Utility Rate Setting for Cost Recovery and Conservation in NC

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In the summer of 2008, the North Carolina General Assembly passed House Bill 2499, commonly known as the 2008 Drought Bill, into Session Law (SL) 2008-143. Among other requirements, the law requires local governments and large community water systems to have full-cost pricing in order to be eligible for state funds for water infrastructure. In addition to covering the costs of operations, maintenance, repair, and debt service, the legislation further recommends that the water rate structure support water conservation efforts. In support of this legislation, the State Water Infrastructure Commission (SWIC) engaged the Environmental Finance Center at the UNC School of Government (EFC) to study the relationship between water rates and water use, as well as to provide recommendations on how state funders can evaluate utilities' water rates and pricing in light of the legislation. This research was conducted between March 2009 and the end of June 2009. As a result of this research, in November 2010, SWIC adopted a guidance document that lists voluntary rate structure and billing options that NC utilities can choose to implement to support water conservation in the long-term.