scope:

Introduction

During the last twenty years of the twentieth century, the cost of supplying potable water increased significantly. This rapid increase can be attributed to a number of factors, including the passage and implementation of the US. Safe Drinking Water Act, the need to develop more remote and expensive water supplies, the need to replace aging infrastructure, and rapid economic development in some areas. The increased costs of meeting water quality requirements and utility plant needs have resulted in increased water rates and charges.

Historically, customers generally paid little attention to their water bills or the structure of the rates. However, as the rates and charges increased and water bills became a more significant percentage of customers' overall expenses, consumers have become increasingly interested in the rate setting process. Water utilities are also recognizing that the methods they employ to charge for service can influence customer use patterns.

The AWWA Rates and Charges Subcommittee believes that the costs of water rates and charges should be recovered costs from classes of customers in proportion to the cost of serving those customers. However, the subcommittee also recognizes that other considerations may be equally or more important in determining rates and charges and may better reflect emerging objectives of the utility or the community it serves.

The emergence of new rate and pricing policies has brought a continuing evolution in rate structures. In some cases, water rates and charges may have been adopted to achieve certain goals without a full understanding of the impacts or resulting implications. Some rate alternatives, if not properly designed, may even have impacts that are counter to what was intended.

This manual is intended to help policymakers and rate analysts consider all relevant factors when evaluating and selecting rates, charges, and pricing policies. It is a comprehensive collection of discussions and guidance on a variety of issues associated with designing and developing water rates and charges; it incorporates materials presented in four different AWWA guidance manuals published in earlier years.

This manual contains ten main sections:

• Section I discusses the determination of revenue requirements

• Section II presents the process in which costs are identified and allocated to classes of customers

• Section III presents various rate structures and how they are developed

• Section IV presents pricing alternatives related to specific customers or groups of customers

• Section V discusses the recognition of demands, drought conditions, and other considerations in establishing rates and charges

• Section VI discusses the derivation and implementation of capacity and development charges

• Section VII presents public and private fire protection charges

• Section VIII concentrates on developing charges for wholesale or bulk users that subsequently resell or distribute water

• Section IX presents a number of special and miscellaneous charges

• Section X presents various implementation considerations