Tough economic times have put water and sewer rates under a lens. As the economy continues to flounder in many aspects, not the least of which is lingering unemployment, the job of providing basic utility services goes on. In Wichita, a recent 8% water rate increase was met with its share of public outcry. The Wichita Eagle reported this week on the 8% rate increase, which evoked a number of responses on it’s blog, none of them too positive. The Wichita increase comes on the heels of an increase that was put in place just five months earlier. In making the latest increase, Wichita compares its rates to national averages, a comparison that reflects favorably for Wichita residents. The comparison, however, doesn’t convince the bloggers; they are still upset regardless.
Comparing local water rates to others is a common approach, but it’s not often effective in convincing ratepayers that all is well with the proposed increases. Local ratepayers don’t live in those other cities, so what do they care what those folks are paying for their water? What local ratepayers know is that the cost of business was lower just yesterday and now its higher, 8% higher in the case of Wichita. The problem with league table – comparisons with other utilities – is that they don’t educate ratepayers on the actual costs of conducting the local affairs of their own utility. The truth about water rates, and the reason that water rate increases have outstripped inflation for the past several years, is that the rates are driven to a large extent by the need for capital dollars as opposed to operating dollars. Local utilities have only the ratepayers to turn to for capital whether its payment of debts or raising new money for things like new pipes, pumps, storage tanks, water supplies, or you name it.
Local ratepayers are more like shareholders in this respect than many utility managers would immediately appreciate. What ratepayers really want and need is not to know what other utilities are charging elsewhere; they need to know how much they have to pay for their own service and why. Taking the time and effort to do this is not always easy, but it becomes a lot easier when you have the right tools. When you understand the costs of providing service and can communicate them effectively, you have a much better basis to present than just comparing your rate with others. In the end, your rates are always based on your own costs – not the costs of other utilities. Understanding and communicating your costs and showing the relationship between the costs and your rates is where you want to be.