Uncertain Revenues. While costs are still a
large concern for utilities, they recognize that
they represent only half of the financial picture.
Maintaining affordable rates was rated by the
workshop participants high alongside full-cost
recovery in the pre-forum survey. However,
these two issues could easily be contradictory
to one another.
Political pressure can influence utility rates
in unexpected ways. If the utility is financially
healthy, but the municipal government’s
general fund is not, utility revenues may
be used to cover the general fund’s deficit,
some utility representatives stated. In
addition, if the water utility is in desperate
need of a rate increase, elected officials are
less likely to approve it at the same time as
a tax or fee increase.
Water conservation is another potential
contradictory utility rate setting objective.
Motivation for customer water conservation
varies across the country. Sometimes it
is driven by physical or environmental
constraints, sometimes by public
expectations. But even if a utility does
nothing to promote conservation, American
households seem to be using less water.
One of the major causes of this decline is
the plumbing standards put in place by
the 1992 Energy Policy Act1. In the long run,
reduced demand could be very financially
advantageous for water utilities: less water
demand means less resource expansion and
infrastructure needs. But if the decline in
water use catches a utility off-guard, it can
be financially devastating.
Public unawareness. Lack of public
awareness of the growing divide between
utility costs and utility revenues only
exacerbates the problem for most utilities.
Utility representatives were frustrated that
there was a common misperception that
water is and should be close to free. In
addition, the utilities have a difficult time
communicating to the public that due to
conservation or static population growth,
the utility needs a rate increase to meet
largely fixed operating costs and increasing
regulatory requirements. It is difficult for the
public to understand that when their usage
goes down, utility costs do not. So when a
utility has to increase rates because people
did so well at conserving water, the public
and media disparage utility efforts.
1Rockaway, t.D., p.a.
coomes, J. Rivard &
B. Kornstein. (2011)
use trends in north
AWWA. February 2011,
The Solution: Strategies for Ensuring
Utility representatives at the workshop
were asked to nominate strategies they felt
had merit for ensuring financial resiliency.
Strategy bulletins were developed from
this effort. These bulletins are snapshots of
the discussion and not meant to serve as a
comprehensive depiction of the strategy. The
major topics of strategic discussion included:
1. Internal Financial Policies (Metrics-driven
2. Cost Index Use for Rate Adjustments
3. Innovative Rate and Pricing Strategies
4. Revenue Enhancement Strategies
5. Integrated Planning Strategies
6. Water-Energy Nexus Strategies
7. Cost Control Strategies
8. Board and Customer Communication
The following summaries provide a brief
introduction to the bulletins, which delve
deeper into each of these strategies, provide
potential benefits and drawbacks of certain
strategies, as well as specific examples.
Internal Financial Policies (Metrics-driven
The 2009 Water Research Foundation forum,
“Surviving or Thriving in an Economic
Recession,” identified financial policies, with