The 2013 Annual North Central Utility Rate Survey included results from 37 regional water systems. The rate survey report, currently in distribution to all survey participants, provides a comparison of the charge for 6,000 gallons of water per month to a residential account, as well as a breakdown of reported rate structures and statistics related to systems increasing rates in 2013 and those anticipating an increase in 2014. This article will summarize the reported results for 2013, and make a comparison between the 2013 projections from the 2012 survey and 2013 actual rate increases.
2013 Rate Increases – How Accurate were Projections?
In the 2012 rate survey, participants were asked if they expected to increase water rates in 2013, and if so, to identify the magnitude of the expected increase. Figures 1 and 2 show the predictions for 2013, and Figures 3 and 4 show the actual results as reported in the 2013 survey.
A comparison between Figures 1 and 3 shows that, on a percentage basis, fewer survey respondents implemented rate increases in 2013 than projected in 2012. Figure 4 shows that approximately half of the system respondents that indicated a rate increase would be made adopted an increase less than six percent. This is generally what was predicted in Figure 2. In 2012, 17 percent of respondents predicted the need for an increase between six and 10 percent, and only six percent anticipated an increase greater than 10 percent. Nearly the opposite transpired, with seven percent increasing rates between six and 10 percent, and 14 percent making an adjustment that exceeded 10 percent. It should be noted that the number of respondents and actual respondents vary between years. However, it is worth noting the Regional Water Systems that had proactively planned for some level of rate adjustments generally implemented adjustments that were very close to their plans.
Looking ahead, Figures 5 and 6 summarize the predictions that regional survey respondents made for 2014. This year, the majority of systems that indicated a rate increase would likely be made in 2014 were undecided as to the magnitude of the increase at the time the survey was completed.
Reported Regional Water Rate Structures
A separate article in this issue of The Source addressed rate structures reported by municipal water systems. To acknowledge the differences unique to the Regional Water Systems, rate structures for the regional systems were also reviewed.
Out of necessity, regional systems typically have a large fixed rate based on debt and capital associated with the system, along with a volumetric rate designed to correlate with operating expenses. Regional water systems also typically cover a large, sparsely populated geographic area as compared to municipal systems. Figures 7 and 8 illustrate the reported regional rate structures in 2013 in terms of number of respondents and population served, respectively. A comparison between Figures 7 and 8 shows that while nearly half of the respondents reported a constant block rate structure, relatively speaking, those systems constitute only about one-third of the population served by the total respondents. A constant block structure is one in which a consistent charge is applied to each unit of water consumed. Similarly, it appears that only 13 percent of the systems utilize a flat fee structure, but in terms of population served, those systems equate to one-quarter of the total population served by regional respondents.
The declining block, in which the unit price of each succeeding block of usage is charged at a smaller unit rate than the previous block(s), is in use by 16 percent of the respondents and applies to 18 percent of the total population of all respondents. The inclining block structure, in which the unit price of each succeeding block of usage is charged at a higher unit rate than the previous block(s), is utilized by 22 percent of systems and applies to 28 percent of the regional respondent population.
A summary of the historical results reported by regional rate survey participants since 2008 is provided in Figure 9. Figure 9 shows the average median reported charges for 6,000 gallons of water each year since 2008. The number of respondents to the survey each year is also indicated. It should be noted that recent years have seen much lower participation, which may be why the average and median charges do not appear to have increased significantly since 2008. In 2014, we hope to encourage broader participation from the regional water systems.
If you are interested in the survey and would like to be included next year or have questions regarding the survey, please contact Shawn Gaddie at Shawn.Gaddie@ae2s.com or 701-746-8087.