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Rate Study Questions Answered
Customer questions about the rate study process:


I think my rates are TOO HIGH.
If this rate study is not about raising more revenue – meaning that lowering one particular rate will require raising rates somewhere else to get the same amount of revenue – then what is the point of a rate study?

The rate study is focused on developing a rate structure that best fits with the Charlotte-Mecklenburg community. The rate study will incorporate feedback from the public on what criteria are most important to the community in developing a rate structure and rate structure alternatives will be developed that meet and balance these criteria.


What is the rate study process and who makes the decision selecting a rate structure?

As part of the rate study, there are two phases of public input to obtain feedback regarding the rate structure. The first phase was completed in September and was aimed at identifying the most important criteria in developing a rate structure. The second phase will be completed in November and consists of obtaining input from the public regarding potential rate structure alternatives. Once this second phase is completed, rate structure alternatives will be developed and presented to the Restructuring Government Committee and to City Council in February. City council will consider the alternatives and make the final decision on the composition of the new rate structure. 


Can you have ordinary citizens on these advisory groups? 
Why does it have to be an employee of corporate person from various businesses? 
Why can’t it be an average joe from any house in Mecklenburg?

The stakeholder advisory group is comprised of a diverse group of customers, including "average joe" single family residential customers. 


I don’t understand the “fixed” service charge at all. Please explain?
Why do you charge a fixed monthly fee? What is the monthly service charge for?

A fixed service charge is a charge that does not vary by the amount of water used in a given month. Rather, the fixed charge is the same amount each month. The existing rate structure includes a $2.40 fixed charge per month for water and $2.40 fixed charge per month for sewer to recover the cost of administering and processing customer bills. Other operating expenses (like water and wastewater treatment) and capital expenses (construction) are currently paid through usage or tiered water rates.


How does Utilities make a profit? 
I personally think that they are making a profit. 
They should charge enough to cover expenses and no more.

Utilities does not make a profit.

Water and sewer rates are established to recover the cost of capital investments made to the system and the cost of operating and maintaining the system. Any revenue that is left over after paying for the cost of the system may be:

• applied directly toward cash purchase for capital improvement (‘paygo’) construction projects, and/or
• applied to mitigate future rate increases as operating costs and debt service costs increase, and/or
• added to capital reserves to maintain the utility’s financial stability, meet bond covenants and maintain our community’s superior AAA credit rating (which earns the lowest possible borrowing interest rates and saves customers millions per year).


Why can’t Charlotte-Mecklenburg Utilities sell bonds to pay for the cost of constructing new facilities?

Utilities does sell revenue bonds to pay for a large portion of the cost of upgrading facilities and adding or replacing pipe.  Roughly $0.60 of every $1.00 goes to pay bonds / loans for current and past improvement projects.


Why can’t I get billed for actual gallons used instead of an estimated figure?

Except for the fixed service charge, customers are billed based on the actual amount of water used. Utilities bills customers in units of hundred cubic feet, and one hundred cubic feet of water (Ccf) corresponds to approximately 748 gallons of water. 


Who are you trying to be affordable for? 
Commercial and industrial customers or residential customers?

Under the existing rate structure, the water rate for usage for the first 1 to 4 hundred cubic feet is charged at a discounted rate. This amount of water usage typically corresponds to essential residential water usage for activities such as drinking, cooking, and cleaning. All residential customers start at this first tier. 


What is the justification for basing sewer rates on water usage?

Since utility customers do not have a separate sewer meter, customers are charged for sewer service based on the amount of water that is used. Under the existing sewer rate structure, single-family residential water usage that exceeds 24 hundred cubic feet in a month is not charged for sewer because water used over this amount is typically used for outdoor purposes, such as watering lawns, washing cars, etc., and does not go into the sewer system.

Sewer is not charged on water usage through separate irrigation meters.


Are the sewer usage caps in place to acknowledge less probability of sewage impact at higher usage rates because of irrigation or an on-site leak?

The sewer cap is in place to acknowledge that some water that is used, specifically water that is used for outdoor purposes, is not discharged to the sewer system for treatment. Water usage above the cap is not charged a sewer rate.


How was the 11 ccf determined?
The Master Meter sewage cap should also be at least set 8 ccf over the 95% usage tier of those in this type of housing. 
Will you provide documentation?

The rate study team is considering adjustments to the sewer cap for both residential and multi-family residential accounts.  Additional information will be forthcoming.


Commercial rate comparisons (with other regional utilities) do not seem to be posted similar to Residential rate comparisons (same with other categories). 
Are these comparisons available? 
If not, why not?  If so, why are they not presented?

It’s difficult to make comparable comparisons for commercial customers because water usage and meter size varies widely within the commercial class. However, it would be possible to provide some example comparisons, such as comparing the bill for a commercial customer with a 1-inch meter that uses 50 ccf. We will consider doing this in future rate presentations. 


Is residential water usage is subsidizing commercial/industrial or vice-versa? 
A breakdown of % of total revenue received from each rate category versus % ccf consumed by the same category is critical to better understand equity concerns (real or imagined). 

This type of analysis would provide little insight into understanding equity between classes. The cost of providing water service to each class is strongly influenced by seasonal and diurnal water peaking associated with each class. It costs much more per unit of water for customer classes that have high peaking factors than it does for customers that are steady water users because the capacity that is used during the periods of high peaking needs to be recovered from the total volume of usage within the class. Part of the rate study is to examine the cost of providing service to each customer class in order to maintain inter-class equity, so the equity concern that is being raised by this question is being addressed in the rate study.