Water Online

March 2013

Water Online the Magazine gives Water & Wastewater Engineers and end-users a venue to find project solutions and source valuable product information. We aim to educate the engineering and operations community on important issues and trends.

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Decentralization Thinking About Creating A Regional Utility? Here Are Three Things To Consider Decentralization may be the wave of the future, but only if the shoe fits. By Jason Mumm and Marilynn Robinson I n September 2010, the U.S. Census Bureau confirmed ities to keeping the existing structure. These analyses include something many Americans already sensed ��� income financial needs for capital facilities, estimating asset lifecycle levels throughout the U.S. had and were continuing to costs, and operating expenses. Through various methods, an fall. Around the same time, the U.S. Conference of Mayors average total cost per customer for each scenario is created released a report projecting spending for local water and and compared to the others to determine the option that wastewater utilities would triple or quadruple to as much as allows everyone to win. $4.8 trillion over the next 20 years in order to address needed For example, a utility located in Colorado needed to infrastructure improvements. perform a cost-benefit analysis to test the feasibility of conThese economic indicators show that the affordability of solidating the existing district with three different neighboring services is and will likely remain one of the most challenging agencies. For this client, MWH measured the total cost of issues for water and wastewater service under various regionutility managers and local elected alization scenarios, including officials. Traditionally, increasing costs paid from typical user fees rates served as the approach and property taxes. Factoring all for addressing funding gaps; costs together, MWH was able to however, with strains on income compare each alternative on the levels in the U.S., utilities are basis of the average cost per unit seeking economies of scale to of service provided. create meaningful and sustainable Ultimately, the cost-benefit solutions that reduce the burdens analysis showed that consolidaon rates. tion provided economic benefits Utility regionalization is a in only one of the proposed scepotential solution. While often narios. Another scenario showed politically contentious, the conthat while the utility would enjoy solidation of services under a cost savings, the agency takregional structure can produce ing over the utility���s operations economic benefits, leading to would see rates for their own lower average costs per unit and residents increase rather than lower rates for service. However, With utility regionalization, results vary. decrease. The utility opted to each utility must consider various pursue the option that provided factors, including financial impacts, service level impacts, and the best financial and economic results for the utility and the governance changes, before embarking on a regionalization ratepayers. of services. Understanding The Service Level Impacts Studying The Economic And Financial Impacts At the center of any regionalization is the question of serThe first and most obvious question to ask when reviewvice delivery. Parties entering into a regionalization need ing potential regional opportunities is, ���Is this economically to understand the required service levels. Key questions and financially viable?��� This is a question not only asked in that require agreement are, ���What���s being provided before regards to the utilities��� finances, but also for ratepayers. the regionalization?��� and ���What will be provided after the Starting at the baseline evaluation, or current financial state, regionalization?��� In many situations, it is likely that one of the utilities need to prepare a value analysis for various available parties is providing service at a different level than the others. options, which can range from regionalizing one or more utilUnderstanding those differences going into the regionaliza- 28 wateronline.com ��� Water Online The Magazine

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