Streamline - Fall 2015 - (Page 32)

Comparative Advantage BY CARL BROWN, PRESIDENT, GETTINGGREATRATES.COM "Comparative advantage" is an economic theory about efficiency. Consider this simple example. If another country can make a product cheaper than the U.S.A., we should buy their product and then produce and sell to them those products that we can produce more efficiently. In that way, we AND our trading partners will be able to buy more, buy better or buy cheaper. This principle works for cities, water providers and even individuals, too. You are better off doing as much of your comparative advantage activity as possible, farming out those things that you need done but that you are not so good at doing yourself. Authors Note: This article, written in the first person, teaches rate analysis solicitation strategies as well as the larger concept of comparative advantage. You can use the solicitation strategies now and then. You can use comparative advantage all the time. a genius at doing something. If not, you still probably do several things better than most people. These are your comparative advantages. There are tasks that you can only perform adequately. And, you have no clue about how to do some things. If you are to get these things done well and efficiently you will need to borrow someone else's comparative advantage. I have one comparative advantage - utility rate analysis. Hence, the subject of this article. Warning: When an expert writes about their field of expertise, the piece will be selfpromotional. My advice - filter, then learn. Granted, utilities need rate analysis only infrequently. The "Ratepayer's Survival Guide," a free download at, describes when and why. For purposes of this article, let's just assume that your utility does indeed need a rate analysis done by a rate setting expert. To say it as briefly but as humbly as I can, I am a rate setting expert. I have spent the better part of my career learning this craft. There is about a 99.9 percent chance that you have spent little if any of your career on rate analysis. Your focus is elsewhere. Consequently, you are not a rate setting expert. When it is time to analyze your utility rates, you are better off hiring me (or, yes, another rate setting expert) to do it so you can spend your time doing what you do best - plying your comparative advantages. hoPefuLLY You are 32 S T R E A M L I N E * F a l l 2 0 1 5 I am told regularly about bad rate studies being done for large sums of money. The most recent really bad one: a population 5,000 Oregon town paid $30,000 for a study that drew these conclusions: * If you raise rates by 5%, you will increase revenues by $XXX. * If you raise rates by 10%, you will increase revenues by $YYY. * If you raise rates by 15%, you will increase revenues by $ZZZ. Sorry folks, but that was not a rate analysis. That was not even a rate study. That was a simple calculation you should do when building your budget every year. I scoped a "re-do" of this town's rates at about $7,500. We'll see what happens. http://www.GETTINGGREATRATES.COM

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

From the President: What if the Hokey Pokey Really is What it’s All About?
From the Executive Director: The Value of Membership
VRWA’s 2015 Expo Wrap Up
Membership is Free, but its Value to your Utility may be Priceless!!
How to Prepare for a Lab Audit
Tomorrow’s Leaders: Attracting Young Professionals
Amherst Source Water Protection
USDA Rural Development/Virginia
Comparative Advantage
Keeping Workers Safe During Night-Time Repairs
Affordable Mixers Now Available for Southern Corrosion Engineered Tank Care Customers
When Consolidation Makes cents
NRWA Recap
VRWA Offers New Member Benefits
Throwing My Loop: Another View
Booster Club
e-Learning Benefits
Membership Application
Do you know what your VRWA Benefits are?
Welcoming New Members
Training Calendar
Board of Directors
VRWA Committees
Index to Advertisers/

Streamline - Fall 2015