Water and wastewater rates in Ontario have increased faster than inflation over the past decade. This occurred in response to the changes mandated by the province after Walkerton. These include regulatory requirements concerning drinking water safety, and the need for sustainable life-cycle asset management, and long term financial planning. Rates setting processes and methodologies are evolving quickly, with more emphasis on the inclusion of long-term full cost, user pay and conservation. Utilities and public works departments are moving away from flat and declining rates, and moving towards the use of constant unit and conservation rates such as increasing block and humpback rates. Revenues and rates are being affected by the continuing decline in residential and industrial water usage, due to a variety of factors. These include changes in plumbing codes that foster efficient fixtures, aggressive municipal conservation programs, water price increases and changes in consumer tastes. As rates have increased, public interest has increased, making public consultation and a rate implementation plan a more important component of the rate setting process. Utilities are anxious to maintain stability in revenue streams through this period of change.

SWML has undertaken numerous water and wastewater rate projects since 1998. These are listed in the experience section of this website. They have accommodated many different capital time horizons and the operating plan typically ranges from 10 to 100 years with the operating plan ranging from six to ten years. SWML has frequently recommended simplifying past inefficient and hard to manage rate structures replacing them with more understandable rate structures. In addition, emphasis is placed on smoothing rates to reduce increases and decreases that frustrate users. Rate increases, if needed, are staged in a way to allow users to adjust their usage and to manage their water bills. Rate reports are prepared that use straightforward language and charts to get the main messages across to readers.

Sharratt Water Management’s Rate Setting Approach

  • Review your rate issues/objectives with you - seasonal use, revenue risk, conservation, affordability
  • Discuss optional rate structures with you including conservation rates
  • Set out optional rate approaches that involve the size of the fixed and variable component of a rate, Consult stakeholders the billing department, large users and the public
  • Include funding requirements to accommodate long run asset life-cycle renewal and replacement plans as well as funding for operational needs and short term capital projects
  • Project future water use in by considering future growth as well reductions that will occur as a result of projected growth, code changes, water price increases, active water conservation programs and changes in consumer tastes for water using fixtures and appliances, such as the adoption of front load washing machines. We will also look closely at seasonal variations from year to year. The aim is to make provision for declining or varying water use per capita and avoid revenue shortfalls for the utility
  • Develop rate options based on the user fee needs from the financial plan as set out in the previous section
  • Compute rates with an emphasis on rate smoothing to avoid fluctuations and on a graduated increase, if an increase is needed.
  • Identify rate impacts on selected user groups - seniors, small business, key users etc.
  • Compare user rates with nearby communities
  • Consult staff and present to utility and municipal management
  • Present financial plan and user rates to the public in an understandable manner
  • Make changes based on input and prepare final report complete with an implementation strategy