The purpose of this report is to help North Carolina water and sewer utilities meet their policy objectives and assure that they have the revenues they need to protect public health. The report provides up-to-date information on current rate-setting practices and trends that can inform and influence (but not dictate) local decisions. The analyses uniquely determine and compare water and sewer bills for multiple levels of consumption and relies on data from multiple sources, including 1) a rates and financial practices survey completed by 277 utilities, 2) a rates inventory and database that includes information from 333 utilities, 3) a financial information database compiled and maintained by the NC State Treasurer, and 4) data from the United States Census Bureau.
Results demonstrate that utilities’ rates and practices vary widely by community. Utility characteristics, such as size, water source and wastewater discharge, impact the prices utilities charge for service, yet other factors – such as demand conditions and the rates of nearby utilities – also affect rate-setting. Many utilities set rates to cover operating expenditures, yet most are reluctant to charge enough to adequately address their capital needs. Respondents stating that affordability concerns significantly impact their rate setting practices were more likely to have lower actual rates and lower rates as a percentage of median household income than utilities less concerned about affordability. Yet affordability appears to have a reduced role in determining other rate-setting practices, such as offering longer grace periods before penalties. With respect to conservation, utilities where managers claimed that conservation objectives significantly impacted rate-setting practices were more likely to have increasing block rate structures. However, these utilities did not send noticeably different price signals to residential customers than other utilities. Moreover, managers whose utilities were close to reaching capacity did not rate conservation as a significant factor more frequently than their counterparts