Utility Finance

Comprehensive Financial Plans and Strategies

Public utilities have the unique challenge of recovering sufficient revenue from customers without over-collecting revenue, while being perfectly equitable among customer in the process. Hildebrand Consulting has a data-driven method of forecasting costs and customer data to inform the rate-setting process. As a first step we develop a comprehensive, reliable, and flexible financial plan that forecasts operational and maintenance (O&M) costs, capital needs, and debt requirements to ensure solid financial performance and stability.

Allocation of Costs

We review extensive billing records and customer data in order to measure the cost responsibilities among all customers and ensure the equitable allocation of costs. We consider historical customer class usage, peaking behavior (for water), strength characteristics (for wastewater), along with emerging demographic and conservation trends. Not only are our methodologies and standards supported by national organization such as the American Water Works Association (AWWA) and Water Environment Federation (WEF), but we have played an active role in developing those very best practices, for the benefit of the industry as a whole. This ensures that our studies are robust enough to withstand both legal and ratepayer scrutiny.

Model Development

With nearly every engagement, we develop customized computer models that are user-friendly and flexible to calculate revenue requirements and allocate costs appropriately based on customer data. We design our models to be useful beyond just the immediate engagement. With minimal training clients can update the financial information for subsequent year financial planning and rate setting. In addition, our models measure both the individual and high-level effect of rate changes on customers. This gives us a powerful tool for assessing the impact of rate changes, and allows us to mitigate the burden on the most vulnerable ratepayers.

Rate Design

Rate design is a hot topic in California because case law has clearly shown that policy-based rate structures (rate structures that are designed to meet certain objectives at the expense of strictly following cost causation) will no longer be tolerated by rate payers and the courts. This "new normal" has been our default practice long before the courts made their decisions. As a standard practice, Hildebrand Consulting develops water and wastewater rate structures that are first and foremost equitable (and therefore defensible) while also meeting the business goals of our clients and stakeholders. Some agencies are best served by basic rate structures, whereas others benefit from the most innovative solutions. There is no one size fits all solution and we use our experience to help you determine the optimal rate structure for utilities.

Clear & Effective Communication

While the methodology for calculating rates & fees is important, it is equally important that those rates be adopted. The key to adoption is clear, transparent, and engaging communication with stakeholders and elected officials. We focus on demonstrating the benefits and equitability of the rates structure to ensure buy-in and adoption.