AWE Resource Library

Water Rates and Rate Structures

FSW Logo-SmAWE has launched Financing Sustainable Water, an initiative to provide helpful tools and data to water managers, elected officials, and consumers on rate structures that balance revenue management, resource efficiency and fiscal sustainability. The Financing Sustainable Water website also provides case studies on successful utility ratemaking and financial planning, and a Resource Search to help managers find relevant research, reports and tools. Below is an overview of new tools that are now available.

Visit www.FinancingSustainableWater.org to access tools, research and more information on water rates and financial planning.

FSW CoverBuilding Better Rates in an Uncertain World: A Handbook for Balancing Revenue Management, Resource Efficiency and Fiscal Sustainability 

This new Handbook provides the latest thinking, guidance and real world examples on the following topics:

  • Ratemaking Principles and Concepts
  • Steps for Building a Better (Efficiency-Oriented) Rate Structure
  • Implementing an Efficiency-Oriented Rate Structure
  • Financial Policies and Planning for Improved Fiscal Health
  • Public Engagement and Communications

AWE Sales Forecasting and Rate Model 

A new analytical tool that can explicitly model the effects of rate structures (examples from model below).  Typical water rate models assume that future sales are known with certainty, and do not respond to price, weather, the economy, or supply shortages—that is to say, not the world we live in. The AWE Sales Forecasting and Rate Model addresses this deficiency and enables analysis of the following:

  • Customer Consumption Variability—weather, drought/shortage, or external shock
  • Demand Response—Predicting future block sales (volume and revenue) with empirical price elasticities
  • Drought Pricing—Contingency planning for revenue neutrality
  • Probability Management—Risk theoretic simulation of revenue risks
  • Fiscal Sustainability—Sales forecasting over a 5 Year Time Horizon

The Model has two distinct modules: 

     The Rate Design Module can answer the following questions:

  • What effect would increasing the rate in our top tier by 15% have on water demand? 
  • Will shifting to seasonal rates cause overall water use to increase or decrease?
  • What block rate design could allow us to preserve our current level of revenue while reducing demand?
  • How should we adjust rates to support our water demand management objectives during water shortages?
  • What proportion of customer bills will increase under our proposed rates when compared to current rates? 

     The Revenue Simulation Module can answer the following questions:

  • What is the likelihood we will meet one-year, three-year, five-year revenue targets?
  • What is the chance our revenues will turn out more than 15% below our current projections. 
  • What level of confidence can we have that our sales will exceed our minimum planning estimates?

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Definition of Terms

Looking for a quick definition of a water or conservation related term or concept?  The AWE Glossary has an extensive list of the most commonly used terms in the biz.

AWE Glossary of Common Water Related Terms, Abbreviations, and Definitions 

Help Us Improve the AWE Resource Library

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