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Birmingham Water Works Board

Birmingham, Alabama, United States

Birmingham Water Works Board (Board) provides retail water service to over 200,000 accounts. Raftelis has assisted the Board on a variety of financial and rate engagements since the late 1990’s and has annually assisted with rates since 2002.   

Raftelis has conducted two cost of service studies for the Board and is beginning a third in early 2018.  The cost of service studies follow industry standards and are supported by an Excel model.  The studies have included the review and development of other ancillary fees.   

Raftelis also developed a rate stabilization and equalization (RSE) process to enable compliance with a legal settlement with the City of Birmingham. Under that agreement, the Board agreed to come under regulation by the Alabama Public Service Commission (PSC). Other utilities regulated by the Alabama PSC have developed RSE processes to simplify rate filing. While the existing RSEs are based on rate of return metrics, the Board’s RSE had to be developed to ensure debt service coverage requirements are satisfied. The RSE process defines when a rate increase or decrease is warranted. Once the Alabama PSC accepts the RSE, the Board’s rates will increase without the Board being forced to enact the increase and, therefore, enabling rate issues to be depoliticized.  

Since 2002, Raftelis has assisted the Board with seven bond issues (five new money and two refunding) of $1.02 billion in aggregate. Raftelis has prepared financial feasibility studies for inclusion in the official statements for each bond issue. Raftelis personnel also assisted in preparing a presentation for rating agencies and participated in meetings with the rating agencies. 

Raftelis also prepared a financial feasibility study for the Board to determine the impact of selling two small systems. In the 1980s, the Board had purchased two small wastewater systems to protect its water sources. Combined, these systems had less than 5,000 customer accounts. In an effort to focus solely on water issues, the Board wanted to sell these systems. However, the systems provided a valuable revenue stream, so the Board needed to understand the impacts of the loss of this revenue, particularly related to debt service coverage and potential customer bill impacts. Raftelis developed initial values for the systems. These values were used as a starting point for the successful negotiation of the sale of the systems to two different utilities. Raftelis also modeled the lost revenue and the impact on the Board’s water rates. 

In addition, Raftelis examined potential affordability programs for the Board. As part of this analysis, Raftelis overlaid the Board’s service area with census income and water consumption data to better understand where affordability is the biggest issue. 

Most recently, Raftelis assisted the Board and Jefferson County, which provides sewer service to 60% of the Board’s customers and for whom the Board provides billing services, with a billing cost allocation study.