Utility Budgets and Rate-Setting
Rate-setting begins with establishing a proper budget. Starting on page 8 of the Midwest Assistance Program’s North Dakota Small Community Water Systems Handbook on Developing and Setting Water Rates you’ll find a straighforward worksheet for calculating the yearly expenditures associated with your water utility. This worksheet does a great job of breaking down system operational costs into subcategories, giving you a clear persepective of the many costs involved in system operation.
The Environmental Protection Agency (EPA) has created a handfull of resources to assist you with Pricing and Affordability of Water Services. This helpful guide to walk you through the process of rate setting; Setting Small Drinking Water System Rates for a Sustainable Future. This resource will help you determine the rates for full cost pricing, meaning the rate that customers would have to pay in order to cover all costs of running the system and providing water service.
Here are some additional tools that you may find useful for rate setting:The University of North Carolina Environmental Finance Center has created useful financial tools for setting appropriate water rates:
Utility Financial Sustainability and Rates Dashboards are offered for a number of states. These software tools help utility managers analyze water rates against multiple characteristics including utility finances, system characteristics, customers’ economic conditions, geography, and history.
The Water and wastewater residential rates affordability assessment tool guides the water utility on the use of census data to assess the affordability of its rates using multiple metrics. This resource requires a quick registration to access.
The Missouri Department of Natural Resources has created a Drinking Water Rate Calculator available in excel format.