The City of Columbus (City), Department of Public Utilities (DPU), manages a massive regional infrastructure network serving over 1.1 million people and 275,000 customer accounts. But the City was facing a perfect storm of aging infrastructure and regulatory pressure.
The City was mandated by the EPA Consent Orders to invest $2.5 billion in sewer improvements to mitigate combined sewer overflows (CSOs). Simultaneously, they had to modernize a 100-year-old electric utility and address aging water pipes.
Funding these massive improvements was complicated by an outdated rate structure. The City needed to simplify an outdated, six-tier declining water rate structure and develop a transparent way to recover "wet weather" costs without causing "rate shock" for residents or compromising the competitiveness of its industrial base.
Transparency through modernization
As a strategic advisor to the City for over 20 years, Raftelis staff helped Columbus deploy a financial framework and cost-of-service (COS) methodologies to ensure long-term solvency:
- Hybrid revenue requirements: We utilized a hybrid approach, combining cash-needs for inside-city equity and utility-basis for outside-city jurisdictions, to accurately account for risk and opportunity costs.
- Rate structure modernization: We transitioned the water utility from a complex six-tier declining block structure to a simplified two-tier inclining block structure for residential customers, better aligning price signals with conservation goals and actual COS.
- Innovative surcharges: To address the $2.5B EPA mandate, we designed a separate wet weather charge based on impervious surface area. This fixed charge is displayed independently on bills, clearly communicating the cost of environmental compliance to the public.
- Asset Reproduction Cost New (RCN): For the 2025 study, we transitioned the capital allocation methodology to an annualized RCN basis rather than original cost. This ensures that rate-setting reflects today’s infrastructure replacement costs rather than historical values, providing greater long-term stability.
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A defensible, equitable foundation
The new financial plan provided the City with a data-backed roadmap to execute “Blueprint Columbus” without leaving anyone behind.
- EPA compliance funding: Successfully structured the recovery for the $2.5 billion Blueprint Columbus program.
- Rate justification: Validated outside-city multipliers, ensuring suburban users contribute their fair share of regional treatment and transmission costs.
- Industrial equity: Calculated extra-strength surcharges for BOD, TSS, and TKN to ensure high-load industrial users cover the higher operational costs they impose on treatment facilities.
- Customer affordability: Helped design a low-income discount program, ensuring that even with relatively high rate increase needs, the most vulnerable residents remain protected.
Through the implementation of simplified tier structures and the Clean River wet weather charge, Columbus has built a transparent and legally defensible financial foundation and is prepared for future infrastructure replacement. The City is now fully funded to meet its EPA obligations and prepared for the next generation of infrastructure investment.
