Utility Rate Making is a Black Box. I recently sat in on a rate-making session for a small town. The participants expressed great concern about the fact that water and waste water rates had nearly doubled over the previous year. I asked when the last rate study had been performed; it was last year. I listened to the rate consulting firm’s presentation that night – they were brilliant! The group consisted of the old sage rate consultant professional who has been in the business for over 40 years, and there was also the younger, well-poised version who was sharply dressed, very bright, and very articulate. While the younger professional talked about utility rate structures, block rates, inverse block rates, and a multitude of other possible rate structures, I saw complete bewilderment on the faces of the audience. No one understood what the presenter was saying, except for me and, of course, the rate consultants in attendance.
The AQUA RATES PLANNER illuminates the black box of rate setting with rapid visualization of cash flow and required rates with any scenario. Think about a scenario as a cauldron with various economic ingredients. Then think about the ability to tweak any economic ingredient in the cauldron and immediately see the impact on rates and cash flow. Using data obtained in the rate study combined with your latest budget, you can test and visualize all of the elements of utility finance and instantly see their impact.
As a finance director, does this powerful application mean that you can transcend the need for a rate study? You still need a thorough analysis to derive the direction of costs that comes with a rate study and the consulting that goes along with knowing how to structure rates, prepared by an outside party, remains a very important tool. However, once a rate study is completed, a finance director should not have to request consulting from a rate consultant on the impact of the budget, CIP projects, financing, or what-if questions that come up from the board or from customers. Refreshing the rates should be as simple as pressing a button. You now have the power to try out any economic scenario and view the impact it will have on rates and cash flow.