2013 Rate Study Report

WSSC established the Bi-County Infrastructure Working Group in 2010 to identify options for lowering the trajectory of rate increases by obtaining access to alternative and/or less costly sources of revenue or methods of funding for operational and capital requirements in the context of the growing need to rehabilitate, upgrade and replace water and wastewater infrastructure and related facilities. The Working Group was comprised of representatives from the executive and legislative branches of the two counties, one WSSC Commissioner from each county, and WSSC staff. 

The Working Group engaged Raftelis Financial Consultants to assist in this process. As part of their scope of work, Raftelis interviewed internal utility stakeholders (WSSC Staff and Commissioners) as well as external stakeholders (Prince George’s and Montgomery County elected officials) to incorporate their opinions on the direction of the Working Group’s efforts. 

One of the recommendations from the consultants included revenue generation structures and practices.  Raftelis had the Working Group prioritize a set of pricing objectives to establish a more cohesive direction for the rate structure and financial planning. The highest ranked priority objectives include, in order of importance:

  • Financial sufficiency
  • Defensibility
  • Revenue stability
  • Rate stability
  • Affordability to disadvantaged customers
  • Minimization of customer impacts
  • Cost of service based allocations

The Working Group narrowed the viable options for funding system reconstruction costs, including segregating system reconstruction costs from the overall utility revenue requirements and implementing a separate fee or charge to recover the level of revenue necessary to fund system reconstruction. Favored options include a fixed fee assessed to every customer or a uniform volumetric charge assessed equally to every unit of a customer’s demand and shown as a separate line item on utility bills.

In order to select a viable path forward, the Commission issued a request for proposal (RFP) for a comprehensive cost of service analysis and rate study to fully examine these options in the broader context of total operation and capital costs, rates and rate structure. The study will allow the Commission to determine advantages and disadvantages based on customer impacts and responses.

The RFP was published in January 2013.  Four consulting firms replied and Municipal & Financial Services Group (MFSG) of Annapolis, Maryland was unanimously selected as the most qualified.  MFSG began their work in April 2013, completing the study in December 2013.

Read the Executive Summary.

Read the Technical Report.

MFSG recommended, and WSSC staff concurred, with the following rate design concepts:

  • A new separate, fixed reconstruction fee by meter size to fund a portion of the annual debt service expense for large and small diameter water and sewer pipe programs; and,
  • Recalibration of the existing Account Maintenance Fee (AMF) to recover 100% of the costs for which the fee is intended; and,
  • Keeping the Commission’s current sixteen step, inclining block rate structure.

MFSG presented their findings to the Bi-County Infrastructure Funding Working Group in January 2014, followed by a briefing to WSSC’s Commissioners in February 2014 (view the presentation).

The Commissioners unanimously approved Resolution 2014-2045 at their March 2014 meeting endorsing the recommended rate design concepts (read the resolution).

As a part of their scope of services, MFSG prepared several customer impact scenarios for residential and nonresidential customers under the status quo versus the recommended rate design concepts.

View the customer impact scenarios.