Water Utility Ratemaking 101: Do you know how your water utility rates are set?

U.S. Water Services Corporation - Water Utility Ratemaking 101

Base Water Utility Rate Charges

The lines that bring water to your home are continually maintained to ensure they function properly at all times. The same is true concerning the wastewater lines that carry sewage from your home. All utilities face fixed costs to maintain water and wastewater treatment plants, as well as these lines, to ensure service is available whenever you turn on a faucet. While you may not require service every day of the year, service must be available at your demand. Most utilities, whether water, electric, or natural gas, operate the same way. A bill will be issued to the customer for a base water utility rate charge that represents the costs necessary to maintain the system and meet its obligation to provide service whenever the customer requires it.
Water Utility Rate Making

Preferred Water Utility Rate Structure

Currently, there is one predominant type of water utility rate structure the Public Service Commission approves for water and wastewater utilities. Pursuant to the Rule 25-30.437(6), Florida Administrative Code, utilities require the use of base facility and usage charge rate structures unless an alternative rate structure is adequately supported. The base facility charge incorporates fixed expenses of the utility and is a flat monthly charge. This charge is applicable as long as a person is a customer of the utility, regardless of usage. The usage charge incorporates variable expenses and is on your bill as per 1,000 gallons or 100 cubic feet. The variable cost is in addition to base facility charge on your utility bill.

Why is this the preferred water utility rate structure?

Most prefer this structure for a number of reasons. The base facility charge is based upon the concept of readiness to serve all customers connected to the system. This type of structure allows each customer to pay his/her fair share of the costs, regardless of whether the customer receives residential, commercial, or other types of service. Also, customers that have high consumption levels have higher bills than those with low consumption levels. By using the base facility charge rate structure, a utility recovers its fixed costs through the base charge. The base facility charge is applicable to all customers each month. The utility also recovers its variable costs through the gallonage charge. The gallonage charge is based on each customer’s actual consumption during the month.

Goals and Objectives

These water rates make sure all prices stay fair and reasonable for residents. As mentioned above, the base utility charge is there to recover the cost of services needed for operations and maintenance. The most important part about this utility rate structure is that the rates do not discriminate against one class or group.

U.S. Water Services Corporation recognizes that there is a lot of uncertainty in the world today with the Coronavirus (COVID-19) spreading and we are here to help. There is no higher priority than to protect the health and safety of our clients! We would like to take the time to provide some important information about COVID-19 as it relates to drinking water and wastewater to provide clarity and put your mind at ease. We want to assure you that we are still open for business and all operations are being maintained! Learn More
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