Rate Studies

Challenges

Rates charged for services must be equitable, acceptable to the consumers, and generate sufficient revenue. A major challenge in the development of rates is the allocation between domestic and industrial users. Additionally a rate study needs to take into account the overall financial health of the community and sectors thereof.

Equitable Rate Structures are a Resource

Communities with sound, equitable rate structures can use them to keep existing industries and attract new ones.

Experience

Jones & Henry has conducted cost of service studies to develop rate structures for a number of communities ranging from large to small, and for water, wastewater, and storm water utilities. The majority of the rate studies have been performed in Indiana, Michigan, and Ohio.

Services

Periodic rate studies are an important element in maintaining adequate fiscal resources for your utilities. Jones & Henry has the expertise to assist you in providing a rate structure that is equitable and acceptable to the users.

Jones & Henry reviews existing conditions objectively and analyzes current rate structures in detail to determine if there is need for change. Rate structures are analyzed for rate equity and revenue sufficiency.

When dealing with water or sewer rates, we collect and analyze operation and maintenance, administrative, capital and debt service expenses. We then project the expenses into future years. In conjunction with the community, we normally develop a prioritized schedule of capital improvements and costs. We review customer classes and usage requirements to determine appropriate cost allocations.

We develop a model using a community's existing rate structure, customer base and usage to verify current revenues. Revenue projections can be made using existing rates, and these can be compared to projected expenses to determine necessary adjustments. Components (usage, customers, rates) of the model can be adjusted to see what will happen to future revenues. In some instances, communities with older rate ordinances want to restructure their method of charging customers, so that the revised user charges better reflect current usage patterns and demand on the system by various customer classes. A new model will then be developed that can be used for "what-if" scenarios.

Our recommendations can also cover miscellaneous charges and fees. These include water tapping charges, fire hydrant fees, and system development fees for water rate studies; and sewer tapping charges, high strength waste charges, and system developing fees for sewer rate studies.

We can assist communities in the presentation of proposed rates. We know that higher rates are never welcome unless fully justified.

We also offer the following financial assistance services:

  • Periodic review of utility systems to determine operation, maintenance, and replacement costs.
  • Preparation of assessment rolls - identifying assessable properties and distribute project costs among parcels of benefiting property.
  • Distribution of capital costs to major industries or tributary municipalities.
  • Engineer’s opinion of rate adequacy for bond issuance.
  • Economic feasibility of project or series of projects.
  • Negotiations with agencies for modification of overly restrictive discharge permits or regulations that could increase operation or capital costs.
  • Optimization of existing treatment facilities to postpone or eliminate costly capital projects.


Results

Rate studies prepared by Jones & Henry produce equitable rates that are implementable. We can provide you with assistance in public participation activities and negotiations with industries.

Jones & Henry
Engineers, Ltd.