Utility Economics

Our utility economics practice is the cornerstone of our services.  We regularly provide our clients with these services utilizing our unique, proprietary live interactive process and tools.

Rate Studies – Represent the most complete financial analysis we offer for utilities.  Normally, these studies include a Revenue Sufficiency Analysis, Cost of Service Allocation, and Rate Design Analysis.  In some cases, these studies may also include a Capital Planning & Funding Analysis, Impact Fees/Capital Charges Analysis, and/or the development of Miscellaneous Service Fees.

Revenue Sufficiency Analysis – Provides a multi-year projection of the sufficiency of a utility’s revenues to meet all of its current and projected financial requirements and determines the level of rate increases necessary in each year to provide adequate revenues to fund all of the utility’s cost requirements.

Rate Design Analysis – Begins with a diagnostic rate structure evaluation whereby the utility’s existing rate structure is reviewed for conformance with several rate design criteria or objectives, such as fairness/equity, legal precedent, resource conservation, industry practice, etc.  Based upon the results of this evaluation, a detailed billing analysis is performed to develop a new rate structure that would satisfy the appropriate criteria while providing adequate revenues to satisfy the cost requirements of the utility.

Cost of Service Allocations – Apportion the costs of each department or division of a utility system to each respective service (such as water vs. wastewater) and/or customer class (retail vs. wholesale and/or residential vs. non-residential).  These allocations are typically relied upon in the performance of Revenue Sufficiency Analyses and/or Rate Design Analyses.

Capital Planning & Funding Analysis – Evaluates the timing and funding sources for annual capital improvement plans and individual projects.  The evaluation focuses on maximizing the use of existing funding sources and matching the type of funding with the useful life of each project while minimizing customer impacts. 

Financial Forecasts in Support of Bond Issues – Provide a historical and pro forma projection of the revenue and expenses of the utility in order to demonstrate the ability of the utility to repay the desired borrowing amount.  The forecasts are typically performed using our FAMS-XL© model, as it automatically generates many of the schedules required for these forecasts.

Impact Fee / Capital Charge Studies – Develop capital charges that are designed to recover the cost of providing capital facilities (infrastructure) needed to serve new development.  These charges are the mechanism by which new growth can "pay its own way" and minimize the extent to which existing customers must bear the cost of new or expanded facilities which are necessitated by additional customers.

Utility System Valuations – Determine the value of a utility system for potential divestment or acquisition situations using several alternative methods such as Reconstruction Cost New Less Depreciation, Income / Debt Bearing Capacity Analysis, Comparable Sales, etc.

Private Utility Rate Case & Regulatory Assistance – Includes the calculation of rates for private utility systems in accordance with the appropriate regulatory agency rules and filing requirements, as well as legal precedent and industry practice. This typically includes the preparation of financial/accounting related schedules required to support rate applications as well as the provision of written and oral expert witness testimony as it pertains to utility rate making issues.

Alternative Water Supply Economics – Identifies and assesses the financial and customer implications of various water supply situations, such as alternative sources of supply, wholesale purchases versus self-production, alternative treatment methods, participating in regional water supply solutions, etc.

Financial Feasibility Analyses – Examines the financial consequences of potential initiatives, such as divestments/acquisitions, substitution of alternative water supplies (such as reclaimed water for potable water), impact fee waiver programs, growth moratoriums, operational configurations/changes, etc.

Special Assessment & Fee Studies – Calculate non-ad valorem assessments for different utilities to be included on the annual tax bill or develop special benefit assessments/fees for costs that have localized benefits within a utility system.

Calculation of Miscellaneous Service Fees – Identifies the costs and develops appropriate fees for providing specific services to individual customers, such as tap fees, meter set fees, service installation fees, disconnection fees, reconnection fees, late payment charges, etc.

Ordinance Development & Revision – Create a new ordinance for the provision of utility service or amend/revise an existing one to adequately describe rules/terms of service, to reflect desired policy and procedure objectives, and to accurately present the rates of the utility.