ROCKY MOUNTAIN WATER MAY 2020 | 27
OPERATIONS
services provider to customers within Sterling Ranch.
As a result of this unique relationship, collaboration is key in
development of equitable rates and charges. From a system
development charge (SDC) perspective, the developer wants
the utility (DWSD) to recover its actual costs, however, attracting
new home buyers is also a priority. Meeting these two conflicting
objectives is paramount to ensuring the financial viability of
both entities. As occurs in all relationships, a compromise is
usually the best method for achieving an appropriate working
relationship. A utility will conduct a study to fully understand the
cost to serve its customers and then often implement a policy
based SDC that is a percentage of the maximum supportable
fee. The utility will then index that fee (typically the Consumer
Price Index or other inflation index) on an annual basis, in lieu
of conducting a full-blown study each year, to move toward the
maximum supportable fee. This allows the developer to be more
competitive in pricing homes, while also allowing the utility the
opportunity to move toward full cost recovery.
Similarly, important for newly developing communities are
growth assumptions. Accurately forecasting customer growth
(via homes sales) is paramount because it can result in large
swings to revenue requirements and correspondingly revenue
increases to rate payers. It’s important to note that well
established and mature communities are impacted to a lesser
extent by inaccurate growth assumptions and forecasts. Typically,
a more mature community has a larger and more established
customer base which can soften financial implications as a
result of these inaccuracies.
User rates also pose a challenge for utilities and developing
communities. Initially, few customers are connected to and
using the system, which presents a challenge when developing
equitable rates and charges. At Sterling Ranch, a combination
of sources was used to adequately capture actual and designed/
expected usage. DWSD worked with the developer and a water
consulting firm to better understand water demands based on
the type of home and local climate characteristics. Blending the
expertise of each of these team members with actual customer
usage data has allowed the district to gain a more robust
understanding of its customers’ current and, more important,
future demands as it continues to budget for infrastructure
and water resource needs. This type of collaborative effort
also allows each team member to have input into the rate
setting process
After identifying revenue requirements and cost-of-service results,
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