Asheville, City of
Rate Structure Evaluation and Financial Planning
The City of Asheville Water Resources Department (Department) recently engaged RFC to evaluate the City’s water rate structure to determine if modifications should be made to the rate structure to more equitably recover costs from its various customer classes. In addition to evaluating the rate structure, RFC is also examining the level of water rates to determine if any adjustments should be made to the current rates. RFC is preparing a ten-year financial forecast for the water utility that projects water rates, expenses and revenues, and debt service coverage ratios in order to be in compliance with outstanding revenue bonds. RFC is currently working with the City Council to present preliminary findings and to seek direction from the Council as to their objectives for the City’s water rates and capital investment needs. As a deliverable of the study, RFC is developing a financial planning model for the Department to use for future planning purposes. RFC will train Department staff to utilize the model for future rate updates.
In response to the recommendations of the NC General Assembly’s Metropolitan Sewerage/Water System Committee (Committee) to “…consolidate the Public Utility Water System (City of Asheville) with the Metropolitan Sewerage District of Buncombe County (MSD),” the City of Asheville engaged RFC to assist the City by conducting a study of governance and cooperative models for providing water and wastewater services. To conduct this study, RFC explored several research avenues, including a survey of best practices and case study analysis across the State of North Carolina. RFC also utilized the knowledge of its senior utility consultants and industry professionals. This study focused on regional cooperation models, drivers for consolidation, governance models, and examples of these topics in practice in North Carolina.
Regionalization in North Carolina has primarily been motivated by financial or capacity drivers, but in some cases it has been motivated by regulatory or environmental issues. The variability of regionalization circumstances have led to the adoption of a number of different utility regional models in North Carolina, which vary in their level of complexity and costs associated with implementation. The cooperative models have included interconnections, shared service, wholesale purchase, capacity purchase, joint ownership, and full consolidation. While financial, capacity, and regulatory issues typically drive utility systems to consolidate, it is often the debate around ownership of assets, legal responsibilities, accountability, control, and protecting individual interests that determine if consolidations take place and whether they are ultimately successful. This study sought to determine the preferred governance structure of the proposed regionalized utility.
RFC engaged the stakeholders of the impacted units of government to understand their local needs and preferences. Further, assisted by the City’s legal counsel, RFC researched existing State of North Carolina enabling legislation to identify the legal forms and representation requirements of all accepted legal entities. This research was supplemented by conducting a survey of 14 existing regional utility models being used throughout the state.
The study found that most utilities participate in some form of regional collaboration, with the most common drivers being financial- and capacity-related. While this represented the majority of utilities in North Carolina, a variety of different cooperative models are present throughout the State. A comprehensive utility governance report was developed (shown below) and shared with the stakeholders during a number of public meetings.
The results of the study are currently being used for ongoing discussions between the stakeholders to arrive at concensus.