UTILITY RATE AND FEE CONSULTING

UTILITY RATE AND FEE CONSULTING

FCS GROUP has performed over 3,000 utility finance and rate development projects for local communities including defining revenue requirements with comprehensive financial modeling tools, performing long-term capital management strategies, and developing full cost-of-service rates. We work with agencies large and small in urban and suburban areas, rural systems, regions with seasonal/climate sensitivities, and communities with special commercial/industrial needs. We are experts and educators in utility rate policies and practices, and are attentive to legal constraints in every location we work. We have invested time with agency staff, policymakers, stakeholders, and customers to improve your utility’s long-term financial health and integrity.

FCS Principal John Ghilarducci

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

John Ghilarducci
Principal

FCS GROUP has performed over 3,000 utility finance and rate development projects for local communities including defining revenue requirements with comprehensive financial modeling tools, performing long-term capital management strategies, and developing full cost-of-service rates. We work with agencies large and small in urban and suburban areas, rural systems, regions with seasonal/climate sensitivities, and communities with special commercial/industrial needs. We are experts and educators in utility rate policies and practices, and are attentive to legal constraints in every location we work. We have invested time with agency staff, policymakers, stakeholders, and customers to improve your utility’s long-term financial health and integrity.

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

John Ghilarducci
President and Principal

The first objective for any rate study should be ensuring the rates will produce enough revenue to meet your utility’s operating and capital expenditures. FCS GROUP begins by determining near- and long-term revenue needs to ensure that rates and other resources fully recover all utility costs, aligning you with a financial plan that will meet your operating, capital, and policy-driven needs.

  • Revenue requirement
  • Utility financial planning
  • Capital planning and funding (or capital funding optimization)
  • Cash reserve analysis
  • Revenue risk assessment and emergency planning
  • Fiscal policy analysis
  • Alternative rate strategies
  • Rehabilitation and replacement (R&R) program funding

Beyond the revenue needs, a rate study should also address the proportionality of the rates: Are customers paying a balanced share for the way they use the system? This element allocates utility costs to classes of customers in proportion to their demands. From this point, we can help you design rates to recover each class’s costs more equitably.

  • Customer data analysis
  • Cost pool analysis
  • Base and peak demand analysis
  • Wastewater flow and loading analysis

A rate study provides the perfect opportunity to develop new policies or modify existing ones. The resulting policy framework leads to fiscal and rate practices that fit the unique needs of your community.

  • Reserve funding
  • Water conservation incentives
  • Rate affordability
  • Demand management
  • Rate structure options
  • Cost of capital

The final element of the rate study is to merge the revenue needs, proportionality, and policies into a cohesive rate schedule: the system of fixed and variable charges driving customer bills. Whereas cost allocation focuses on interclass equity – where each class pays its proportional costs – rate design can promote intraclass equity where customer bills achieve proportionality among individuals within the same class of service. Thus, the rate design process serves to balance your priorities while preserving revenue stability.

  • Rate modeling
  • Tiered rates
  • Seasonal rates
  • Wastewater surcharge rates
  • Water budgets
  • Fixed v. volume rate balance
  • Bill frequency impact analysis

Defensible system development charges (SDCs) are an essential funding tool for utilities. These one-time fees imposed on new utility customers mitigate the costs of new or expanded utility infrastructure to meet growth needs. Many agencies consider SDCs a means for “growth paying for growth” so that existing ratepayers are not burdened with expansion costs. While state statutes vary concerning the imposition of these fees, they all stem from a common principle: the fee should not exceed the proportionate share of capital facilities required to serve a new connection. FCS GROUP develops strong methodologies for establishing these fees, providing the necessary analytical justification for each utility, and helping communicate with the development community when setting new or increased SDCs.

  • Connection fees
  • Capital facility charges
  • General facility charges
  • Capacity fees
  • Impact fees
  • Development fees
  • Capital recovery charges

FCS GROUP can also help prepare and facilitate a public engagement strategy to implement study results successfully. Engagement strategies vary but often include agency-preferred paths for interacting with their elected decision-makers and stakeholder involvement and community outreach to inform, if not influence, local rate solutions.

  • Council/board communication
  • Stakeholder/customer engagement
  • Newsletter and billing insert content
  • Web page messaging
  • Prop 218 support (California)

Financial planning for capital infrastructure reinvestment—repair, rehabilitation, and replacement of utility facilities—is critical. FCS GROUP works with utility finance, engineering, and operations professionals to develop a long-term “whole system” capital plan to assure your long-range success. Our approach employs various methods for estimating the future costs of infrastructure replacement; establishing policies on financing methods, equity issues, and rate affordability; analyzing the accumulation and use of dedicated cash reserves; identifying rate and fee impacts; and developing transition strategies for beginning or enhancing a capital reinvestment program. A good financial plan provides the blueprint for a utility to proactively address future replacement needs, help to avoid rate shock, and treat different generations of customers equitably. Additionally, as a part of engineering-led 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.

  • Benchmarking
  • Bond feasibility analysis
  • Capital financial planning
  • Excise tax rebate analysis (Washington State)
  • Financial capability assessment (EPA consent decree)
  • Utility master plan financial analysis
  • Parity Certificates
  • Water supply and treatment economic analysis

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.”

Kathleen M. Small, Manager, Pasadena Park Irrigation District No. 17, Washington