By - Jon Brown

Cost of Service and Rate Design for Water Utilities 101
June 22-23, 2016 | Denver, CO

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Water utilities are faced with escalating costs and infrastructure needs, while under pressure to keep reliable service at reasonable rates.  Cost of service studies are essential to assist a utility in setting fair and equitable rates.  This class is an introductory course and will review the basics of cost of service studies (COS) for water utilities as well as key financial targets to determine the overall health of the utility.  Examples and explanations will be used on standard COS methodologies and how key financial targets work together to set fair and equitable rates, while working toward a financially healthy utility providing the lowest possible rates to customers.

Please bring your laptops to work on the examples and exercises.

Who Should Attend

This is a basic introductory level course designed for:

  • Accountants
  • Finance directors
  • Management
  • Board/Council members
  • City Managers
  • Anyone decision maker who would be interested in the in the overall financial health of the utility

Learning Outcomes

  • Discuss the essential outputs of cost of service studies
  • Examine key financial targets and industry standards
  • Discuss adequacy of capital re-investment
  • Identify recommended minimum cash requirements
  • Define fair revenue requirements
  • Review basic process of a COS study
  • Design defendable rates following COS results and other considerations
  • Discover how to explain a rate increase to the end user/governing board


Monday, June 20, 2016

8:00 – 8:30 a.m. :: Registration and Continental Breakfast

8:30 a.m. – 5:00 p.m. :: Course Timing

12:00 – 1:00 p.m. :: Group Luncheon

Introductions and Overview

Overview of Cost of Service (COS)
  • Key out comes of a COS study
  • Basic overview of process and objectives
  • Cash VS Accrual basis
  • Defining revenue requirements
Cost of Service Study Process
  • Classification
  • Allocation
Rate Design
  • Proper rate structure
  • Rate design objectives
  • Stabilizing revenues with rate design
  • How to explain a rate increase to the end user/governing board
  • Create a rate design following COS results and other considerations
Financial Statements
  • Roll in assessing overall health
  • Key indicators
  • Age of system
  • Adequacy of capital re-investment
  • Debt Vs. net book value
  • Defining minimum cash reserves
    • Methodology for creating a cash reserve policy

Question and Answer


Tuesday, June 21, 2016

8:00 – 8:30 a.m. :: Continental Breakfast

8:30 a.m. – 12:00 p.m. :: Course Timing

Review of Day One
  • COS key outcomes
  • Basic process
  • Rate design
Key Financial Targets
  • Capital reinvestment
  • Operating income
  • Debt to equity
  • Days cash on hand
  • Age of system
Key Financial Policies
  • Minimum cash reserves
  • Rate of return
  • Debt coverage ratio

Wrap-up and Questions


Dawn Lund, Vice President, Utility Financial Solutions

Dawn Lund is Vice-President of Utility Financial Solutions, LLC (UFS) and has 20 years of experience in financial analysis for utility systems.  She is a consultant that provides financial assessment, cost of service studies, rate design, and financial plans for utilities throughout the country.  She also teaches financial planning and cost of service courses for agencies across the nation.  She is a regularly requested speaker on a variety of utility financial topics.


EUCI Offices
4601 DTC Blvd
Denver, CO 80237
Suite 800


Hyatt Regency Denver Tech Center
7800 E. Tufts Ave
Denver, CO 80237
Phone: 303-779-1234
0.4 miles away

Hilton Garden Inn Denver Tech Center
7675 E. Union Ave
Denver, CO 80237
Phone: 303-770-4200
0.6 miles away

Denver Marriott Tech Center
4900 S. Syracuse St
Denver, CO 80237
Phone: 303-779-1100
0.7 miles away

Hyatt Place Denver Tech Center
8300 E. Crescent Parkway
Greenwood Village, CO 80111
Phone: 303-804-0700
0.9 miles away


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