scope:

PURPOSE

In 2012, the American Water Works Association (AWWA) published the sixth edition of AWWA Manual M1, Principles of Water Rates, Fees, and Charges. That manual provides comprehensive guidance on establishing rates and charges for water service. The methods and examples contained in Manual M1, while recommended and appropriate for many water utilities, may prove to be overly complex and burdensome for others. This burden applies particularly to the development of cost-of-service rates. Such rates require the determination of revenue requirements by customer class before designing and adopting a rate structure.

Recognizing the limitations Manual M1 may have for smaller systems, or larger systems without sufficient data or rate-making capability, the AWWA Rates and Charges Committee (authors of Manual M1) developed the idea for a "Manual M1-type" alternative. A rate manual for small systems provides guidelines for the development of rates for utilities that lack the data and resources needed to apply the methods described in Manual M1. For these utilities, this manual-Developing Rates for Small Systems-provides guidance in developing rates when data and information may be lacking. The Rates and Charges Committee encourages all utilities to use Manual M1 as the primary guidance tool but believes this manual fills a need for small systems.