Adapting to Change Through Utility Rate Studies
Recap of McGill Minute, Episode 4, Part 2
In McGill Minute’s Episode 4: Utilities Under Stress, Part 2, Joel Storrow (Principal and Past President of McGill) interviewed Dale Schepers (Consulting Services Analyst at McGill) about utility rate studies and what communities can do in the wake of COVID-19 and in relation to the protocol of wading through difficulties in the future. With over 30 years of experience with municipalities and 24 years of managing public infrastructure and utilities, Dale encourages communities of all sizes to revisit their rate studies, in order to reevaluate and reassess present and future concerns.
Just as we have seen with our current way of life, things can change rapidly. So how does the reevaluation of rate studies help a community? Dale’s motto, “what gets measured, gets managed,” points out that it is easier to manage certain elements when there are current data points to check. He suggests an annual review of rate structures and fees as a best practice and, at a minimum, a review every three years.
How Does McGill Conduct a Rate Study?
Based on the American Water Works Association Manuals of Practice, McGill looks at two components with every project. First, we consider a revenue requirements analysis, in order to determine adequate funding for the utility in a planning period – usually five to ten years. This incorporates any possible surprises, along with other contingencies and obligations to various related funds, including economic development. Second, we create a cost of service analysis, which will determine the cost differences between provided services and the revenue collected. This helps to develop an alignment of cost between service and revenue to avoid cross customer-class subsidies. Both components help produce a financial model to accurately analyze current and future conditions, which help to develop strategies to mitigate any potential negative effects down the road and allow for informed decisions along the way.
Teaming with the Client for Best Results
The McGill approach is always interactive and collaborative with the client. Our team acts as an extension of our clients to create open conversations and develop specific models for each individual community. We work with staff and stakeholders to set a firm understanding of goals, objectives, and methods of measurements. These pieces – in combination with industry benchmarks – establish a standard that can be adjusted based on the established goals and changing conditions.
Rate Study Deliverables
Once the model is developed, we are able to provide easy-to-read charts and graphics. The supplied deliverables can assist in presentations and other communications, which are helpful when presented to officials and other administrators to express community needs and create further collaborative decision making. From here, special considerations can be made, including capital planning and modifications based on funding and loans.
Let’s Work Together
Rate studies are just one way McGill seeks to help communities thrive. Our consulting services can assist your community with a strategic plan for the future and create short- and long-term solutions. If you have a project that needs a rate study or other consulting assistance, email us at firstname.lastname@example.org. We look forward to hearing more about your upcoming project.
Dale Schepers, Consulting Services Analyst
828.328.2024 or email@example.com