Increase Revenues without Raising Rates
It surprises me how many utilities ignore their meter stock. Water meters are the “cash registers” of the utility – they are how we bill our customers. Many utilities allow their meters to age without checking how much loss their may be. I have a client who regularly has issues with high unaccounted for water, which is a permit condition. Every time the issue arises, they ask me what to do. Each time I ask the Finance Department, which is responsible to for meter reading and billing, to check the number of meters with 90 days of zero readings. The past two times I had them do this the number of meters was about 10% of the system! Both times I have had them replace all 10% immediately. The result each time was to decrease the unaccounted for water amount in half (15 to 7%). In essence they received a 7% rate increase without raising rates. Yet, the Finance department NEVER runs the zero read report unless I ask them to.
This situation is all too common. Meters lose accuracy with time. Small meters lose accuracy slower than big meters, which may lose 50% of their accuracy (for low flows) within 2 years, but the small meters may not last the 15 to 20 years they are typically installed. The easy way to monitor this is to run a zero read report monthly, and to run a report to compare the water billed 12 months apart to see if the billing amount decreases significantly from year to year. Water utilities need regular meter maintenance to insure they are receiving the revenues for services delivered. But it is often too easy, or too politically difficult to spend the dollars to insure meters run accurately and to bill people appropriately. But we should ask if it is fair to bill others disproportionately to avoid fixing the meter problem?
Similarly utilities need to insure that everyone is being billed. Some cities do not charge themselves for water, which means they cannot track it adequately. Other potential users that are not metered or charged include churches, parks, and schools. There is a fairness issues associated with not billing everyone. Likewise, large losses that cannot be accounted for may be indicative of water theft. A water audit program can help identify potential water theft. Theft is an affront to all customers.
Utilities should also look at fees for services. Sometimes these have not been adjusted for years. Utilities should determine exactly what it costs to provide services like meter turn-ons, turn-offs and call outs. A couple utility clients of mine have contracted to perform services for other utilities as a mean to raise revenues without big rate increases.
Keep in mind though that rates need to increase because power, chemicals and capital needs are constantly increasing. Power, cable, telephone and other utilities increase to insure they recoup their costs. Water and sewer utilities should incorporate CPI-type increases in their rate structures to insure they can sustain ongoing operations and capital replacement programs. Insuring everyone is billed properly and the meter inventory is up-to-date insures that rate increases are limited to what is actually needed.