Louisville Water Company

Louisville, Kentucky, United States

As part of the Engineer of Record team with Hazen and Sawyer, Raftelis was engaged by the Louisville Water Company (LWC) to perform a comprehensive water cost-of-service evaluation, financial planning study, and rate design. During the first phase of work for this project, Raftelis developed a new cost-of-service model that allocates annual LWC costs to customer classes and types. During this process, Raftelis also made recommendations to LWC related to historical approaches used by staff in evaluating cost-of-service to promote continued consistency with industry practices and recommendations. The results of this study were presented to the LWC Board of Directors and the new cost-of-service model has been adopted by staff for ongoing use.

The second phase of this engagement involved the development of a new financial planning and rate design model that is managed and used by staff. Raftelis worked with staff in a series of workshops to develop a model that accounts for all known operating and capital costs and projects these costs over a long-term planning horizon. The new model was developed with interactive dashboards and reports to provide simplified ease-of-use and update by LWC staff. A dashboard-based rate design module was also included in the model that allowed Raftelis to work with LWC staff and executive leadership to consider and evaluate over 15 alternative rate structures. Raftelis helped select a preferred alternative rate structure which was presented to the Board of Directors in October 2018. The new rate structure accounts for current customer behavior characteristics and LWC objectives to enhance revenue stability while maintaining minimal customer impacts.

In 2020, Raftelis was engaged to review the existing system development fees (SDF) and perform an updated calculation to validate the existing charges or recommend new fees. The SDF were last updated in 2014 and much of the data used to develop the fees has since changed. Raftelis developed a model that explored a variety of SDF methodologies and presented these to LWC staff. The results were summarized in a report and will be incorporated in the 2022 budget request.

Strategic Planning

Louisville Water Company (Louisville Water) initiated a process to create an updated vision and a plan to drive progress toward the organization’s most important priorities. This effort built on a legacy of successful strategic planning, including Louisville Water’s 2013-2018 Strategic Business Plan. The goals for the strategic planning process were myriad – the plan had to be clear, measurable, and implementable over a five-to-seven-year time horizon. It had to be inclusive of prioritized goals and metrics that cascaded throughout the organization and achieved alignment of overarching strategic objectives, departmental plans, and employee performance goals. Finally, in a departure from previous planning efforts, which had mostly occurred at Louisville Water’s leadership level, the Company sought to engage employees and key external stakeholders during the process and launch and sustain a robust communication effort upon completion.

To assure success in each of these areas, Louisville Water partnered with Raftelis to design a process and facilitate its strategic plan. Ultimately, the organization followed a classic strategic planning approach, with several key milestones, including a project kickoff; stakeholder engagement; development of the foundational elements of the strategic plan, including vision, mission, values, and goal areas; development of the strategies and tactics necessary to support implementation efforts; and a communications roll-out of the finalized deliverable to employees, customers, and other stakeholders.

Louisville Water wanted to ensure that employees were engaged and inspired by the strategic plan. Raftelis developed an internal communications plan to accompany the roll out the Strategic Business Plan to employees that included a “first six months” timeline and task list to keep the plan at the forefront of employee communication.

The Louisville Water strategic plan represents collective input from its leadership, employees, and stakeholders, and includes cascading priorities, strategies, and tactics that will support organizational progress and future decision-making. Building on its long tradition of planning, implementing the 2019-2025 Strategic Business Plan will allow Louisville Water to achieve its desired future state, as articulated in its organizational vision: “Louisville Water will lead the industry with superior quality, service, innovation and value.”

View Strategic Plan One-Pager

 

Billing Services Analysis

Louisville Water Company (LWC or Louisville Water) and the Louisville and Jefferson County Metropolitan Sewer District (MSD) are partners in a One Water initiative aimed at identifying opportunities for shared services to promote more efficient service delivery. One area of shared services is billing and collection wherein LWC provides these services to MSD in accordance with an agreement that became effective in January 2013.

Given the timing of LWC technology investments and the provisions in the original service agreement, this is the optimal time to revisit the financial terms of the billing agreement with goals to include:

  • Developing a cost-based approach to the fees LWC charges for billing services
  • Recommend a transparent pricing framework for billing services that can be easily updated and monitored in future years
  • Conduct benchmarking of other municipal agencies to understand if these costs are appropriate for the level of services provided
  • Understanding what a market-based approach to pricing billing services may be and how that aligns with the cost-based approach
  • Perform a high-level operations review of metering, billing, and customer service processes used to confirm the benchmarking results and the adequacy of existing performance levels

Raftelis was engaged in June 2020 to work with LWC and MSD in exploring the cost of service in providing billing, metering, customer service, and collection services, also known as the Meter-to-Cash Cycle (M2C), summarized in Figure 1.1. Developing a cost-of-service model supported by benchmarking key metrics with peer utilities and performing a high-level operational assessment was used as a tool to align cost of service with existing performance and levels of service. These findings were also used to provide recommendations aimed at improving operations deficiencies and service levels which are beneficial to both LWC and MSD, the community, and their customers.