Financing for Environmental Compliance
Planning Process Step Five: Conduct a Rate Analysis
The cost to provide service changes over time. A rate analysis should be conducted periodically to ensure that rates cover the full cost of providing a service. The rate analysis should determine whether the current rate structure is covering current costs and whether the rate will need to be changed to meet future costs.
The 2004 American Water Works Association Water and Wastewater Survey states that the average monthly wastewater rates for the average customer1 are:
- Large system $22.79 (defined as billing > 60 million gallons per day)
- Medium system $21.65 (defined as billing 15-60 million gallons per day)
- Small system $25.39 (defined as billing < 15 million gallons per day)
In addition, the Environmental Finance Center at Boise State University provides free rate-setting software, Rate Checkup, to help communities set water and wastewater rates and plan for future expenditures. This software can be downloaded at http://sspa.boisestate.edu/efc/
Setting Small Drinking Water System Rates for a Sustainable Future (PDF) (62 pp, 341K, About PDF)
EPA created this rate setting guide to help small drinking water systems bring in enough money to cover the full costs of doing business now and in the future. This guide is designed to help owners, operators, and managers of community water systems (CWSs) serving 3,300 or fewer persons understand the full costs of providing a safe and adequate supply of drinking water to their customers and how to set water rates that reflect those costs.
A broader discussion of full-cost accounting in a municipal solid waste context can be found at http://www.epa.gov/epaoswer/non-hw/muncpl/fullcost/questions.htm
Next Step: Complete a Community-Wide Financial Analysis
Previous Step: Devise a Technical Solution