How large of a water rate increase will your customers swallow?

What would your customers do if you told them you needed to raise your water rates by 30%? Or 40%? Or 121%? A recent summary of water rate increases by the Public Service Commission of Wisconsin showed the median increase for 2013 so far has been 30%, while the average is 40% with the largest being 121%! These statistics do not consider that this is only for the 49 utility rate increases approved so far and therefore there are around 500 utilities that did not raise rates, nor does it factor in how long it has been since their last increase. It does point out that as water industry professionals; you need to think about what will happen when you do implement our next increase. A few thoughts to consider:

  • Since nobody likes rate increases, is it prudent to hold off raising rates for as long as you possibly can and then see major increases? Our opinion is customers generally accept more frequent smaller increases rather than less frequent larger increases.
  • Utility communications should focus on the dollar increase rather than the percent. While utilities always attempt to talk about increases this way, many customers and newspapers focus on percent.
  • Compare your average residential customer bills historically. Through conservation, the average residential customer is now using less water than in the past. If you apply the increased unit rates to the reduced volume, you get a truer picture of what your average customer bill change has been.
  • Point out the relative low cost of water – in reality many utilities charge less than $1 per day for the average residence. That pales in perspective to bottled water and other utility costs such as electricity, wastewater, telephone, internet, cable TV, etc.
  • Plant the seeds early. Keep your governing board and customers aware of your upcoming financial needs and the resulting rate increases. Nobody likes to be surprised  with a rate increase, especially of a major magnitude.

We welcome the opportunity to talk with you and help develop strategies to foster the balance between maintaining your financial integrity with customer resistance to rate increases. Please contact your Baker Tilly representative for assistance.