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“Apparently, conserving water won’t necessarily save you money!” Appearing on a local news website last autumn in northern California this headline highlights an interesting situation when water utility customers – after engaging in a successful conservation effort – received the surprising gift of an 8% water rate increase. An inside analysis of how utilities typically must manage costs provides insight into how successful conservation programs may result in an increase to customer’s water rates.

Such a significant increase after a successful conservation effort at first glance, doesn’t seem natural. Customers generally believe that cutting back on their water use should result in a reduced bill for water service. If user’s charges are calculated on a cost per gallon or cost per unit of service, this may be true – at least in the short term. Using less water usually does result in lower customer charges for water service.

Common thought then follows that should the water provider deliver fewer gallons of water to customers, the utility should enjoy lower costs for providing fewer units of service. This in the end should save the water utility money as well and all should be equitable, right?

This model falls apart though, when water providers begin to understand and manage their actual costs. Unfortunately for them, many provider costs can be classified as “fixed” or set costs. These costs do not change in relation to the number of gallons provided or number of units sold. In the case of water providers, these costs generally include maintenance, insurance, debt service as well as payroll and other costs that won’t be reduced if customers consume fewer gallons of water. In short, fixed costs occur at steady levels without relationship to customer use and are required by the utility to provide ongoing service to existing customers.

Utility revenue on the other hand, is a simple function of quantity times price per unit of service. When customers reduce usage, the result is lower revenue for the provider. So, while conservation benefits consumers with temporarily reduced charges, the reduction in revenue to the provider causes financial shortfalls that must be made up in some fashion. Because utilities have so much fixed cost, any reduction in the revenue stream means that the utility will have difficulty meeting its existing and ongoing expense obligations. Conservation then often reduces – sometimes significantly – the revenue needed by utilities to provide continuing service.

At this point – the point where income levels are insufficient to support expenses – the utility is naturally compelled to identify new sources of revenue. Most water utilities will then seek rate increases in an effort to cover their fixed costs. If fewer units of product or in this case, gallons of water are sold, the rate per unit or gallon is going to have to be higher to return the utility to its original revenue levels that covered ongoing expenses.

The point where utility expenses threaten to outpace revenues is usually marked by requests for a rate hike. Increases in rates then erase any gain the customer conservation efforts produced. After all, if fewer units are sold, the rate per unit (gallon) is going to have to be raised to a level that provides enough revenue to support the providers’ ongoing operations. This results in a basic conflict between provider revenue requirements and efforts to reduce customer bills.

The only viable way to avoid this conflict is for utilities and customers both to fully understand the tradeoffs between conservation and utility revenue prior to initiating any kind of conservation effort. Establishing a rate structure in advance of conservation programs can help offset some of the expected revenue reductions and provide some degree of stability to customer rates. Skilled water rate consultants can also help design these rate and fee structures in advance. And that is a better solution than facing down upset customers at the next public meeting.

The Water Utility Consultants at StepWise help water and wastewater utilities nationwide improve business processes, improve cash flow management as well as manage consumer rates in a sometimes challenging business environment. Contact the Water Utility and Wastewater Consulting Experts at StepWise today!

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visit new projects

By any chance do you have possession of a landscaping corporation? If you do your possibly like most landscaping firm owners when it comes to advertising and marketing your business…lost. O . k, so lost probably doesn’t describe you however it is usually challenging to think creatively and out of the box when everything you’ve ever known is what the other businesses in the area are usually carrying out. Now Let me present you with Seven advertising concepts that you just most likely have never thought of when it comes to promoting your small business.

1. Write a notice to local Real estate agents letting them discover what you are as well as what your organization does. Allow them to know the need for acquiring a tidy, presentable yard when they will be marketing a building and ways in which crucial curb overall appeal is and the way your small business may help by using these types of things.

2. Email a letter to building supervisors. Property managers are always trying to find good businesses to work with on the subject of preserving the real estate under their administration.

3. Employ the backside of your respective company card. Is the backside side of your respective card blank? If so you’re losing a large opportunity! Use this space to provide a first time reduction or mention that you simply give or maybe offer an inducement for referrals. You should not allow this space get wasted.

4. Post your customers a Thanksgiving card. Just what a more rewarding season to inform your people how thankful that you are for their business than on Thanksgiving. Always reap the benefits of delivering some thing and include an insert with special “Thanksgiving Offer”.

5. Spring Bundles: Take benefit from being slow through the winter time and create a deal of all your most in-demand expert services. Promote your offers for much less if they prepay them early in the year. This allows you to obtain a increase of income early in the year when with the ability to supply the services in the course in the next growing period.

6. Provide a no cost report. The great issue in regards to the survey will be that enables you to get prospective customer’s info and market to them further sometime soon.

7. Develop a recommendation notice to present to prospects. I think that if you have already been running a business for any amount of time that you have ideally collected virtually any letters or messages that your customers may have sent you that have good things to say. Accumulate all of your superior testimonials and write them all on 1 or 2 sheets and ensure that you put your customers first.

Whether or not your aim is beauty, privacy, or security, discovering an excellent landscaping provider is often a step within the perfect direction. To look for a good California landscaping company, try Woodside Landscaping

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