A San Carlos, CA wastewater and sewer service provider recently wound up on the losing end of a legal case brought by a San Francisco area group that claimed the utility allowed too many 'overflows' of raw, untreated sewage that found its way into San Francisco Bay. Following settlement of the suit, the utility is now preparing its customers for another rate increase as the settlement requires increased spending for maintenance programs and staff. In the end, the cost of additional maintenance personnel will be passed through to customers.
Wastewater Utility Consultants provide extensive help to utilities in avoiding treatment system failures. However, this might be one instance where the utility cut its maintenance costs only to get hit with a lawsuit for failing to properly maintain its systems. And the costs of this legal action will only increase the operating costs that the utility was originally trying to reduce.
Costs to prevent additional spillage or "overflow" events appear to mean another cost increase to the San Carlos consumers. Additional salaries and expenses necessary to meet the settlement requirements could result in a 7% increase in customer service rates.
What causes utility and service providers to get into situations where consumer demand for low rates and requirements for expanded maintenance conflict? Among the possible reasons is the universal demand on the part of customers for the lowest possible fee structure. This pressure often drives providers to cut ongoing maintenance costs - sometimes below what would normally be considered adequate. Insufficient maintenance though, especially for systems utilizing aging plant and facilities, can only invite the kind of problem experienced in San Carlos.
Aging infrastructure requires greater maintenance. Some utilities are operating with water and wastewater plant and delivery systems that exceed 100 years in age. So as maintenance budgets are reduced to keep rates low, the chances for problems can increase significantly. Settlement costs to recover from these problems simply add to the operating expenses and cost structure - which inevitably are passed on to customers.
What are utility and service providers to do? Educating customers about the input and cost items that drive their rates up is one method. However the major tool water and wastewater service providers utilize is assembling a viable financial plan. Back in San Carlos, customers have seen their service rates nearly double since 2005. Meeting every challenge with a rate increase though is a difficult and ineffective way to manage a utility organization. A long term financial plan can both explain to customers why their rates are structured in a certain fashion as well as provide a reasonably predictable cost model for future years.
Water and sewer rate increases may not be inevitable, but for many utilities, they are difficult to avoid when an unexpected disaster strikes or a court case is lost. Financial contingency planning is therefore imperative if the service provider is to avoid an annual parade of rate increase requests.
Wastewater Utility Consultants provide extensive help to utilities in avoiding treatment system failures. However, this might be one instance where the utility cut its maintenance costs only to get hit with a lawsuit for failing to properly maintain its systems. And the costs of this legal action will only increase the operating costs that the utility was originally trying to reduce.
Costs to prevent additional spillage or "overflow" events appear to mean another cost increase to the San Carlos consumers. Additional salaries and expenses necessary to meet the settlement requirements could result in a 7% increase in customer service rates.
What causes utility and service providers to get into situations where consumer demand for low rates and requirements for expanded maintenance conflict? Among the possible reasons is the universal demand on the part of customers for the lowest possible fee structure. This pressure often drives providers to cut ongoing maintenance costs - sometimes below what would normally be considered adequate. Insufficient maintenance though, especially for systems utilizing aging plant and facilities, can only invite the kind of problem experienced in San Carlos.
Aging infrastructure requires greater maintenance. Some utilities are operating with water and wastewater plant and delivery systems that exceed 100 years in age. So as maintenance budgets are reduced to keep rates low, the chances for problems can increase significantly. Settlement costs to recover from these problems simply add to the operating expenses and cost structure - which inevitably are passed on to customers.
What are utility and service providers to do? Educating customers about the input and cost items that drive their rates up is one method. However the major tool water and wastewater service providers utilize is assembling a viable financial plan. Back in San Carlos, customers have seen their service rates nearly double since 2005. Meeting every challenge with a rate increase though is a difficult and ineffective way to manage a utility organization. A long term financial plan can both explain to customers why their rates are structured in a certain fashion as well as provide a reasonably predictable cost model for future years.
Water and sewer rate increases may not be inevitable, but for many utilities, they are difficult to avoid when an unexpected disaster strikes or a court case is lost. Financial contingency planning is therefore imperative if the service provider is to avoid an annual parade of rate increase requests.
About the Author:
Author Jason Mumm operates StepWise Advisors providing Water and Wastewater Consulting services to service provider organizations nationwide. Jason brings many years of experience and unique perspective to each client. This and other unique content '' articles are available with free reprint rights.
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