Streamline - Spring 2013 - (Page 33)
BY CARL BROWN,
The Virginia RATES
Program is at Your Service
world, you would know exactly how to set your own utility’s user rates, connection
fees, capacity development fees, penalty fees and every other fee. You would set each one fairly and
adequately so the system would be well funded and everyone would be happy.
IN THE IDEAL
Now, what is
holding you back
Give VRWA a call.
They will set you
on the course
and fair rates. It
doesn’t get any
better than that.
But this is the real world.
Rate setting is complex. The exercise almost
always results in higher rates. Higher rates almost
always make people mad. Consequently, you
would like to avoid everything about rate calculations and rate increases … except for the increase
in revenue you need.
To help you navigate this minefield, the
Association initiated the Virginia RATES Program.
Learn about the program at www.vrwa.org and
click on the “25% Discount on Fees for User Rate
Studies” link. Through the RATES Program, the
Association provides basic rate setting help for
free. During most years, that is what your system
needs. That’s a great service and it’s only a phone
This article, however, is about those occasional
years when rate setting is not basic, but complex.
In those years you need a rate setting specialist.
Getting a good specialist is a minefield of its own,
so the RATES Program makes that a sure thing
for you, too.
Rate Analysis Cost:
5-year Total Revenue Net
of Analysis Cost:
Net Revenue Shortfall ( - )
Compared to Option 3:
Increases Running Total
Your decision to get a good rate analysis and
guidance, or not, should turn on what that help will
buy you. The table shows three common strategies
for handling rate adjustments for a 500 connection
The net result from each option is this:
• Over five years Option 1 results in under assessment of fees to the tune of about $400,000 compared to Option 3. Option 1 costs nothing but it
also yields no extra revenues.
• Over five years Option 2 performs in between
the other two. There is a $2,500 cost savings
compared to hiring a specialist. But the option
also results in a net revenue loss of $200,000
compared to Option 3. Said another way, an
additional investment of $2,500 in a specialist
yields a net revenue return of $200,000 over five
• Option 3 is the best alternative on a net revenue
basis and often on a cost basis, too. Option 3
gets the revenues right. It also results in rates
that are demonstrably fair. That is critical when
Assumptions: 500 connections, average monthly user rate of $30, which is currently inadequate by one-third, and inﬂation will be 4% annually in the future
Table of Contents for the Digital Edition of Streamline - Spring 2013
From the President
From the Executive Director
Water and Wastewater Certifi cation Exam Test Taking Tips
Past 25 Years of VRWA
Proactive vs. Reactive
Asset Management and Drought Management
Is the Tank Contaminating the Water?
Committed to the Future of Rural Communities
Standard Operating Procedure For Leak Detection Using the Pressure Hold Method
The Virginia RATES Program is at Your Service
Ergs, Joules and Other Stuff
VRWA 25th Annual Exposition Agenda
Do You Know What Your VRWA Benefi ts Are?
Throwing My Loop
Welcoming New Members
Board Of Directors
Index To Advertisers/Ad.com
Streamline - Spring 2013