Warrington, PA (December 21, 2009) – BCWSA recently announced the results of its cost of service rate study.
The study, based upon methodologies set forth in “Principles of Water Rates, Fees, and Charges” Manual of Water Supply Practices M-1, copyright 2000, American Water Works Association and “Financing and Charges for Wastewater Systems, copyright 2005, Water Environment Federation, was conducted to ensure proper and fair rates across all BCWSA customers.
The process of Cost Based Rate development is outlined in the M-1 Manual has many steps and iterations. The first step is twofold: first, projected revenue requirements for the covered rate period must be determined. Second, a method of projecting that revenue need must be determined. For the BCWSA study, a four-year window coinciding with the Authority’s largest providers’ rate modification schedule was chosen. BCW&SA chose the “cash needs” approach which is the M-1 recommended approach for government owned utilities, for method.
In addition, a variety of projections for the period were utilized. Rate increases that were contractual were directly applied. For non contractual items, the best available information based on experience and CPI histories was utilized. The revenue requirement is therefore designed and projected to carry BCWSA through the year ended 2012. The revenue requirement is classified as a projection.
The revenue projection must then be allocated to several categories as defined by the M-1. These categories include: Commodity, Capacity, Actual Customer, Customer Accounting, Meters and Services, Fire Protection and Related Revenue. The categories vary slightly in nomenclature between water and sewer but are essentially the same. BCWSA utilized major costs and analyzed miles of water and sewer pipes in order to allocate costs to these categories. These allocations are estimated and based upon known factors and past experience of BCWSA operations. The previous retail sewer rate in Upper and Central Bucks County for 12,500 gallons was $135/quarter and $22/month for Bensalem customers. Under the new standardized sewer rate, the cost for 12,500 gallons will be $112/quarter and $37/month for Bensalem customers. This estimate is based on average usage; different level users will experience different total costs.
The revenue projection is then further defined and allocated to specific customer classes. These requirements are allocated based upon actual customer counts, the actual and projected gallon use for each class of customer, estimated peaking or loading factors for each customer class, and a customer accounting factor. BCWSA used it best estimates and experience to produce the allocation factors.
The revenue requirement is then specifically allocated to the two stages and a total revenue requirement per cost factor and per customer type factor is attained. These projected requirements in total are then broken out by a constant or customer cost and a variable commodity/capacity cost. This produces a fixed and variable cost per customer type based upon their use and demand placed upon the system as a whole.
The resulting standardized rate will apply to all service areas per customer type. This rate will be the standard rate for all existing and incoming customers that are not currently under a contractual rate agreement. Currently Middletown Township for both water and sewer service, and Upper Dublin Township for sewer service are under contractual rate agreements that will expire at year end 2012. This rate application is designed to finish at the end of year 2012 so that the new iteration will include all BCW&SA service areas. In the meantime, the new rate design will be applied to the Central Bucks, Bensalem, Lower South, New Hope service areas at this time.
There will be no change in water charges for the average user of water across our water system.
Benjamin Jones, CEO of BCWSA stated, “As a non-profit agency, BCWSA is dedicated to providing our customers safe, clean water and sanitary service at an affordable price. We realize the importance of ensuring fair rates for all of our customers, and we believe that the rate stabilization process guarantees that our customers experience equitable rates.”
Sewer Rates Changing By: CHRISTINA KRISTOFIC - Bucks County Courier Times