Streamline - Spring 2015 - (Page 25)

Adequate Rates versus Affordability Can we charge enough to cover expenses? BY BARRY E. MATTHEWS, P.G., DEPARTMENT OF HEALTH CAPACITY DEVELOPMENT MANAGER THE TWO CONCEPTS of Rate Adequacy and Water Affordability have been around the utilities industry for a long time. However, our aging water infrastructure and the nature of our current economy bring these two philosophies into more direct and deeper conflict. Can a water utility ensure that rates are affordable for its service population while at the same time charging enough to cover expenses, not to mention funding future reserves for capital improvements, maintenance and unexpected costs? First, we must define what we are talking about, even though you probably have a good idea of both concepts. What do we mean by adequate utility rates? The American Water Works Association (AWWA) provides the following: "Water utilities' revenues from water service charges, user rates, and capital charges (e.g., impact fees and system development charges) should be sufficient to enable utilities to provide for: *  nnual operation and maintenance a expenses; *  apital costs (e.g., debt service and c other capital outlays); and *  dequate working capital and required a reserves." Next, what is affordable and who determines affordability? This is a much more complex and challenging issue. A 2 percent water bill burden was utilized by the Environmental Protection Agency (EPA) in its 1993 assessment of the affordability of water service.2 However, this is not where the discussion started; the affordability of Safe Drinking Water Act (SDWA) regulations on waterworks and variances granted by states based on the affordability of the treatment technology, is really where this conversation started. The initial conversations weren't so much that we care if Mr. and Mrs. Jones can afford to purchase water, as the conversation was, can the Town of Jonesville afford to implement a treatment technology that achieves an EPA mandated compliance standard? These two issues are not the same, although many assume them to be analogous and therefore utilize a percent of the Mean Household Income (MHI) as a measure of affordability for households. While this may be useful in the question of: "can the Town of Jonesville afford the treatment technology?" The question of Mr. and Mrs. Jones affording their water bill is entirely different. By the very nature of MHI, Mr. and Mrs. Jones have a 50/50 chance of being above the MHI or below the MHI. Further this does not consider the number of individuals dependent on that MHI. Do Mr. and Mrs. Jones have 0.59 children? Hopefully not, so should a family of 6 be charged differently than a family of 3? You might say "of course not", but most water rates will charge a different amount because a family of 6 utilizes more water. So if Jonesville charges $20.00 for 2000 gallons, and $3.50 per 1000 additional gallons, and Mr. and Mrs. Jones with their 4 children use 6000 gallons a month, their water bill is $34.00. If the Jones' household income is $36,000, their water bill represents 1.1 percent of their income. Is this affordable, would it be more affordable if the Jones family was only Mr. and Mrs. Jones and two children? 25

Table of Contents for the Digital Edition of Streamline - Spring 2015

From the President: Power Failure
From the Executive Director: Highlights from 2014
The Sustainability Managed Utility
Communication… Say What?
Flushing Away the Ebola Threat
Hazard Communication Standards – Guidelines for OSHA Compliance
State Water Control Board Approves Controversial Permit
VRWA Said Goodbye to Past Executive Director
USDA Rural Development
The RATES Program
Adequate Rates versus Affordability
NRWA Recap
Debt Refinancing: An Alternate Source of Capital
How the Cloud is Revolutionizing the Future of Water Utility Management
Southern Corrosion Supports Victory Junction
Throwing My Loop: Call Me Anytime
Wastewater Math
Booster Club
eLearning Benefits
Membership Application
Do You Know What Your VRWA Benefits Are?
VRWA Mailbag
New Members
Board of Directors
VRWA Committees
Index to Advertisers/

Streamline - Spring 2015