Introduction to Financial Management and Rate Setting

Transcription

1 Introduction to Financial Management and Rate Setting DENR Washington Regional Office Water Operator Workshop November 7, 2013 Washington, NC efc.sog.unc.edu

2 Housed at the UNC School of Government. Dedicated to enhancing the ability of governments and other organizations to provide environmental programs and services in fair, effective and financially sustainable ways.

3 How financially healthy is your water system?

4 Do Water and Wastewater Rates Cover System Costs? n = 420 (FY 2012)

5 Where does your water system s revenues come from?

6 Rate Structures Base Charge ($ / bill period) (with or without consumption allowance) + Volumetric Rates ($ / volume used) (flat, uniform, increasing block, decreasing block, seasonal, combination, other..)

7 Residential Water Use is Declining in NC

8 Revenues and Costs, and How Water Use Affects Both Utilities costs are mostly fixed, not dependent on the amount of water sold/used by the customers. But the majority of revenues come from the amount of water sold. If customers conserve, revenues drop significantly but not costs. Revenue and Expenses for Charlotte-Mecklenburg Utilities in a Given Year Source: CMU Director Doug Bean s presentation to the Charlotte City Council on December 1, 2008.

9 $6,000,000 North Carolina Utilities Average Operating Revenues and Expenditures ( ) Average Operating Revenues $5,000,000 Average Operating Expenditures $4,000,000 $3,000,000 $2,000,000 $1,000,000 $ Fiscal Year Ending

10 What Goes Into Reviewing Rates Are we following the applicable laws? for the Next Year? Will it provide sufficient cost recovery? What exactly does this include? Will revenues be resilient to changing water demands? Are we allocating the costs to the right customers? Do these rates send the right signals to our customers, based on our objectives? Will our customers understand these rates? Will our customers be able to pay these rates?

11 EFC Resources for Water Systems to Help with Rate Setting Guidebooks on designing appropriate rate structures based on utility objectives Do-it-yourself tools in Excel to allow you to analyze your rates and try out scenarios Benchmarking rates and financial performance (Rates Dashboard) Documents that provide information and data on NC rates, tap & impact fees, financial practices, etc. Capital planning reference guide Trainings and workshops Direct assistance Weekly blog posts on related financial and managerial issues And more

12 Where do you find all of these resources? Click on Programs / Drinking Water & Wastewater or click on Resources (Publications and Tools)

13 Designing Appropriate Rate Structures Free guide written for utility managers in June Find it in Resources / Publications Thanks to Public Water Supply section of NCDENR

14 Elements of Rate Structure Designs 1. Customer classes/distinction 2. Billing period 3. Base charge 4. Consumption allowance included with base charge 5. Volumetric rate structure 6. (If applicable) Number of blocks, block sizes and rate differentials 7. (Optional) Temporal adjustments 8. Frequency of rate changes

15 Presenting on Financial Planning Tools 1. NC Rates Dashboard 2. Water & Sewer Rates Analysis 3. User-Friendly C.I.P. Tool Developed by the EFC at UNC. Funded by the Public Water Supply Section, Division of Water Resources (NCDENR) and by U.S. EPA

16 NC Rates Dashboard Find it in Resources / Tools Benchmark your rates and your financial performance

17 Water & Sewer Rates Analysis Model Find it in Resources / Tools Free, simplified Excel tool allowing you to model and compare two rate structures on your projected fund balance Funded by NC DENR Public Water Supply Section

18 User-Friendly C.I.P. Tool Find it in Resources / Tools Free, simplified Excel tool allowing you to list your capital projects and plans for funding them, and automatically estimates rate increases Funded by NC DENR Public Water Supply Section

19 We Can Assist Small Water Systems for free* *under a Cooperative Agreement with the US EPA Water systems serving <10,000 people can contact any of the EFCs for free, direct assistance on: Asset Management Water Loss Reduction Water System Collaboration Fiscal Planning and Rate Setting Energy Management Funding Coordination, and Managerial and Financial Leadership Please sign up on the handout if you want us to contact you about any of the above issues, or go to

20 Where do you find all of these resources? Click on Programs / Drinking Water & Wastewater or click on Resources (Publications and Tools)

21 Acknowledgement Public Water Supply Section (Division of Water Resources, NC DENR) Note: Come up to me during the break to view your utility on the Rates Dashboard or to talk about financial issues at your system 26

22 Shadi Eskaf Environmental Finance Center at the University of North Carolina School of Government, Knapp-Sanders Building CB #3330 Chapel Hill, NC USA efc.sog.unc.edu