Thursday, July 9, 2020
     

  • Utilities need adequate user rates.
    Ratepayers demand fair rates.
    Getting both — and proving it — is difficult.
    Correction: It used to be difficult.

    KRWA has initiated the Kansas RATES Program to help cities and water districts get their rates set properly and simply. Through the program, KRWA provides basic rate reviews, FREE OF CHARGE!

    Most of the time, a basic review is all that is needed. But when the situations are more complex, KRWA will refer those systems to Carl Brown Consulting to get a service and fee proposal. If the city or RWD then wants to proceed, the firm will do an analysis and assist in getting rates, fees and everything else set up properly.

    Learn more about the Kansas Rates Program and
    Rate Analyst Performance Standards...

  • Utilities need adequate and fairly structured rates. That is easy to say but hard to do.

    "RATES" stands for Rate Analysis and Training for Environmental Systems.

    The Kansas Rural Water Association (the Association) has worked on this for years. GettingGreatRates.com (GGR), a firm that specializes in utility rate analysis and rate setting, has been helping utilities set rates properly for years, too.

    In 2012, we partnered and put together what we call the RATES Program to help you get great rates, do it simply and do it at reasonable and known cost. Following is a description of how the Program works.

    RATES is a collaboration:

    "Comprehensive rate analysis" means that everything that might affect rates and fees, or that might be affected by rates and fees, is considered when doing rate calculations.

    GGR uses the approach described in the American Water Works Association's M1 Manual: Water Rates, Fees and Charges. The resulting rates are often called, "cost-to- serve" rates. If you want something different, that can be modeled, too.
    • The Association does many kinds of technical assistance, including rate setting assistance. All of that is free.
    • GGR does comprehensive rate analysis, rate setting guidance and training. This work is not free, but it ends up paying for itself in a few days in increased revenues.

    How does GGR deliver rate analysis and related services and, are you protected?

    The Association supervises the work, contacts and fees of GGR to make sure its member systems are treated well, charged reasonable fees and they get great rate setting results. These contacts also give the Association the opportunity to give GGR insights into each client’s situation, needs and opportunities. That information is used to make each analysis that much better.

    The Association’s supervision assures that you will get great results. If not, GGR gets fired. As Mr. Brown says, “We treat people right, whether they are served through the RATES Program or not, so the supervision and input are helpful to us.”

    GGR must consistently satisfy the performance standards that follow. And for your information, utilities that have already used the Program are achieving these results, among others.

    GGR’s Credentials:
    • Since 2005, Mr. Brown has produced over 325 rate analyses and counting.
    • He has trained thousands of rate setting practitioners.
    • GGR’s models are loaded with your actual data to arrive at “cost-to-serve” rates for you. If you prefer another structure, GGR does that, too. With real data in the model, almost any structure can be created.
    See GGR’s references for more.

    The main feature Association member systems notice is the 25 percent discount off GGR’s regular fees. GGR’s regular fees normally place in the bottom third of its comparable competition. That means the discounted fees are the cheapest, or close to the cheapest you can pay for a comprehensive rate analysis. Thus, some utilities may be able to have their executive (the city administrator or district manager) purchase these services within their spending limit rather than go through a time-consuming and cost increasing acquisition process. Review your spending limit policy for details about that.

    Your results are also well assured because GGR has this no-recourse guarantee:

    “If you are not satisfied with our work, don’t pay us.”

    After 325-plus analyses so far, none of those clients have exercised the guarantee. But it’s there, just in case.

    From start to finish – from scoping the project to you adopting new rates – your project is likely to take six months to complete. You will take up about two-thirds of that time and GGR the rest. Your project will probably unfold through these steps:

    1. You call the Association, or call GGR at (573) 619-3411, to talk about your situation. If your rates do not need comprehensive analysis right now, Association staff will take care of you.

    2. If your rates do need analysis now, and you desire it, GGR will scope your project on that call and propose services. Scoping is done by phone and usually takes about 20 minutes for each utility being considered.
    a. If your system is a member of the Association, you will get the 25 percent discount.
    b. If the utility is not a member, join. The discount will pay for several years of membership. Then you will get a great rate analysis, the discount AND the great benefits of having your system be a member of the Association. Membership has its benefits!

    3. GGR will prepare and e-mail to you a service and fee proposal, usually within a day of the scoping call. The proposal will look much like samples you can find at gettinggreatrates.com/Freebies. Sample reports, references, Mr. Brown’s rate setting book, guides and capital improvement and repair and replacement scheduling spreadsheets are there, too.

    A common theme: If you are not sure of some rates-related thing, call GGR.

    4. To accept one or more services from the proposal, you just call or e-mail GGR. Unless you desire otherwise, GGR will use its proposal, its guarantee, your acceptance and the performance standards from the RATES Program as the “contract.” If you want a contract, you are welcome to draw one up. However, rather than a full and separate contract, we suggest a simple letter of engagement to add to the proposal. Our letter of engagement template, in Microsoft Word format, is on the Freebies page.

    5. With your acceptance, the project is underway. Work will start by acquiring data and information. Most of this is described in the “Data Needs Sheet” on the Freebies page. You may not know what some of this data is or how to get it. Do not be concerned. GGR will guide you through everything. Every rate analysis client requires at least some data gathering help. Some require a lot. Like many other things in work and life, once you have done it a few hundred times, it gets a lot easier.

    6. Following your desires and using your input, GGR will perform the analysis work.

    7. Once the analysis is essentially complete GGR will e-mail you a proposed final report package. You may go back and forth a time or two until the report suits you.

    8. You and GGR will arrive at a final report and rate recommendations, much like the reports on the Freebies page.
    a. Using the report, you should present rate recommendations to your board or council and answer their questions, if you feel up to it.
    b. Otherwise, you should have Mr. Brown do that presentation. Or, it may be sufficient to have Mr. Brown participate by speaker phone or video conference during your meeting – whatever works for you.

    9. The board or council should soon settle upon new rates and fees and adopt an ordinance or rule to make them effective. This set of rates is called the “initial” rate adjustment. Now you’re off and running with new rates.
    a. At this point, the rate analysis project is “complete.” But you may have need to ask questions that occur to you later, even years later. You have probably never been through this before, so some issues simply will not occur to you until they finally come up later on. When that happens, just call Mr. Brown and he can probably talk you through whatever you are concerned about.

    10. As the year following the initial rate adjustment unfolds, you should track the system’s financial performance. If it performs much like the analysis had predicted, and it probably will, no changes will be needed for the rest of that year. Otherwise, call GGR.

    11. At budget preparation time for the next fiscal year, you should compare the system’s financial performance with the projections in the analysis report. If you are on track you should raise all rates and fees incrementally as recommended in the report (so keep it handy). If you are NOT on track, follow Chapter 9 of Mr. Brown’s book (on the Freebies page) to make the adjustments. If you are not sure of anything, just call GGR.

    12. Finally, about five years into the future, after several rounds of incremental rate increases totaling about 20 percent, the rate structure will likely become skewed enough that it will be worthwhile to start this process all over. It is also likely by then that your capital improvement needs, and other issues will have changed enough that it is time to go back to Step 1 above to true up the rates again.

    Now it’s time to find out if your rates are where they should be and, if not, what it would take to get them there. It’s time for Step 1 above.

    An important part of the RATES Program is the “training” piece. Rate analysis only goes so far. YOU must do the work of adjusting rates, developing budgets, planning and executing equipment repair and replacement and planning and executing capital improvements. To help you do these things well, GGR, in cooperation with the Association, conducts rate setting and related workshops for utility managers and decision-makers. Attend if you can. We think you, and your ratepayers, will be glad you did.

  • As verified by the Association, GGR will serve you to at least the following standards:

    1. GGR will copy to the Association all important submittals made to you. This includes at least the following: the service and fee proposal, invoice(s) and the final rate analysis report package. This enables Association staff to monitor the performance of GGR and the RATES Program to assure that you are being well-served.
    2. GGR will respond promptly to your requests. Proposals will be offered within one week of request, usually within a day. Analyses and reports will be turned around promptly.
    3. If you have specific goals you want to achieve with your system(s), GGR can develop rates to achieve them, if that is financially possible. However, GGR is able to develop appropriate rates for systems given no guidance at all, too.
    4. Generally, GGR’s fees will be on a lump-sum basis for each package of service. For example: $XX for the water rate analysis, $YY for the sewer rate analysis, $ZZ for each visit made to your location to present the analysis results and recommendations, etc. This keeps you in control of cost.
      • Though uncommon, if you need a large or unknown number of “scenarios” modeled, you are considering entering into a wholesale agreement, you are being sued over rates or there is some other fluid situation, fees for those services will be proposed on an hourly basis. But in those cases, work will only be done at your direction, so you will still be in control of what gets done and what it ultimately costs.
    5. Association member systems get a 25 percent discount on GGR’s normal rates and fees. GGR will not “jack up” fees in an attempt to recoup the discount.
    6. GGR provides the following guarantee:

    “If you are not satisfied with our work, don’t pay us.”

    1. As a part of GGR’s proposal to you, the firm will give you copies of one or more rate analysis reports like the report you will end up receiving. You can also find about a dozen reports on the GGR Web site.
    2. GGR will provide you with a reference contact list of all clients for the past four-plus years (no cherry picking) with enough information so you can tell which clients were facing situations like yours. This will make your reference checking and fee comparisons tasks easier.
    3. Unless you request something different, your rate analysis will include the following:
      • A projection of rates; incomes; costs; capital improvement program (CIP) needs; equipment repair, refurbishment and replacement needs (R&R); and all other issues that could markedly affect the system’s rates and finances. R&R projections cover 20 years. All others cover 10 years.
      • Utilities deal with CIP and R&R in various ways. If the way you deal with these things is financially sound and works well for you, GGR will include what you do in modeling of your rates.
      • If the way you deal with CIP and R&R is not financially sound or if it could work better and you desire that, GGR will recommend improvements. If, and as much as you desire to make such improvements, GGR will include that in modeling of your rates.
      • In water and sewer rate calculations, and to a degree, calculation of rates for other types of utilities requires gathering of usage data. How detailed that data will need to be depends upon the rate structure to be modeled and recommended. Some billing programs are quite unfriendly about exporting usable detailed data, so GGR may need to use averages or other data that can be acquired. That said, GGR will always use the most appropriate usage data that can be obtained from your billing program, so the most reliable income projections can be made.
      • Data needs and instructions are more thoroughly covered in the “Data Needs Sheet” available at https://gettinggreatrates.com/Freebies.

     

    1. If you desire, GGR will present its results and recommendations to your board, council or commission and to the public so everyone can understand why rates and fees should be adjusted as recommended. Quite importantly, GGR will demonstrate how rate adjustments will affect various ratepayers. This demonstration normally shows that the recommended adjustments, usually increases, will not be as hard to absorb as most ratepayers fear. This smooths the way to enabling your utility to be funded appropriately and serve ratepayers well.
      • This presentation may be done in-person (which is preferable because it is most effective), or by conference call or video connection into your meeting, as it best suits your needs.