Reviewed Date: 03/28/2023
Costs for operations and maintenance (O&M) should be recovered from customer classes in proportion to the costs of providing service to those customers. The user fee should be fair to all customer classes. Each customer should be charged for their portion of the expenses incurred by the utility in providing service. Discounted rates and subsidies may be viewed as discriminatory and in some cases may be illegal.
Impact on Customers
A city should give customers information about any planned changes in advance with explanations on why changes were needed. When modifying an existing user charge system to achieve greater fairness, sudden drastic changes can have negative consequences when costs are redistributed to certain user classifications. For this reason, a planned, phased-in approach to implement major changes gradually over a period of time is usually best.
The utility’s user charge system should be easy to understand and easy for officials to explain to the public. Sewer rate structures that are similar to water rate structures are easy to understand.
A customer may want to know about how their rates compare with comparably sized cities or with cities in the same geographical proximity. Particularly commercial and industrial users. This information should not be used to set the rates for the utility because each utility has it's own financial issues.