Rate Studies and Fee Studies
City, County, and State governments, water, power and wastewater utilities periodically conduct rate and fee studies to assess existing cost structures, rationale behind prevailing rates and fees and to potentially modify rates and fees to best meet the financial goals and objectives of the organization. Outputs of cost of service/fee or rate studies may include recommendations on a new classification system for utility customers, new basis for setting wholesale rates, increasing or maintaining the utility's revenue requirements, allocation of system costs to customers, and development of alternative rate structures. Fee studies may also encompass all fees that are charged to a City or County’s residents. For these fees, it is important to understand the structure of services rendered and the nature of the fee (subsidized, enterprise fund, etc.) Fee and rate studies encompass a comprehensive study of the consumption patterns (monthly, quarterly or annual trends), macro and micro economic conditions, condition of the infrastructure and other factors that affect an agency’s operations. Fees designed or modified as a result of such a comprehensive study enable generation of a revenue stream that supports increasing operating and maintenance costs as well as funding of capital improvement projects to rehabilitate aging infrastructure.
A communications plan is usually developed in conjunction with the fee study to ensure effective dissemination of information on potentially increased rates to customers. This plan includes key audiences, key messages, communications vehicles, time lines and other pertinent information that allows the utility to effectively communicate rate change information to customers while ensuring "buy-in" from internal and external stakeholders.
Sample Case Study:
City of Cleveland, Division of Water - Comprehensive Financial Plan for Water and Water Pollution Control Facilities