Streamline - Winter 2017 - 32

The Rate Setting Results...Are In
BY CARL BROWN, PRESIDENT, GETTINGGREATRATES.COM

and fair rates. Stating the need is easy. Satisfying the need is hard.
Ask yourself these questions:
* How are adequate and fair rates calculated?
* Who should do the calculating - me? Someone else?
* Do I want to take the time to learn what assumptions to make, the process of analysis and how to
do the calculations? Do I want to catch flack for recommending rates? If not...
* How much will it cost to have a specialist do it for me? The nagging worry...
* Will they take me for a ride? And, the elephant in the room...
* How much extra revenue will a rate analysis help my utility generate?
UTILITIES NEED ADEQUATE

"Back in the
day" when
utility service
was cheap,
rates were...
cheap. Being
cheap, rate
structure
fairness was
no big deal.
Surprise: it's
2017. Utilities
are not cheap
anymore. Now,
rate structure
matters.

"Back in the day" when utility service was
cheap, rates were...cheap. Being cheap, rate
structure fairness was no big deal. Surprise: it's
2017. Utilities are not cheap anymore. Now, rate
structure matters.
Your association understands this change.
They provide rate setting help. But, it's mostly
of the basic kind. Rate analysis is time consuming and association staff has a lot of folks to get
around to.
Rate analysis payback

As you will see in some tables that follow,
analysis can enable utilities to collect a lot more
revenue. Thus, the cost of analysis - which is an
investment - has a payback period. That simply
means the return on investment (extra income
produced) will pay for the cost of the investment (analyst's fees) in a calculable period
of time.
The payback period for analysis described
here is measured in days. Compare that to an
investment in a balanced mutual fund, with
an eight percent return rate. That investment
will pay back in nine years. Notice, that's days
versus years.

Rate Analysis and Training for Environmental Systems
"RATES" is a joint effort of six rural water associations and
GettingGreatRates.com.
RATES goal: Provide excellent utility rate analyses and rate setting
guidance at low cost, and training at no cost.
To learn more about the Program and to see detailed results, visit
https://gettinggreatrates.com and click on a state link.
32 S T R E A M L I N E * W i n t e r 2 0 1 7

That said, most utilities will raise their rates
some over five or 10 years. That would reduce
the extra incomes attributable to rate analysis,
and that would lengthen the payback period, but
it would almost always still be measured in days.
Occasionally, rate adjustments are aimed at
creating fairly-structured rates rather than extra
revenue. You can't measure the value of fairlystructured rates in dollars, but they are worth
a lot to ratepayers. And fairly-structured rates
are a part of almost every appropriately done
rate analysis.
Rate analysis is also a narrow specialization.
It takes a long time to learn the principles and
how to "do the math." Unless you do a lot of rate
analysis, it's just not worth the time it takes to
learn this discipline.
Enter, the "RATES Program."
In 2012, the Kansas and Wyoming associations
were the first to initiate RATES Programs. North
Dakota, New Mexico and Virginia came along
the next year. In early 2017, Colorado became
the most recent association to join in.
A few years into the Program, some of the
RATES Programs now have results to show.
Here they are.
Table 1 shows some of the overarching results
of the RATES Programs. For example, the average fee for rate analysis of one utility works out
to $6,123. Since the average client has had 1.75
utilities analyzed (usually water and sewer) and
included a visit to present results and recommendations to their board or council, the total
fee came in at $10,715.
On average, utilities end up raising their overall rates by enough that they recover the fees out


http://www.GETTINGGREATRATES.COM http://www.GettingGreatRates.com https://www.gettinggreatrates.com

Table of Contents for the Digital Edition of Streamline - Winter 2017

From the President: Ammonia-Nitrogen
From the Executive Director: Your Most Important Tool
VRWA’s 2017 Expo
How to Pass a Certification Test – The First Time
Slips, Trips and Falls – Winter Safety Tips
Looking Forward to Being of Service
Floodplain Management
No Wipes in the Pipes
Going Green?
Need Cash? Check the Meter!
The Rate Setting Results…Are In
Introducing JumpStart – A New App for Operators to Test Their Skills Before Testing!
Throwing My Loop: Christmas Lights on the Barn!
VRWA Member Corner
eLearning Benefits
Membership Application
Benefits for VRWA Members
Board of Directors
VRWA Committees
Index to Advertisers/Ad.com
Streamline - Winter 2017 - Intro
Streamline - Winter 2017 - cover1
Streamline - Winter 2017 - cover2
Streamline - Winter 2017 - 3
Streamline - Winter 2017 - 4
Streamline - Winter 2017 - 5
Streamline - Winter 2017 - 6
Streamline - Winter 2017 - 7
Streamline - Winter 2017 - 8
Streamline - Winter 2017 - From the President: Ammonia-Nitrogen
Streamline - Winter 2017 - 10
Streamline - Winter 2017 - From the Executive Director: Your Most Important Tool
Streamline - Winter 2017 - VRWA’s 2017 Expo
Streamline - Winter 2017 - 13
Streamline - Winter 2017 - 14
Streamline - Winter 2017 - 15
Streamline - Winter 2017 - 16
Streamline - Winter 2017 - 17
Streamline - Winter 2017 - How to Pass a Certification Test – The First Time
Streamline - Winter 2017 - 19
Streamline - Winter 2017 - Slips, Trips and Falls – Winter Safety Tips
Streamline - Winter 2017 - Looking Forward to Being of Service
Streamline - Winter 2017 - 22
Streamline - Winter 2017 - Floodplain Management
Streamline - Winter 2017 - 24
Streamline - Winter 2017 - No Wipes in the Pipes
Streamline - Winter 2017 - 26
Streamline - Winter 2017 - Going Green?
Streamline - Winter 2017 - Need Cash? Check the Meter!
Streamline - Winter 2017 - 29
Streamline - Winter 2017 - 30
Streamline - Winter 2017 - 31
Streamline - Winter 2017 - The Rate Setting Results…Are In
Streamline - Winter 2017 - 33
Streamline - Winter 2017 - 34
Streamline - Winter 2017 - Introducing JumpStart – A New App for Operators to Test Their Skills Before Testing!
Streamline - Winter 2017 - 36
Streamline - Winter 2017 - Throwing My Loop: Christmas Lights on the Barn!
Streamline - Winter 2017 - 38
Streamline - Winter 2017 - VRWA Member Corner
Streamline - Winter 2017 - 40
Streamline - Winter 2017 - eLearning Benefits
Streamline - Winter 2017 - Membership Application
Streamline - Winter 2017 - Benefits for VRWA Members
Streamline - Winter 2017 - 44
Streamline - Winter 2017 - VRWA Committees
Streamline - Winter 2017 - Index to Advertisers/Ad.com
Streamline - Winter 2017 - cover3
Streamline - Winter 2017 - cover4
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