UTILITY RATE AND FEE CONSULTING

UTILITY RATE AND FEE CONSULTING

FCS GROUP has performed over 2,000 utility rate studies, from defining revenue requirements to analyzing the costs of service and underlying pricing of utility service. We serve agencies large and small, in urban and suburban areas, rural systems, seasonal locales, and industry towns. We are experts and educators in utility rate standards, and we are attentive to the legal framework in every state and province where we work. We’ve invested time with agency staff, legislators, dominant stakeholders, and everyday customers impacted by our studies.

“We apply our experience, knowledge, technical rigor and innovation on each assignment to produce deliverables of lasting value to our clients.”

Principal

FCS GROUP has performed over 2,000 utility rate studies, from defining revenue requirements to analyzing the costs of service and underlying pricing of utility service. We serve agencies large and small, in urban and suburban areas, rural systems, seasonal locales, and industry towns. We are experts and educators in utility rate standards, and we are attentive to the legal framework in every state and province where we work. We’ve invested time with agency staff, legislators, dominant stakeholders, and everyday customers impacted by our studies.

“We apply our experience, knowledge, technical rigor and innovation on each assignment to produce deliverables of lasting value to our clients.”

Principal

An effective rate study generates a pricing structure and financial plan that satisfies the long-term obligations of the utility and targets equitable cost recovery from customers while conforming to legal constraints, agency policies, and community values.

FCS GROUP begins by determining near- and long-term revenue needs to ensure that rates and other utility fees can fully recover the costs of service. Costs include annual obligations for maintenance, operations, and administration; prior debt service; and prevailing fiscal management policies. Beyond that, a thorough revenue requirements analysis develops a capital funding strategy to accomplish known and estimated capital improvement programs.

For most agencies, capital programs are dominated by the need to invest meaningfully in system rehabilitation and replacement of their aging infrastructure. Developing a funding strategy for this ongoing, substantial expenditure within the framework of a utility rate study helps the agency avoid rate shock by taking measured steps and considering alternative financing before expenses peak. It also provides the justification for active and successful reserve management, which can enable more stable revenue patterns, phased rate plans, and intergenerational equity.

Beyond the financial basis, a utility rate study also addresses the equity of pricing: Are customers paying for their proportionate use of the system? This element allocates utility costs to classes of customers in line with their demands and demographics. From this point, rates can be set to recover costs fairly.

The final element of the rate study is the design of an actual rate structure: the system of fixed and variable charges that drive customer bills. Whereas cost allocation focused on interclass equity, quality rate design can achieve better intraclass  equity, yielding customer bills that achieve proportionality between individuals. Furthermore, locally-tailored rate design can implement pricing policies that might further agency goals, such as price signaling for water conservation efforts and other forms of demand management.

FCS GROUP rate studies can also prepare and facilitate a public involvement strategy for the successful implementation of study results. This not only includes agency-preferred paths for interacting with their elected decision-makers, but also, stakeholder involvement and community outreach to inform, if not influence, local rate solutions.

(Also referred to as: Capital Facilities Charges, General Facilities Charges, Capacity Fees, and Impact Fees)

More than ever before, system development charges (SDCs) are becoming an essential element in the funding toolbox for utilities. These one-time fees that are imposed on newcomers to a utility system serve to mitigate the costs of new or expanded utility facilities and infrastructure and are required to address the increased demand for utility service. Many agencies consider SDCs as a way of “making growth pay for growth,” so that existing ratepayers are not burdened with the cost of expansion. While many states have their own statutory structure governing the imposition of these fees, they all stem from a common principle: the fee should not exceed the newcomer’s proportionate share of capital facilities required to serve. FCS GROUP has developed strong methodologies for establishing these fees, providing the necessary level of analytical justification for each utility, and helping many of our clients interact with the development community when setting new or increased SDCs.

As a part of larger comprehensive or master planning efforts, FCS GROUP prepares financial plans, working with the utility’s selected engineer or developing the plan as a separate but concurrent effort. The motivation for a financial plan often stems from the utility’s development of a Capital Improvement Program (CIP)—the list of five to 20-year needs facing the utility. A financial plan can often turn that needs list into a reality by setting the financial strategy for getting it done. Capital funding strategies are developed, including identification of resources to be used, such as rates, cash reserves, special grants or loans, and traditional debt financing. Cash flow is projected in the utility’s reserves, and rate and fee impacts are identified, including development of any transition strategies. By looking at capital needs within the context of a “whole-system” financial plan, the utility can set forward-looking strategies that define the practical means for accomplishing its program.
Elected utility officials face the challenge of operating their agencies efficiently and resourcefully, while keeping rates as low as possible for their customers. FCS GROUP’s utility financial planning reviews offer ongoing preventative care, as well as periodic financial check-ups, in the same way a doctor annually checks on your physical health. As part of a fiscal health review, our consultants analyze active budget management and reporting systems and review various ratios such as liquidity, financial performance and leverage, water and sewer maintenance, and overhead, all of which are prime indicators of financial well-being. FCS GROUP also reviews infrastructure aging and replacement/reserve management programs. Finally, we can conduct a benchmarking analysis to determine how well a utility is doing in relation to similar utilities.
  • Parity Certificates
  • Litigation Support and Expert Witness
  • Negotiations and Mediations
  • Excise Tax Rebate Analysis (Washington)
  • Water Supply and Treatment Economic Analysis
  • Utility Management Consulting – Our utility management consulting practice also supports utilities with user fees, performance efficiency audits, organizational reviews, etc.

Your Primary Contacts

Angie Sanchez Virnoche
Angie Sanchez VirnocheUtility Rate and Fee Consulting
John Ghilarducci
John GhilarducciUtility Rate and Fee Consulting

What our customers are saying

“The Sanitation Rate Study was adopted by City Council at their regular meeting last evening. FCS Group, and you two [Angie Sanchez Virnoche and Sergey Tarasov] in particular, are to be commended on an outstanding job! You both received a number of complements from Council on the workshop presentation and how easily understood the information was. I would also like to personally thank you both for your work on the project and the number of compliments that I have received because of this project. You guys ROCK! THANKS!”

Tim Davis, Sanitation Operation Manager , City of Moscow, Idaho

“Within six months of hiring FCS GROUP, Pasadena Park Irrigation District No. 17 was able to quote commercial service water rates and charges with confidence. The District now has water rates and System Development Charges that are fair, equitable and most importantly defendable.”