Increasing Wastewater Treatment Fees

Rate increases for sewer utility service generally receive less press coverage than their more glamorous water utility cousins.  Owing to the comparatively fewer number of sewer utilities – 16,000 in the US compared to around 52,000 drinking water delivery utilities – the topic of wastewater collection and treatment just may not be as attractive to investigate.  Regardless of what reasons may exist, sewer and wastewater utilities may be facing very difficult financial times ahead.

Wastewater and sewer utilities face many of the same general maintenance requirements and infrastructure replacement issues as water supply utilities.  But wastewater providers must also undergo careful scrutiny from regulatory agencies to meet important EPA, regional and local standards for treated water.    These are significant requirements that cannot be provided cheaply.

Utility rates across the board have been on the increase lately because older systems are in need of repair, maintenance and replacement.  Maintenance cannot be deferred indefinitely however, so we are currently witnessing an accelerating rate of utility fee increases as maintenance around the country has been put off for so long.  This has caused some utilities to get creative.

A recent case in Scranton, PA provides a good illustration.  Customers there were recently informed that their method of being charged for use was being modified into a model based partly on usage and partly on a fixed three month fee amount.  The impact is to cause rates to be reduced for customers contributing more than 6,000 gallons of “flow” into the treatment system each month.  Those contributing fewer than this number of gallons would pay an increased amount over their previous fee level.  Of course those slated to pay more are unhappy with the change.  More commentary is available for review at the above link

Some wastewater and sewer utilities utilize flat rate billing for residential consumers.  However when costs of the utility increase, customers generally prefer a usage based billing program that requires customers to pay for service based on usage or flow.  It is interesting that in the Scranton case, the utility moved from proportional usage billing to a partially flat cost system while its costs are increasing. This has fueled consumer unhappiness and dissatisfaction.

This level of dissatisfaction can be expected to escalate as well.  Because the new rates depart from what is known as “cost of service principles” which holds that customers pay for the proportion of utility costs that their level of service requires, customers feel overcharged by the flat-rate portion of the fee schedule.  Customers have a strong understanding of the ‘cost of service’ principle.  In the minds of many consumers, proportional usage should mean a strictly proportional rate.   Scranton has thus abandoned its previous method of billing proportionally for service, added a flat rate to lower usage customers which increases their rates and has earned a significant level of customer dissatisfaction.

Fortunately, there are methods for determining causation and proportionality in sewer rates.  StepWise Utility Advisors specializes in preparing cost-of-service studies in these kinds of situations as well as others.  The bottom line is that where cost differences exist, rates should be designed to match them.  When a utility or provider fails to accomplish this, the natural result is an angry customer base and even unstable rates leading to additional financial problems in the future.

StepWise Advisors is comprised of highly efficient and experienced technical and financial planning experts focused on specific needs of water utilities and utility customers. Founder Jason Mumm brings over 15 years of experience analyzing the water utility industry and the needs of its customers. Visit the StepWise Website for the latest water and utility industry news.