AWWA M54-2016 Developing Rates for Small Systems (Second Edition).pdf

1、Ideal crop marks Manual of Water Supply Practices M54 Developing Rates for Small Systems Second Edition M54 Developing Rates for Small SystemsDeveloping Rates for Small Systems Second Edition M54 Copyright 2016 American Water Works Association. All Rights Reserved. Printed on recycled paper Printed

2、in the United States of America American Water Works Association 6666 West Quincy Avenue Denver, CO 80235-3098 awwa.org hours of work by your fellow water professionals. Revenue from the sales of this AWWA material supports ongoing product development. Unauthorized distribution, either electronic or

3、 photocopied, is illegal and hinders AWWAs mission to support the water community. This AWWA content is the product of thousands of Manual of Water Supply PracticesM54Edition 2 Developing Rates for Small Systems Copyright 2004, 2017 American Water Works Association All rights reserved. No part of th

4、is publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, 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. Disc

5、laimer The authors, contributors, editors, and publisher do not assume responsibility for the validity of the document or any consequences of its use. In no event will AWWA be liable for direct, indirect, special, incidental, or consequential damages arising out of the use of information presented i

6、n this book. In particular, AWWA will not be responsible for any costs, including, but not limited to, those incurred as a result of lost revenue. In no event shall AWWAs liability exceed the amount paid for the purchase of this book. Managing Editor: Melissa Valentine Production: Sandra Lankenau, M

7、elanie Yamamoto (Cover) If you find errors in this manual, please email booksawwa.org. Possible errata will be posted at www.awwa.org/resources-tools/resource.development.groups/manuals-program.aspx. Library of Congress Cataloging-in-Publication Data Library of Congress Cataloging-in-Publication Dat

8、a Names: Bradley, Daniel T., author. | Giardina, Richard D., author. | Matthews, Paul L., author. Title: M54 : developing rates for small systems / by Daniel T. Bradley, Richard D. Giardina, Paul L. Matthews. Other titles: Manual 54 Description: Second Edition. | Denver, CO : American Water Works As

9、sociation, 2017 | Includes bibliographical references and index. Identifiers: LCCN 2016048765 | ISBN 9781625760159 (alk. paper) Subjects: LCSH: Water utilities-Rates. | Water utilities-Management. Classification: LCC HD4456 .B73 2017 | DDC 363.6/10688-dc23 LC record available at https:/lccn.loc.gov/

10、2016048765 ISBN-13 978-1-62576-015-9 eISBN-13 978-1-61300-276-6 Copyright 2016 American Water Works Association. All Rights Reserved. iii AWWA Manual M54 Contents List of Figures, v List of Tables, vii Preface, ix Acknowledgments, xiii Chapter 1 Basics of Water Ratemaking 1 Basic Premise, 1 Water Ut

11、ility Service, 1 F i n a n c i a l S e l f S u ffi c i e n c y , 1 The Financial Plan, 2 Cost-of-Service Rate Study, 2 Implementing Rates, 3 Periodic Reviews, 4 Chapter 2 Customer Account and Usage Data 5 Customer Information, 6 Importance of Customer Records, 7 Customer Classes, 11 Equivalent Resid

12、ential Units, 13 Chapter 3 Preparing a Financial Plan and Evaluating Revenue Su ciency 17 Overview of the Financial Planning Process, 17 Development of the Financial Plan, 18 Establishing Target Reserve Balances, 26 General Overview of Common Industry Practices, 27 Summary of the Financial Plan, 29

13、O v e r v i e w o f t h e R e v e n u e S u ffi c i e n c y E v a l ua t i on , 2 9 E v a l ua t i n g t h e S u ffi c i e n c y o f R e v e n u e s P r o j e c t e d U n d e r E x i s t i n g R a t e s , 3 1 D e v e l o p i n g a P l a n o f R a t e R e v e n u e A d j u s t m e n t s , 3 1 E v a l

14、 ua t i n g A l t e r n a t i v e P l a n s f o r R a t e R e v e n u e A d j u s t m e n t s , 3 2 Chapter 4 Rate Design . 37 R a t e o r P r i c i n g O b j e c t i v e s , 3 8 Rate Design Concepts, 39 Rate Evaluation, 43 Other Considerations, 44 Chapter 5 The Rate Adoption Process 47 Strategic an

15、d Procedural Considerations, 47 Rate Change Phase-In Plans, 48 Regulatory Approval of Rates, 48 Customer and Stakeholder Involvement, 49 Interest Group Meetings, 50 P u tt i n g I t A l l T o g e t h e r , 5 0 Appendix A Alternative Cash Flow Plans 53 Copyright 2016 American Water Works Association.

16、 All Rights Reserved. iv AWWA Manual M54 Appendix B Examples of Financial Policies 57 Cost Recovery Policy, 57 Debt Policy, 58 Investment Policy, 58 AWWA PolicyFinance, Accounting, and Rates, 59 Appendix C Frequently Used Financing Sources for Water Utilities . 61 Index, 65 List of Manuals, 73 Copyr

17、ight 2016 American Water Works Association. All Rights Reserved. v AWWA Manual M54 Figures 1 - 1 S c h e m a t i c o f a n a n c i a l p l a n , 2 1-2 Cost-of-service steps, 3 4-1 Alternative rate forms, 38 4 - 2 E x a m p l e o f e v a l ua t i on , 4 4 5-1 Comparison of monthly residential water b

18、ills, 49 C - 1 F u n d i n g o p p o r t u n i t i e s f r o m l o a n s , g r a n t s , a n d p a r t ne r s h i p s o w f r o m a c a p i t a l network of federal and state agencies to water utilities in local government and the private sector, 62 Copyright 2016 American Water Works Association. A

19、ll Rights Reserved. This page intentionally blank. Copyright 2016 American Water Works Association. All Rights Reserved. vii AWWA Manual M54 Tables 2 - 1 N u m b e r o f c u s t o m e r s b y m e t e r si z e f o r t h e e x a m p l e u t i l i t y , 8 2-2 Number of annual water bills sent to custom

20、ers by meter size, 8 2-3 Water use by meter size (1,000 gal), 9 2-4 Current rates, 10 2-5 Current rate revenues by customer type and meter size, 11 2-6 Common ERU values under the meter size ERU calculation approach, 15 3 - 1 P r o j e c t e d r a t e r e v e n u e f o r t h e e x a m p l e u t i l

21、i t y , 2 0 3 - 2 S u m m a r y o f p r o j e c t e d O & M e x p e n s e s , 2 2 3-3 Summary of 5-year capital improvement program, 24 3 - 4 S u m m a r y n a n c i a l p l a n , 3 0 3-5 Summary of alternative revenue increase plans (in thousands of dollars), 33 4 - 1 I l l u s t r a t i on o f p r

22、 o j e c t e d r e v e n u e f r o m x e d s e r v i c e c h a r g e , 4 2 4-2 Illustration of volumetric/usage charge calculation, 43 5-1 Basic strategies to winning public support, 51 A - 1 A l t e r n a t i v e c a s h o w p l a n j u s t - i n - t i m e r e v e n u e a d j u s t m e n t s , 5 4

23、A - 2 A l t e r n a t i v e c a s h o w p l a n si n g l e i n c r e a s e i n y e a r 1 , 5 5 A - 3 A l t e r n a t i v e c a s h o w p l a n e q ua l a n n ua l i n c r e a s e s , 5 6 Copyright 2016 American Water Works Association. All Rights Reserved. This page intentionally blank. Copyright 20

24、16 American Water Works Association. All Rights Reserved. ix AWWA Manual M54 PURPOSE I n 2 0 1 2 , t h e A m e r i c a n W a t e r W o r k s A s s o c i a t i on ( A W W A ) p u b l i s h e d t h e si x t h e d i t i on o f AWWA Manual M1, Principles of Water Rates, Fees, and Charges. That manual pr

25、ovides com- prehensive guidance on establishing rates and charges for water service. The methods and e x a m p l e s c on t a i ne d i n M a n ua l M 1 , w h i l e r e c o m m e n d e d a n d a p p r o p r i a t e f o r m a n y w a t e r u t i l i t i e s , m a y p r o v e t o b e o v er l y c o m p

26、 l e x a n d b u r d e n s o m e f o r o t her s . T h i s b u r d e n a p p l i e s particularly to the development of cost-of-service rates. Such rates require the deter- mination of revenue requirements by customer class before designing and adopting a rate structure. Recognizing the limitations

27、Manual M1 may have for smaller systems, or larger sys- tems without sufficient data or rate-making capability, the AWWA Rates and Charges Committee (authors of Manual M1) developed the idea for a “Manual M1-type” alterna- tive. A rate manual for small systems provides guidelines for the development

28、of rates for utilities that lack the data and resources needed to apply the methods described in Manual M1. For these utilities, this manualDeveloping Rates for Small Systemsprovides guidance in developing rates when data and information may be lacking. The Rates and Charges Committee encourages all

29、 utilities to use Manual M1 as the primary guidance tool but believes this manual fills a need for small systems. INTENDED AUDIENCE This manual is intended to serve as a resource for managers (and others) of small water s y s t e m s i n t h e d e t e r m i n a t i o n o f r a t e s f o r w a t e r

30、s e r v i c e . O t h e r r e s o u r c e s , f o r e x a m p l e , M a n - ual M1 and state and local government agencies, may also be of value in the prepara- tion of rates for small systems. However, this manual focuses on the unique attributes of small systems as related to financial planning an

31、d rate design. Managers and operators of small systems and their advisors (financial, accounting, and engineering professionals) should find this manual useful in preparing water rates that recover costs using generally accepted cost-based practices. For purposes of this manual and for those who mig

32、ht benefit from its use, there is no reason to specifically define a small system in terms of connections or population. Rather than define a small system in either of these terms, and therefore restrict or limit the appli- cability of this manual, the characteristics of the systems to which this ma

33、nual may apply a r e t h e p r i m a r y c on si d e r a t i on . F o r e x a m p l e , s u c h f a c t o r s i n c l u d e A lack of or limited customer or demand data A system that predominately serves only a single class of customers, e.g., residential accounts Limited system peak-day and peak-ho

34、ur data L i m i t e d o r n one x i s t e n t f i x e d - a s s e t d a t a Regardless of size, water systems with these and other similar characteristics will likely benefit from this manual. So although this manual is generally written for systems Preface Copyright 2016 American Water Works Associ

35、ation. All Rights Reserved. AWWA Manual M54 x serving a limited population, any system having one or more of the characteristics listed above may also find it useful. At the same time, this manual may not be applicable for many water systems. Systems with a rapidly growing or diverse customer base,

36、those with a large industrial customer or customer base with signifi- cant outside city or wholesale service arrangements, or those with contracts requiring cost-of-service based rates should refer to Manual M1 for guidance in financial planning, cost allocation methods, and rate design. Systems see

37、king to materially modify their rate design approach would also benefit from the information contained in Manual M1. In addition, Manual M29, Water Utility Capital Financing, should be reviewed as well when developing a financial plan. UNDERLYING FINANCE AND RATEMAKING PRINCIPLES The AWWA has establ

38、ished policies for finance, accounting, and rates. These AWWA policies provide direction to AWWA members and the volunteers that produced this manual. These policies are updated and generally available from AWWA. The policies included in the preparation of this manual were those revised by the Board

39、 of Directors on January 17, 2010. The relevant AWWA policies for this manual include: 1. Water utilities revenues from water service charges, user rates, and capital charges (e.g., impact f e e s a n d s y s t e m d e v e l o p m e n t c h a r g e s ) s h o u l d b e s u f c i e n t t o e n a b l e

40、 u t i l i t i e s t o p r o v i d e f o r : A n n ua l o p e r a t i on a n d m a i n t e n a n c e e x p e n s e s Capital costs (e.g., debt service and other capital outlays) Adequate working capital and required reserves 2. Water utilities should account for and maintain their funds in separate

41、accounts from other gov- ernmental or owning entity operations. Water utility funds should not be diverted to uses unre- l a t e d t o w a t e r u t i l i t y s e r v i c e s . R e a s on a b l e t a x e s , p a y m e n t s i n l i e u o f t a x e s , a n d / o r p a y m e n t s f o r services rende

42、red to the water utility by a local government or other divisions of the owning entity may be included in the water utilitys revenue requirements after taking into account the contribu- t i on f o r r e p r o t e c t i on a n d o t h e r s e r v i c e s f u r n i s h e d b y t h e u t i l i t y t o

43、t h e l o c a l g o v e r n m e n t o r t o other divisions of the owning entity. 3. Water utilities should adopt a uniform system of accounts based on generally accepted account- ing principles. Utility practices should generally follow the accounting procedures outlined i n A W W A s a c c o u n t

44、 i n g t e x t b o o k , Financial Management for Water Utilities: Principles of Finance, Accounting, and Management Controls. 4 . M o d i c a t i on s m a y b e m a d e t o s a t i s f y t h e n a n c i a l a n d m a n a g e m e n t c on t r o l r e p o r t i n g ne e d s o f t h e u t i l i t y a

45、n d t o m e e t t h e r e q u i r e m e n t s o f l e g i s l a t i v e , j u d i c i a l , o r r e g u l a t o r y b o d i e s . 5. Water rate schedules should be designed to distribute the cost of water service equitably among each type and class of service. Rate-setting practices that are not bas

46、ed on cost of service may be a p p r o p r i a t e i n s o m e si t ua t i on s , s u b j e c t t o l e g a l r e v i e w a n d a p p r o v a l , p r o v i d e d t h e y r e e c t m a r k e t c on d i t i on s , t h e b e ne t s r e c e i v e d b y t h e u s e r s o f t h e s e r v i c e , a n d a n

47、 a p p r o p r i a t e b a l a n c e o f t h e g o a l s a n d o b j e c t i v e s e s s e n t i a l t o t h e p u b l i c g o o d . A n y r a t e - s e t t i n g p r a c t i c e n o t b a s e d on c o s t o f s e r v i c e that is implemented by a utility should be fully disclosed to its customers,

48、 regulators, and the n a n c i a l c o m m u n i t y . S u c h d i sc l osu re s h o u l d i d e n t i f y e a c h su c h r a t e - s et t i n g p r a c t i ce , i t s e x p ec t ed b e ne t , a n d i t s i m p a c t on t h e u t i l i t y s c u s t o m e r s . 6 . W a t e r u t i l i t i e s s h o

49、u l d m a i n t a i n a s s e t r e c o r d s t h a t d e t a i l s u f c i e n t i n f o r m a t i on t o p r o v i d e f o r t h e monitoring and management of the physical condition of infrastructure. These asset records should also support planned and preventive maintenance programs and budgets adequate to maintain the utilitys assets at a level of service consistent with good utility practice. Utilities s h o u l d a n n ua l l y p r o v i d e c o m p a r a t i v e i n f o r m a t i on t o c