The City of Asheville Water Resources Department (Department) engaged Raftelis 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, Raftelis also examined the level of water rates to determine if any adjustments should be made to the current rates. Raftelis prepared a 10-year financial forecast for the water utility that projected water rates, expenses and revenues, and debt service coverage ratios in order to be in compliance with outstanding revenue bonds. As a deliverable of the study, Raftelis developed a financial planning model for the Department to use for future planning purposes. The Department later engaged Raftelis to rebuild the financial planning model to cover a longer financial forecast period, and to examine the existing level of water rates to determine if any adjustments should be made.
In 2017, Raftelis was engaged to evaluate the Department’s system development fees. The fees were calculated based on current industry standards as set forth in the American Water Works Association’s Manual M1. These fees are currently being modified to reflect recent changes to state legislation. North Carolina utilities are now required to calculate system development fees based on the new North Carolina general statute 162A Article 8 “System Development Fees”. Raftelis is currently working with the Department to modify these fees.
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 (City) engaged Raftelis to assist the City by conducting a study of governance and cooperative models for providing water and wastewater services. To conduct this study, Raftelis explored several research avenues, including a survey of best practices and case study analysis across the State of North Carolina, and utilized the knowledge of our 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.
Raftelis engaged the stakeholders of the impacted units of government to understand their local needs and preferences. Further, assisted by the City’s legal counsel, Raftelis 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 and shared with the stakeholders during a number of public meetings.