º Revenue Risk Assessment Tool: This
tool allows utilities to quickly determine the proportion of residential
revenues from water sales that may
be at risk of loss when residential customers change demand patterns
based on the utility’s own rate structure, customer demand profile, conservation program targets, and
normal weather fluctuations. This
tool requires only minimal data and
uses simplifying assumptions based
on actual customer behavior. It
focuses exclusively on revenue projections and assessments and allows
the user to compare two different
rate structures and assess which one
offers greater revenue resiliency.
º Customer Assistance Program
Cost Estimation Tool (CAPCET):
This tool was developed to help utilities assess the costs and benefits of
a customer affordability program in
their service area at a broad level.
Using information from the U.S.
Census Bureau and water and waste-
water rates inputted by the user, this
interactive instrument incorporates
information about the household
eligibility threshold to qualify for an
affordability program, annual
assistance offered per customer, and
percent of customers responsible for
bad debt. By adjusting the appropri-
ate fields, the results provide insight
into design considerations and pro-
gram costs to the utility.
THIS RESEARCH REINFORCES the grow-
ing sentiment among many in the indus-
try that the general water utility business
and pricing model is not as robust and
resilient as once thought. Most water utili-
ties rely on the sale of one essential prod-
uct, and historically, many utilities have
raised sufficient and predictable revenue
through small rate modifications. While
this approach has never been foolproof,
the quantitative analyses throughout this
report offer additional evidence that the
last five years has been a particularly try-
ing time for this business model. A resilient
business model for the water industry is
one that is strategic and deft. Specifically,
º Understand their business risk for
disruptive revenue fluctuations.
º Adopt basic policies and perfor-
mance targets to drive financial
º Re-examine sales projection
º Consider the repercussions of the
message that customers are buying
gallons of water when the cost side
of the business model suggests they
are buying access to water.
º Consider new pricing models.
ONGOING WRF FINANCE PROJECTS
THERE ARE TWO ongoing WRF projects designed to help utilities with fiscal issues.
Additionally, let us be a resource for you on specific financial related questions you
may have or research needs that you feel need investigated. For further information,
contact Jonathan Cuppett at firstname.lastname@example.org.
“Rate Approval Process Communication Strategy and Toolkit”
PROJECT #4455 WILL identify and develop communication strategies and specific messages that utilities
can use with their governing boards to gain support during their rate and budget approval process. To be
completed in 2015.
“Capital Funding Imperatives: Best Practices for Identifying, Prioritizing, Funding, and
Resourcing Capital Improvement Programs”
PROJECT #4493 WILL identify best practices for developing and financing utility Capital Improvement
Programs. To be completed in 2015.