One step ahead using a finance plan for regional water system operations
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One Step Ahead: Using a Finance Plan for Regional Water System Operations. Deena Hood Central Wyoming Regional Water System Carol Malesky Integrated Utilities Group, Inc. September 18, 2002 RMSAWWA/RMWEA Joint Annual Conference. Central Wyoming Regional Water System (CWRWS).

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One step ahead using a finance plan for regional water system operations
One Step Ahead: Using a Finance Plan for Regional Water System Operations

Deena Hood

Central Wyoming Regional Water System

Carol Malesky

Integrated Utilities Group, Inc.

September 18, 2002

RMSAWWA/RMWEA

Joint Annual Conference


Central wyoming regional water system cwrws
Central Wyoming Regional Water System (CWRWS) System Operations

  • Located in Casper, Wyoming

  • Serves eight wholesale customers

  • Governed by Joint Powers Board (JPB)

  • Annual rate setting is crucial

  • Computerized finance plan is a critical tool


Challenges faced by the regional water system
Challenges Faced by the Regional Water System System Operations

  • Issuing revenue bonds

  • Using a Capital Construction Reserve Fund

  • Change from contract to in-house operations

  • Establishing a Rate Stabilization Fund

  • Responding to drought conditions


Issuing revenue bonds
Issuing Revenue Bonds System Operations

Issue:

  • Refinanced $23 million loan

  • Saved ratepayers $12 million over 30 year period

    Finance Plan:

  • Savings estimated

  • Coverage calculated

  • New rate determined


Using a capital construction reserve fund
Using a Capital Construction Reserve Fund System Operations

Issue:

  • Reserve needed for major construction project

    Finance Plan:

  • Raised sufficient revenues to set aside necessary funds over 2 years


Changing from contract to in house operations
Changing from Contract to System OperationsIn-House Operations

Issue:

  • A number of options for operations exist for Regional Water

    Finance Plan:

  • Compared rate impact of city operations vs. regional operations

  • Impact did not differ significantly


Establishing a rate stabilization fund
Establishing a Rate System OperationsStabilization Fund

Issue:

  • Revenue bonds provided for the establishment of this fund

  • Rate changes needed to be levelized

    Finance Plan:

  • Established the fund

  • Provided mechanism for tracking transfers


Responding to drought conditions
Responding to Drought Conditions System Operations

Issue:

  • Call placed on North Platte River

  • Water purchases necessary

    Finance Plan:

  • Projected for future water purchases and zero growth in usage

  • Alternate scenarios answered “what if” questions

  • Projected rate increases under scenarios


Finance plan schematic
Finance Plan Schematic System Operations


Finance plan model
Finance Plan Model System Operations

  • Requires data input

  • Forecasts revenue requirements

  • Estimates debt service payments

  • Determines water rates

  • Allows CWRWS to evaluate alternative financing scenarios


Tool for planning
Tool for Planning System Operations

  • Budgeting process

    • One year of history, current budget year, 10 years of forecasting

    • Used every year to prepare and justify budget and rate

  • Shows expected changes

    • Capital improvements

    • Water sales

    • Rates


Model inputs
Model Inputs System Operations

  • Project expenditures to date

  • Budgeted and actual O&M expenditures

  • Bond issue sizing

  • Beginning fund balances

  • Water rate revenues

  • Non-rate revenue

  • Water usage billed

  • Interest rates on fund balances

  • Transfers to other funds


Assumptions used in the model
Assumptions Used in the Model System Operations

  • Expected water sales

    • Growth factor

    • Actual sales

  • Coverage ratio

    • Net annual revenues over annual debt service

    • Minimum of 1.10

  • Maintain 25% of annual revenue requirement in operating fund.


Establishing a rate
Establishing a Rate System Operations

  • Based on revenue requirements and water sales

  • Same rate for each customer

  • No rate decreases

  • Current rate= $1.09


Conclusion
Conclusion System Operations

  • Finance plan is part of long-term financial management strategy

  • Allows JPB to control rates

  • Shows how different financial planning scenarios impact rates and fund balances

  • Flexible model matures with the regional water system


Conclusion continued
Conclusion (continued) System Operations

  • Model is accurate

  • Managers and policy makers can make informed decisions and be proactive

  • Provides credibility


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