Introduction to Financial Management and Rate Setting...efc.sog.unc.edu Introduction to Financial...
Transcript of Introduction to Financial Management and Rate Setting...efc.sog.unc.edu Introduction to Financial...
efc.sog.unc.edu
Introduction to Financial Management and
Rate Setting
DENR Washington Regional Office
Water Operator Workshop
November 7, 2013
Washington, NC
Housed at the UNC School of Government.
Dedicated to enhancing the ability of governments and other organizations to provide environmental programs and services in fair, effective and financially sustainable ways.
How financially healthy is your
water system?
Do Water and Wastewater Rates Cover System Costs?
y
n = 420 (FY 2012)
Where does your water system’s
revenues come from?
Rate Structures
Base Charge ($ / bill period) (with or without consumption allowance)
+
Volumetric Rates ($ / volume used) (flat, uniform, increasing block, decreasing block, seasonal,
combination, other..)
Residential Water Use is Declining in NC
Revenues and Costs, and How
Water Use Affects Both Utilities’ costs are
mostly fixed, not dependent on the amount of water sold/used by the customers. But the majority of revenues come from the amount of water sold. If customers conserve, revenues drop significantly but not costs.
Revenue and Expenses for Charlotte-Mecklenburg Utilities in a Given Year
Source: CMU Director Doug Bean’s presentation to the Charlotte City
Council on December 1, 2008.
North Carolina Utilities’ Average Operating
Revenues and Expenditures (1997-2011)
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year Ending
Average Operating Revenues
Average Operating Expenditures
What Goes Into Reviewing Rates
for the Next Year?
Do these rates
send the right
signals to our
customers, based
on our objectives?
Will it provide sufficient
cost recovery?
Are we allocating
the costs to the
right customers?
What exactly
does this
include?
Will our
customers
understand these
rates?
Will our
customers be
able to pay these
rates?
Are we
following the
applicable
laws?
Will revenues be
resilient to
changing water
demands?
EFC Resources for Water Systems
to Help with Rate Setting • Guidebooks on designing appropriate rate structures
based on utility objectives
• Do-it-yourself tools in Excel to allow you to analyze your rates and try out scenarios
• Benchmarking rates and financial performance (Rates Dashboard)
• Documents that provide information and data on NC rates, tap & impact fees, financial practices, etc.
• Capital planning reference guide
• Trainings and workshops
• Direct assistance
• Weekly blog posts on related financial and managerial issues
• And more…
Where do you find all of these
resources?
http://efc.sog.unc.edu
Click on Programs / Drinking Water & Wastewater
or click on Resources (Publications and Tools)
Designing Appropriate Rate Structures
http://efc.sog.unc.edu/
Find it in Resources /
Publications
Free guide written for
utility managers in
June 2009
Thanks to Public
Water Supply
section of
NCDENR
Elements of Rate Structure Designs
1. Customer classes/distinction
2. Billing period
3. Base charge
4. Consumption allowance included with base charge
5. Volumetric rate structure
6. (If applicable) Number of blocks, block sizes and rate differentials
7. (Optional) Temporal adjustments
8. Frequency of rate changes
Presenting on Financial Planning
Tools
1. NC Rates Dashboard
2. Water & Sewer Rates Analysis
3. User-Friendly C.I.P. Tool
Developed by the EFC at UNC.
Funded by the Public Water Supply Section, Division of Water Resources (NCDENR)
and by U.S. EPA
NC Rates Dashboard http://efc.sog.unc.edu/ Find it in Resources / Tools
Benchmark your rates and your financial performance
Water & Sewer Rates Analysis Model http://efc.sog.unc.edu/ Find it in Resources / Tools
Free, simplified Excel tool allowing you to model and compare two rate
structures on your projected fund balance
Funded by NC DENR Public Water Supply Section
User-Friendly C.I.P. Tool
http://efc.sog.unc.edu/ Find it in Resources / Tools
Free, simplified Excel tool allowing you to list your capital projects and
plans for funding them, and automatically estimates rate increases
Funded by NC DENR Public Water Supply Section
We Can Assist Small Water Systems for free* *under a Cooperative Agreement with the US EPA
• Water systems serving <10,000 people can contact any of the EFCs for
free, direct assistance on:
– Asset Management
– Water Loss Reduction
– Water System Collaboration
– Fiscal Planning and Rate Setting
– Energy Management
– Funding Coordination, and
– Managerial and Financial Leadership
Please sign up on the handout if you want us to contact you
about any of the above issues, or go to http://efcnetwork.org
Where do you find all of these
resources?
http://efc.sog.unc.edu
Click on Programs / Drinking Water & Wastewater
or click on Resources (Publications and Tools)
Acknowledgement
Public Water Supply Section
(Division of Water Resources,
NC DENR)
26
Note: Come up to me during the
break to view your utility on the
Rates Dashboard or to talk about
financial issues at your system
efc.sog.unc.edu
Environmental Finance Center at the University of North Carolina
School of Government, Knapp-Sanders Building
CB #3330
Chapel Hill, NC 27599-3330
USA
Shadi Eskaf [email protected]
919-962-2785