News Feature | December 6, 2013

Regulators Push For New Water Rate Structure

By Sara Jerome

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The association for regulators is pushing to change the way water utilities determine their rates. 

In a recent resolution, the National Association of Regulated Utility Commissioners (NARUC) said the traditional methods that water and wastewater utilities use to determine their rates are no longer effective as a result of low growth at utilities paired with high levels of spending. 

"Revenue, driven by declining use per customer, is flat to decreasing, while the nature of investment (rate base) has shifted largely from plant needed for serving new customers to non-revenue producing infrastructure replacement and compliance with new drinking water standards," the resolution said. 

That's why the association wants utilities to explore new ways to charge. The resolution said NARUC "supports consideration of alternative regulation plans and mechanisms." It said it is ready to assist utilities as they take on that challenge. 

The aim is to support utility's capital investment needs. Tap water infrastructure costs over the next decade could hit $1 trillion, according to the American Society of Civil Engineers 2013 Report Card for America’s Infrastructure. "Capital investment needs for the nation’s wastewater and stormwater systems are estimated to total $298 billion over the next twenty years," the report said. 

The EPA estimates a need for capital investment of $338 billion over the next 15 years for drinking water infrastructure, according to the Water Research Foundation. 

Water and wastewater utilities are behind the times compared to energy companies. "The electric and natural gas delivery industries have in place a larger number and a greater variety of alternative regulation policies, such as multi-year rate plans and rate stabilization programs," NARUC said. 

Researchers say ratepayers and taxpayers are sending an increasing amount of money to water utilities, but U.S. water infrastructure is crumbling anyway, Water Online previously reported

NARUC issued a report recently on resilience at regulated utilities, including the water sector. 

Image credit: "Money," © 2011 401(K) 2013, used under an Attribution-ShareAlike 2.0 Generic license: http://creativecommons.org/licenses/by-sa/2.0/

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