Water and WastewaterRevenue Overview:
Rates and FeesPresentation to State Water Infrastructure Commission
August 22,2006Jeff Hughes
Environmental Finance CenterUniversity of North Carolina at Chapel Hill
919 843-4956www.efc.unc.edu
Presentation Topics
Revenue and rate setting framework
Rate structures
What utilities charge
Household impacts
Material focuses on centralized drinking water and sewerutilities and does not cover septic system and stormwaterservice revenues.
Data Sources
Audited financial statements (LGC)
Annual Financial Information Reports (LGC)
Rates (NCLM/EFC Rate Inventory and ModelingEffort)
Connection Charges (EFC Inventory)
Rate setting practices (NCLM/EFC PracticesSurvey
Water 2030 (Rural Center)
Demographic (US Census)
Study Partners/Supporters
USEPA
NC League of Municipalities
Water Resources Research Institute
Urban Water Consortium
NC Rural Center (Water 2030 Initiative)
NC Local Government Commission
Utilities throughout North Carolina
Rate Setting in North Carolina(Government and Non-Profit Utilities)
Few rules or regulatory restrictions
Self-approved (primarily elected boards)
Wide variation in rates and rate structures
Over 75% of rate studies done in house
Over 80% review annually
50% raised their rates last year
(7.2% water, 8.2% sewer)
Source: EFC & NCLM 2005 Rate Practices Survey
Primary Concern Considered WhenDesigning Rates (n=277)
Financial Stability or Cost Recovery---79%
Affordability---18%
Other (including conservation)--- 3%
Source: EFC & NCLM 2005 Rate Practices Survey
333*1260261Total
140140Not-for-profit
8341Sanitary District
4112Metropolitan District or
Authority
3212110County/District
275720248Municipality
TotalSewerOnly
WaterOnly
ServingWater &
Sewer
InstitutionalArrangement
Rate Schedules Analyzed
* Plus 11 unique rate schedules from included utilities for semi-autonomouscounty districts or specific groups of residential customers.
Source: FY05-06 Rate Schedules
$0
$10
$20
$30
$40
$50
$60
0 1 2 3 4 5 6 7 8 9 10 11 12
Monthly Consumption (in 1,000 gallons)
Mo
nth
ly-E
qu
iva
len
tW
ate
rB
illi
ng
Median of 358 WaterSystems, FY04-05
Utility A
Utility B
Utility CA
C
B
Comparison of Customer Bills Over DifferentConsumption Levels (3 Utilities)
Source: FY04-05 Rate Schedules
$0
$2
$4
$6
$8
$10
$12
$14
0 - 999 1,000 -
2,499
2,500 -
4,999
5,000 -
9,999
10,000 -
24,999
25,000+
Number of Accounts
Med
ian
Mo
nth
ly-E
qu
ivale
nt
Base
Ch
arg
e
Median Water Base Charge Median Sew er Base Charge
Median Base Charge Based onNumber of Accounts
Source: FY05-06 Rate Schedules
25%$ 9.0075%$ 4.623215,000+
60%$ 14.4140%$ 5.19257,500 -14,999
73%$ 10.5025%$ 7.17643,000 - 7,499
82%$ 12.0018%$ 8.30881,000 - 2,999
80%$ 11.0020%$ 11.5049500 – 999
77%$ 12.0022%$ 11.0074< 500
Percent ofUtilities
MedianCharge
Percent ofUtilities
MedianCharge
Number ofRate Structures
Number ofWater
Accounts
Fixed Base Charges for Water Service
Fixed Charge Does NotInclude any Consumption
Fixed Charge IncludesSome Consumption
Source: FY05-06 Rate Schedules
Water Rate Block Structures
Source: FY05-06 Rate Schedules
Uniform
54%
Decreasing
Block
23%
Increasing
Block
20%
Other
3%
Uniform69%
DecreasingBlock
13%
Other2%Increasing
Block16%
Over Full Consumption Range Applicable up to 15,000 gpm
Residential Sewer Rate Structures
Decreasing
Block
9%
Increasing Block
12%
Other
3%
Uniform
76%
Source: FY05-06 Rate Schedules
y
Source: FY05-06 Rate Schedules
Rates Do Not Always Meet Costs…
1.50$34.08
0.76$33.88
1.02$32.98
0.88$32.30
1.02$32.10
0.99$32.07
Operating Revenues / Expenses RatioMonthly Bill
Comparison of Operating Margins for Seven Utilities with MonthlyCombined Water and Sewer Bills Between $32.07 - $34.08/month
Sources: NC LGC FY04-05 financial data; FY05-06 Rate Schedules.
Monthly Residential Water Bills by Consumption
(N = 332)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Consumption (1,000 gallons per month)
Month
ly-E
quiv
ale
ntB
illing
90th Percentile Median 10th Percentile
Source: FY05-06 Rate Schedules
$22.96
Monthly Residential Sewer Bills by Consumption
(N = 275)
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Consumption (1,000 gallons per month)
Mo
nth
ly-E
qu
iva
len
tB
illin
g
90th Percentile Median 10th Percentile
Source: FY05-06 Rate Schedules
$27.12
Median Combined Water and Sewer Billings for Rate
Structures with Different Inside/Outside Rates
$0
$20
$40
$60
$80
$100
$120
$140
$160
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Consumption (1,000 gallons per month)
Mo
nth
ly-E
qu
ivale
nt
Billin
g
Outside Inside
Source: FY05-06 Rate Schedules
Rates by Number of Accounts
$27.68 ( 9)$17.85 (14)1.1825,000+
$29.04 (16)$23.95 (25)1.1810,000 - 24,999
$26.21 (17)$19.76 (26)1.115,000 - 9,999
$26.80 (31)$22.00 (41)1.162,500 - 4,999
$27.26 (46)$23.80 (53)1.011,000 - 2,499
$27.05 (61)$23.35 (58)0.900 – 999
Median SewerBill for 6,000
Gallons(# of Utilities)
Median WaterBill for 6,000
Gallons(# of Utilities)
MedianUtility’s
Water and/orSewer
OperatingRatio
Size of Systemby Number of
Water orSewer
Accounts
Sources: NC LGC FY04-05 financial data; EFC & NCLM 2005 Rate PracticesSurvey; FY05-06 Rate Schedules. Samples limited to utilities with data onoperating ratio and number of accounts.
Water Rates by System Capacity
$18.12 (30)1.142,301+
$19.51 (44)1.08601 - 2,300
$23.63 (69)1.08181 - 600
$23.45 (74)1.0161 - 180
$25.50 (42)0.8831 - 60
$22.64 (31)0.86<= 30
Median WaterBill for 6,000
Gallons(# of Systems)
Median Utility’sWater and/or
Sewer OperatingRatio
Size of System byQuantity of Water
Sold per Year (MGY)
Sources: NC LGC FY04-05 financial data; Rural Development Center Water2030 data; FY05-06 Rate Schedules. Samples limited to utilities with data onoperating ratio and quantity of water sold.
Sewer Rates by System Capacity
$24.96 (26)1.142,001+
$26.05 (37)1.11601 - 2,000
$27.39 (58)1.06151 - 600
$26.45 (72)0.9351 – 150
$30.00 (34)0.8816 – 50
$29.85 (24)1.02<= 15
Median SewerBill for 6,000
Gallons(# of Systems)
Median Utility’sWater and/or
Sewer OperatingRatio
Size of System byQuantity of
Wastewater Treatedper Year (MGY)
Sources: NC LGC FY04-05 financial data; Rural Development Center Water2030 data; FY05-06 Rate Schedules. Samples limited to utilities with data onoperating ratio and quantity of wastewater treated.
Source: FY05-06 Rate Schedules; Census 2000.
Comparison of Median HH Income with Combined Water
and Sewer Bill as % MHI (Inside Rates)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000
Median Household Income, 1999
An
nu
al
W&
SB
ills
as
%M
HI N = 252 systems
Source: Rural Development Center Water 2030 data; FY05-06 RateSchedules; Census 2000.
Annual Combined Water & Sewer Bills and Utility Operating Revenue
(6,000 gal, inside rates)
$0
$200
$400
$600
$800
$1,000
$1,200
$0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10
Millions
Operating Revenue
An
nu
alW
&S
Bill
N = 250 systems
Sources: NC LGC FY04-05 financial data; FY04-05 Rate Schedules.
