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Fundamentals of Cost of Service and Rate Design for Water Utilities

April 28-29, 2022 | Online :: Central Time

Sponsored by EUCI

Click Here to register $1195.00 (single connection)

If you are unable to attend at the scheduled date and time, we make recordings available to all registrants for three business days after the event

Water utilities are facing constant pressure to replace aging infrastructure and meet increased regulatory demands, while meeting enhanced levels of service at a reasonable cost.  Cost of service and rate design studies are necessary to assist a water utility in setting rates that are fair and equitable to its customers.  These studies also support the water utility’s mission.

This introductory course reviews the basic mechanics of a cost of service and rate design study for water utilities. Participants will also learn valuable tools on obtaining buy-in or “selling” the need for a revenue increase to its constituent groups.  Real world examples based on generally accepted ratemaking principles will be utilized throughout the course.

Learning Outcomes:

  • Identify how a cost of service & rate design study supports the utility’s mission 
  • Discuss the impact of policy and financial considerations on customer rates
  • Define the data requirements needed to begin a cost of service & rate design study
  • Identify revenue requirements and recognize the importance of a multi-year financial plan 
  • Explain the cost of service allocation process
  • Assess design rates that are defensible based on the cost of service and/or policy considerations
  • Discuss contractual pricing and other sources of revenue for the utility
  • Recognize the importance of customer outreach to sell your needed revenue increase

Agenda

Thursday April 28, 2022

 9:00 a.m. – 4:00 p.m. :: Central

Introduction and Overview of Course

How Financial Planning, Cost of Service (COS) Studies, and Rate Design Supports a Water Utility’s Mission

  • Examples of Utility Missions
  • Commonalities
  • What is Financial Planning?
  • What is Ratemaking (COS Studies & Rate Design)?
  • Constituents to the Process

Policy/Financial Considerations

  • Debt Service Coverage
  • Operating Reserves
  • Infrastructure Planning & Investment

Data Requirements

  • Types of Data Needed
  • Tips

Developing Revenue Requirements/Financial Plan

  • Process
  • Fundamental Principles
    • Cash Basis vs. Utility Basis
  • Methodology
  • Multi-Year Financial Plan

Cost of Service Allocation Process

  • Functionalization
  • Classification
    • Base-Extra Capacity Method
    • Commodity-Demand Method
  • Allocation (Distribution) to Customer Classes

Rate Design

  • Options – Rate Structures
  • Conservation Pricing
  • Examples

Friday, April 29, 2022

 9:00 a.m. – 12:00 p.m. :: Central Time

Review of Day One

  • Development of Revenue Requirements/Financial Plan
  • Cost of Service Process
  • Rate Design

Contractual Pricing & Sources of Revenue

  • Wholesale/Contractual/Industrial Pricing
  • Non-Rate Fees and Charges

Communications Outreach

  • Purpose/Goals
  • Toolbox
  • Case Study Example – Fort Worth Water

 Case Study – Small Water System Rates