OCTOBER–DECEMBER 2013 ADVANCES IN WATER RESEARCH 8
help utilities evaluate the industry’s business model and provide grounded solutions to overcome some of its challenges.
This project provides an assessment of the
revenue model and resulting financial condition of water utilities in North America
(primarily the United States), considers
factors influencing financial performance,
and discusses practices that have the
potential to improve financial resiliency.
Additionally, this project generated two
tools to assist utilities in exploring pricing
and program strategies for revenue resiliency. Results clearly show that there is not
one generalizable “new normal” or inevitable pre-ordained financial outcome for the
industry and that the prevailing revenue
model has posed significant problems for
many utilities, but also continues to serve
many utilities relatively well. Figure 1 highlights the geographic diversity of data utilized for analyses in this project.
The results of this project are broken
into three distinct sections:
1. Assessing the Revenue Resilience of
the Industry’s Business Model
2.Factors Influencing Revenue
3. Strategies and Practices for Revenue
Key findings within each section are
described in more detail and a more
comprehensive discussion of each topic
is presented in the final report.
Assessing the Revenue Resilience
of the Industry’s Business Model
EACH UTILITY FACED a unique set of
financial challenges over the last decade.
Analyses on the robustness of utility business models in generating stable and
adequate revenue were performed.
º Revenue: For the majority of utilities,
the largest component of utility revenues comes from customer sales (base
and variable charges). Generally, variable revenues from a utility’s commodity charges comprise the largest
portion of those sales. Figure 2 displays
year-to-year revenue variability for 485
utilities from across the nation.
Figure 1. Map of utilities included in all utility financial and rates data sets
Figure 2. Annual increases to total operating revenues among the same 485 utilities