data could result in inappropriate rates or in the utility collecting too little or too much revenue. IMPORTANCE OF C
39、USTOMER RECORDS For the purposes of water rate setting, accurate and detailed customer records are important in the areas of (i) number of customers, (2) metered consumption, (3) billed revenue data, (4) peak period demand data, and (5) information on public and private fire services. For some utili
40、ties, not all of this information is readily accessible or even available. The example illustrated in the balance of this manual is based on the following data: Number of customers Metered consumption Billed revenue CUSTOMER ACCOUNT AND USAGE DATA 3 Number of Customers As a starting point, most util
41、ities maintain certain standard customer-related statistics. This information typically includes a listing of water utility customers and their billing addresses. Along with this information, most utilities will have details related to the size of each customers meter and, if multiple rate classes a
42、re used, the class for each customer. This type of information is often referred to as “tombstone” information because it does not generally change between billing periods but rather forms the basis of the customer record. Along with the tombstone information are other data that generally are update
43、d for each billing period. This includes metered consumption data, payment history, and service call history. Data for past billing periods may be available on a monthly/quarterly/semiannually or aggregated year- end basis, depending on the sophistication of the utility billing system and the freque
44、ncy of billing. A utility should maintain records regarding the number of water bills it has issued in terms of meter size and customer class. This detailed information is necessary to accurately develop customer-related charges such as a minimum charge (which may include some water usage allowance)
45、 or service charge (billing or meter units that do not include a water usage allowance). These base or fixed charges are common to almost every type of alternative rate form and may be significant in terms of providing the water utility a stable source of revenue. Table 1-1 shows an example tabulati
46、on of the number of metered accounts by meter size and by customer class, as well as the number of unmetered accounts by class. As discussed below, this information can represent a year-end accounting, annu- al average, monthly average, or other billing period. The basis of reporting should be clear
47、ly specified in the database so the reporting period is clear to the user. Within any given water utility, it is common to bill all customers on the same frequency, although billing frequencies may vary by classification of customer. For example, residential accounts may be billed quarterly while ot
48、her accounts are billed monthly. This may be done for a variety of reasons, but the result is that there may not be a one-to-one correspondence between the number of customers within a class and the number of water bills generated. For the example illustrated in this manual, all customers are billed
49、 monthly. In Table 1-2 all customers (see Table 1-1) are assumed to have been active and receiving service for each month of the year; as such, the number of accounts multiplied by 12 yields the number of bills shown in Table 1-2. In reality this is rarely the case because customers open and close accounts as they move in and out of a community. Calculating number of customers. The number of customers can be calculated in a variety of ways, depending on the amount of detail available. It is most common to assume that the number of customers is equal to the number of metered
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