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StepWise Ratemaking Course for Elected Officials

September 20, 2009

The following links will take you to PDF files for the 4-hour seminar on water and sewer rates.  The seminar is a short course that we present from time to time with the targeted audience being elected officials and general managers.  It’s not a hands-on course that teaches the ins and outs of utility rates and the rate setting processes, but it is a broad overview of these issues with special emphasis on how elected officials can manage the risk of rate shock through competent rate setting processes tied to effective communications strategies.  The seminar addresses four key areas:

1. Why water and sewer rates are important.
2. The right way to adjust water and sewer rates.
3. How to get communities/customers to more readily accept needed rate increases.
4. How to make rate setting part of a utility’s normal processes.

click to download Part 1	Part 1 – Intro & Why Rates Are Important -  The first segment in the seminar addresses the importance of utility rates in the normal governance of any publicly owned water or sewer utility. The concept of risk is introduced with changes in rates being described as an event with a high probability of occurrence and a potentially high consequence that depends on the magnitude of the change in the rate.  We introduce the concept of utility ownership and how customers’ reactions to rates can be compared to corporate shareholders’ reactions to low returns. We conclude the session by suggesting that managing the rate setting process is akin to managing customers expectations and,therefore, is a most effective tool for managing risk.
click to download Part 2	Part 2 – The Right Way – The second segment of the seminar addresses the rate setting process.  Starting with alignment of financial plans and strategic plans (like a utility master plan, or other long-range plan), this second and longest segment describes how rate setting starts with sound planning and financial policies before moving on to cost-of-service allocations and, ultimately, rate design.  The intent of this segment is provide elected officials with exposure to rate making processes; we provide some simple examples to help the information sink in.
click to download Part 3	Part 3 – Making it Work -  The final session focuses on using the information gained during the rate setting process to communicate more effectively with customers.  General communication strategies are discussed,with more attention given to the process of ongoing customer relations.  The session demonstrates how to tie-in the rate making process to the communication plan.  The final segment in this session talks to the implementation of rate setting as a normal business process for the utility; it shows where the the rate setting process fits and talks to some of the challenges facing utilities for implementation.

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