Rethinking Water Rates

Less revenue from water sales due to drought restrictions and longer term customer behavioral modification has utility operators in the Southwest rethinking the basic base rate of their financial models.  From the Environmental Finance Blog: 

"Base charges are critical for water utilities’ finances given that the majority of utility expenses are fixed in the short term and require a stable revenue source to pay for them despite decreasing demands. The most common practice is for utilities to set a constant base charge for each customer class or vary the base charge by meter size. Yet, this assumes that every residential customer with a 5/8″ meter places the same fixed costs on the water system. A few utilities have determined that this was not the case and have structured base charges more creatively, resulting in varying base charges among customers of the same customer class. This post describes some of the less common structures of base charges."