Tip:
Highlight text to annotate it
X
bjbj Scripts for the Online Tutorial Videos for the North Carolina Water and Wastewater
Rates Dashboard Video 5: The Rates Comparison tab Understanding the Affordability and Cost
Recovery Gauges In the last video, I ve explained the Bill Comparison and the Conservation Signal
gauges. Let s look at the Affordability gauge next. Again, we are currently looking at how
much the Example Utility is charging for water and wastewater combined for 5,000 gallons/month.
The monthly bill comes out to be $62.25. Is that affordable ? It s difficult to give a
straight answer to this. There is no universally accepted definition of affordability, and
this gauge should not be used as the single indicator of affordability of rates. However,
the gauge does show the most commonly used indicator of affordability: the percent MHI
. It is calculating what a year s worth of $62.25 monthly bills is compared to the median
household income of the community being served by this utility. If you take every household
in your service community and line them up based on their annual household income, and
then find the middle household, their income equates to the median household income .
Basically it means that half of the community s households make less than (or more than)
this amount. The US Census Bureau collects this information. We ve already identified
and linked your community s median household income, which is inflated to 2008 dollars
in this dashboard. In the Example Utility, which is completely made up, we said that
the MHI is a little over $38,000. So, 12 months of $62.25 monthly bills amounts to 1.96% of
the MHI. This means that half of the households would spend up to (or more than) 1.96% of
their annual income on water and wastewater bills if they used 5,000 gallons/month for
12 months. So, is this affordable? Any answer to that question is subjective. We ve color
coded the gauge based on a combination of factors: what funding agencies evaluate, what
EPA and other utilities generally use, etc. Here, we show that up to 1% MHI for water
and 1% MHI for wastewater (2% for combined) is relatively affordable or at least it is
more affordable than 1.5% MHI for water or wastewater (3% combined). But then again,
this is subjective, and many households have income levels much lower than the MHI, so
the affordability scenario looks very different to them. Utilities need to use their best
judgment in assessing the affordability of their rates and not rely solely on a single
indicator. Nonetheless, since funding agencies use the % MHI number in their considerations,
we provide this number for you on the dashboard. The final gauge is one of the most important!
It measures the cost recovery of the utility in the previous year. It equals operating
revenues (how much the utility collected from all of their customers) divided by operating
expenses, which in North Carolina include depreciation, for one fiscal year. A ratio
of 1.0 means that the utility brought in just enough revenue to cover its expenses in that
year. Anything below 1.0 means that the utility did not recover enough revenue to pay for
operating expenses including depreciation (a measure of capital need). The ratio should
really be higher than 1.0 to accommodate future capital needs, and bond agencies consider
this operating ratio when setting their ratings for a utility. As a result, we see a ratio
of 1.2 or higher as a possible sign of financial health. For the selected utility, the operating
ratio is 1.10, which is good but should probably improve in order to plan for future capital
cost increases. The good news is that the utility has more revenues than expenses. Government
owned utilities are run as non-profits, so this is NOT a measure of profit . The utility
uses this extra cash to pay for needed infrastructure replacements and rehabilitation in order to
keep the system running, and anything extra means that the utility is less likely to raise
rates in the near future. In the next video, we ll look at all four gauges together to
get the big picture. I ll also explain the slider on the bottom. PAGE \* MERGEFORMAT
}r}f}f}^}^V}N gd v gdP% gd v JFIF 1Exif Adobe Photoshop CS2 Windows 2010:04:26 13:37:47
JFIF Adobe_CM Adobe b34r 7GWgw AQaq" dEU6te '7GWgw '$Ue k=/c} vU-s 84ae9 mqh, 7T94 IN~G
4zTo `q0] UawT&> ?8[` m'BvY U_oP h{_c[ x9UN .{?? hcl~ }Em }$AU qE-k k\`mk\ Dn.- V^7O
z4rzte XO>mw las, YKif 3;uvW v.MNe .sZk +..- qmpK_ ?9+W i.k\ NEL V e}?* Z({Y qeN2A Qfgu
C*ca {VvFE 6Xw4 7k-v |ZQF^CD6 "D:Wz |6Zb^m Z?GU kl8tX {[ch bcbXq k-f5M ?GMv{ ?1Sf7 Cmm];
-/mS Y.s\ 4[=& Z@0H BY1O 5f}^ -lELo V3kux +}987 v