Rates, Rates, and More Rates

Transcription

1 Rates, Rates, and More Rates Jeff Hughes David Tucker February 10-11, 2015 Chapel Hill, NC

2 Draft 2015* by the Numbers (Based on data submitted as of 2/1/15) Operating revenues collected by governmental utilities (FY 2014) Highest (SUBMITTED TO DATE) (FY 2014) Lowest (FY 2014) Median charged by NC utility Average number of blocks 4 Median multiplier for out-of-city rates (Among 83% percent of municipalities) Percent of utilities that raised rates (376 water sewer rate structures) Median increase for those that increased bills >$2.2 billion $197 million (Raleigh) $1,178 (Boiling Springs Lakes) $31.32 Water $38.42 Sewer $67.80 Combined 1.84x Water 1.92x Sewer 53% Water 52% Sewer 4.6% Water 4.9% Sewer

3 Draft 2015* by the Numbers (Based on data submitted as of 2/1/15) Highest rate per 1,000 gallons at 5,000 gallons/month Median base charge Highest base charge $20.00 Water $21.00 Sewer $15.00 Water $16.00 Sewer $31.00 Combined $94.37 Water $65.21 Sewer $90.07 Combined Lowest non-zero base charge $2.47 Water $1.97 Sewer $6.14 Combined Median percentage of customer bill due to base charge at 5,000 48% Water 43% Sewer

4 Annual NC Water and Wastewater Rates Survey NC League of Municipalities Environmental Finance Center at the School of Government Collaboration since survey just completed. 496 utilities included. Free, online information: tables, summary report, Rates Dashboard, rate sheets at and

5 Factual Report and Data Tables Find it in Programs / Drinking Water Or

6 Which Rates were Studied? January 2015 rates for 496 utilities across NC Rates for water, irrigation, and wastewater services Rates for residential and for non-residential (small commercial) customers Rates for inside and outside customers Including base charges and allowances

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8 Rates Dashboards Interactive tool to compare water & sewer rates (bills) among all utilities, or utilities with similar characteristics: System size (number of accounts or revenues) Technology (water source type or river basin) Location (regional council, 25 / 50 / 100 miles) Same rate structure (uniform, incr. block, etc.) Demographics (median household income) County economic development tiers Available online at

9 New Features -- New Technology!!! Much faster load and response times Access it on tablets (e.g. ipad) Type in your utility's name to select Click on and select any utility on the map Edit your utility's data (temporarily and locally) View your rates at 500 gallon/month increments Simulate raising rates up to 100%

10 NC Rate Setting Resources Call the EFC / SOG Guide to Billing and Collecting Public Enterprise Utility Fees for Water, Wastewater, and Solid Waste Services (by Kara Millonzi, SOG) NC Rates Dashboard (EFC web) Do-it-yourself Excel tools for rate scenarios and capital planning (EFC web) Designing Rate Structures that Support Your Objectives guide (EFC web) 2010 NCLM/EFC Financial Practices & Policies Survey (EFC web) Other EFC web resources (blog posts, data, guidelines/reports, tools) at LGC Fiscal Analysis Dashboard Painful Art of Rate Setting article in Popular Government AWWA M1 Manual, EPA Rate Setting workbooks, etc. Rural Water Association, Consultants, etc. EFC s blog:

11 Webpage on NC Rates (with report, tables, Dashboards, more) Find it in Programs / Drinking Water The 2015 Rates Dashboard, report, and tables are now posted on the EFC website, and an will be sent to utility managers, finance directors and town clerks/administrators.

12 Subscribe to Keep Up-to-Date with the Environmental Finance Blog Examples of relevant blog posts: Declining demands in NC Increasing rates in NC Operating ratios in NC Water debt in NC What s wrong with %MHI Financial strategies And much more!

13 Public Enterprise Challenge Utility has lost several large customers and has significant capital needs and prices that do not generate any extra funds for capital investments. The utility realizes that they need at least an extra 50% in revenues on a yearly basis to stop the bleeding. The town has a fairly high median household income but many people live in serious poverty and are out of work.

14 What s Your Rate Challenge 1. Changing business model (selling less water) 2. Affordability 3. General revenue shortfalls 4. Funding depreciation 5. Communication 6. Wholesale rates

15 What is biggest challenge to setting rates in your utility? 1. Falling consumption trends/ difficulty with projections 2. Governing board s unwillingness to raise rates 3. Communities ability to pay more for water and wastewater service 4. Pressure to keep rates comparable to other water utilities 5. Rising cost of other governmental taxes and fees 6. Other? 24% 29% 24% 14% 5% 5%

16 What is biggest challenge to setting rates in your utility (2014 Participants)? 1. Falling consumption trends/ difficulty with projections 2. Governing board s unwillingness to raise rates 3. Communities ability to pay more for water and wastewater service 4. Pressure to keep rates comparable to other water utilities 5. Rising cost of other governmental taxes and fees 6. Other? 29% 29% 21% 8% 8% 4%

17 How satisfied are you with the rates you have today? 1. Not at all need an overhaul 2. Not very they need a lot of work 3. Somewhat tweaks needed 4. Very no changes needed 67% 13% 10% 10%

18 How satisfied are you with the rates you have today (2014 Participants)? 1. Not at all need an overhaul 2. Not very they need a lot of work 3. Somewhat tweaks needed 11% 15% 52% 22% 4. Very no changes needed

19 How satisfied are you with your rates and the revenue they generate? (2011) 1. Not at all need an overhaul 2. Not very they need a lot of work 3. Somewhat tweaks needed 4. Very no changes needed

20 REVENUE SUFFIENCY

21 Do Water and Wastewater Rates Cover System Costs? n = 438 (FY 2014) Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

22 FY 2014 Rates and Operating Ratios Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

23 CHANGING USAGE PATTERNS

24 What happens at your utility when customers reduce their use from 10,000 to 5,000 gallons/ month? 287 Uniform Rates 161 Increasing Block Rates 38 Decreasing Block Rates Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

25 Are revenue increases keeping pace with rate increases? Revenue increases Rate increases Two-thirds of the utilities had lower revenue increases than rate increases (points below the 1:1 line), and almost every utility that raised rates by more than 50% had relatively lower revenue increases. Reported in Defining a Resilient Business Model for Water Utilities, Water Research Foundation Report #4366. Data analyzed by the Environmental Finance Center at the University of North Carolina, Chapel Hill. Revenues are total operating revenues as reported to the Local Government Commission.

26 AFFORDABILITY CONCERNS

27 Rates as Percent of Income Medians: 1.01% Water, 1.26% Sewer 2.60% Combined The average North Carolinian pays $71.50/ month for 5,000 gallons of water and wastewater, if everyone is charged at the inside rate Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

28 Percent of Annual Income Spent at 5,000 gal./mo: Median & Low Income Customers 506 Water Bills, 419 Wastewater Bills, and 384 Combined Bills Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

29 ADJUSTING RATES

30 When did you last increase your rates? 49% increased rates last year 62% changed rates within the past 2 years Only 11% of rate structures have not changed since total rate structures Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

31 Increases to the 5,000 Gallons/ Month Water Bill by Utilities that Raised Rates out of the Same 196 Utilities Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

32 Changes in Rates Since Last Year Median increase to monthly bill for 5,000 gallons: $1.19 water, $1.51 sewer Half of the rate increases were for more than 4.6% (water) and More than 4.7% (wastewater) Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

33 Anticipated Rate Increase Request for Next Year 1. No change 2. 0 to 2.99% 3. 3 to to or above 25% 29% 36% 7% 4%

34 Anticipated Rate Increase Request for Next Year (2014 Participants) 1. No change 39% 39% 2. 0 to 2.99% 3. 3 to to or above 7% 11% 4%

35 Cumulative Percent Change for 5,000 gal./mo. Water Bill, Inflation Rate (323 Rate Structures) Inflation from is 21% (1.92%/yr.)

36 Median Charge for 5 kgal / mo. by Water Supply Type Water Rate Structures Total Median Number of Monthly Water Structures Bill All Rate Structures 507 $31.26 By Water Supply Type Groundwater 163 $29.40 Surface Water 129 $27.81 Purchase 215 $34.80 Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

37 Inside/Outside Billing ~62% of utilities (83% of municipalities) have different outside rates Median differential: 1.84 water, 1.92 sewer Median combined bill for 5,000 gallons: Inside $73.82 Outside $ Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

38 CURRENT RATE STRUCTURES (JANUARY 1, 2015)

39 Base Charges Median combined: $31.00 Low Bills for Low Consumption Amount vs. Revenue Stability Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

40 Median Base Charge for Utilities that Vary Base Charges by Meter Size 23% of Rate Structures Have Varying Base Charges By Meter Size Meter Size Water Wastewater 5/8" $12.92 $ /4" $12.93 $ " $21.09 $ /2" $34.35 $ " $56.42 $ " $ $ " $ $ " $ $ " $ $ " $ $ Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

41 Residential Rate Structures Water Wastewater Rate structures applicable to residential customers for consumption up to 15,000 gallons/month only Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

42 Volumetric Rates at 5,000 gallons/month Medians: $4.31/1000 gallons water $5.50/1000 gallons sewer $9.68/1000 gallons combined Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

43 Residential Monthly Bills Across 384 Water Rate Structures Across 319 Wastewater Rate Structures 5000 gallon median: $ gallon median: $ gallon median combined: $67.80 Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

44 Pricing Different Services 27% use separate rate structures for non-residential customers 22% use separate rate structure for residential irrigation water Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

45 CHANGING RATES

46 Median Increase Utilities Changing Rates over the Same 196 Utilities in North Carolina Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report

47 Utilities that Raise Rates Frequently Have Lower Rate Increases Each Time Average rate adjustment by frequency of raising rates Reported in Defining a Resilient Business Model for Water Utilities, Water Research Foundation Report #4366.

48 But they Also Accumulate Greater Rate Increases in the Long-Run Average 5-year cumulative rate increase by frequency of rate adjustments Reported in Defining a Resilient Business Model for Water Utilities, Water Research Foundation Report #4366.

49 Rates Rising Faster than Inflation Reported in Defining a Resilient Business Model for Water Utilities, Water Research Foundation Report #4366.

50 Median Monthly Water Charge at Different Levels of Consumption for the Same 196 Utilities Source: 2015 NCLM/EFC North Carolina Water & Wastewater Rates Survey Report