Central Alabama Water workshop highlights pressures shaping future rates
COMES TO GETTING A RATE STRUCTURE. A WORKSHOP WAS HELD THIS MORNING TO GIVE THE BOARD MEMBERS IDEAS ON HOW TO BOOST AND RECOVER REVENUE, SEEN AS PUBLICLY ACCEPTABLE. WVTM 13 S JARVIS ROBERTSON JOINS US LIVE IN BIRMINGHAM AFTER DIGGING THROUGH A PRESENTATION THAT SHARES VARIOUS IDEAS. JARVIS. YEAH. SO THE CENTRAL ALABAMA WATER CFO STARTED THE MEETING BY SAYING THAT THE FIRST QUARTER OF THIS YEAR WAS TRENDING BELOW TARGET. NOW, JUST A COUPLE OF MONTHS AGO, WE DO KNOW THAT CAWCAW LAID OFF 135 EMPLOYEES AND ELIMINATED ANOTHER 76 VACANT POSITIONS. THAT WAS ALL WORKFLOW OR WORKFORCE REDUCTION. NOW, THE WORKSHOP WAS PRESENTED BY. REPTON IS A COMPANY THAT PROVIDES MANAGEMENT CONSULTING TO UTILITY COMPANIES. ACCORDING TO CAW, ALL CUSTOMERS PAY A FIXED CHARGE OR A VOLUMETRIC CHARGE. BACK IN MARCH, THE UTILITY VOTED NOT TO RAISE RATES FOR 2026, BUT WE ALSO LEARNED THAT MORE THAN 53% OF TREATED WATER WAS NOT BUILT TO CUSTOMERS. IN 2024. THE PRESENTATION NOTES THAT PER CAPITA WATER USAGE HAS BEEN DECLINING IN OVERALL USAGE HAS ALSO BEEN DOWN SLIGHTLY AS THE BOARD MOVES FORWARD WITH SETTING A RATE STRUCTURE, THEY WILL WEIGH THE OPTIONS OF KEEPING THE CURRENT STRUCTURE, LOWERING THE RATE DIFFERENTIAL BETWEEN TIERS OR MOVING RESIDENTIAL CUSTOMERS TO A UNIFORM RATE. AS A BOARD, THIS IS ONE OF THE MOST IMPORTANT JOBS THAT YOU HAVE. HOW DO YOU WANT TO SET YOUR RATES? HOW? WHAT’S THE MAGNITUDE OF THE RATES AND WHAT’S THE STRUCTURE OF THE RATES? NOW KEEP IN MIND THIS WAS JUST A PRESENTATION AND Q AND A FOR BOARD MEMBERS. NO DECISION WAS MADE TODAY ON WHETHER OR NOT RATES WILL BE RAISED OR LOWERED. MOVING INTO THE FUTURE. ALSO, KEEP IN MIND THAT THEY DO HAVE TO RECOVER OR FOCUS ON RECOVERING REVENUE.
Water rate workshop highlights tough choices on affordability, revenue stability and future pricing
A recent water rate workshop Central Alabama Water held laid out the key financial and policy decisions that will shape future customer bills, showing how the utility is trying to balance infrastructure needs, revenue stability, affordability and conservation goals.This comes after the agency announced there would not be a rate hike for 2026 while also eliminating several jobs.One of the biggest pressures discussed in the presentation is declining water use. Per-capita consumption has been falling, and overall usage has also trended slightly downward. While conservation is often seen as a positive outcome, it creates a challenge for utilities that still must recover largely fixed costs regardless of how much water customers use. The presentation also notes that higher residential tiers and commercial usage can fluctuate significantly from year to year, adding more uncertainty to revenue collection.A couple of months ago, CAW announced that in 2024, more than 53 percent of treated water was not billed to customers. Since 2001, residential water rates have increased 354% while inflation has increased 79%. This demonstrates that revenue increases were driven by rate increases and not by growth of customers or consumption. From 2019 to 2024, the utility’s operating margin decreased 27%.In 2024, the dollar impact of the reduction in operating margin from 2019 amounted to approximately $30 million.Billing accuracy is another issue raised in the workshop. Meter-reading gaps and estimated billing periods have created irregularities, and the utility is planning a major investment in automated meter reading to improve that process. The presentation identifies about $120 million in budgeted spending for automated meter reading, with implementation targeted for 2028.Ultimately, the workshop shows that the utility is facing a difficult balancing act. It must generate enough revenue to maintain operations, invest in infrastructure, and protect long-term financial health, while also keeping rates fair and understandable for customers. The choices ahead will shape not only how much customers pay, but also how the utility defines fairness, affordability and conservation in the years to come.
A recent water rate workshop Central Alabama Water held laid out the key financial and policy decisions that will shape future customer bills, showing how the utility is trying to balance infrastructure needs, revenue stability, affordability and conservation goals.
This comes after the agency announced there would not be a rate hike for 2026 while also eliminating several jobs.
One of the biggest pressures discussed in the presentation is declining water use. Per-capita consumption has been falling, and overall usage has also trended slightly downward. While conservation is often seen as a positive outcome, it creates a challenge for utilities that still must recover largely fixed costs regardless of how much water customers use. The presentation also notes that higher residential tiers and commercial usage can fluctuate significantly from year to year, adding more uncertainty to revenue collection.
A couple of months ago, CAW announced that in 2024, more than 53 percent of treated water was not billed to customers. Since 2001, residential water rates have increased 354% while inflation has increased 79%. This demonstrates that revenue increases were driven by rate increases and not by growth of customers or consumption. From 2019 to 2024, the utility’s operating margin decreased 27%.
In 2024, the dollar impact of the reduction in operating margin from 2019 amounted to approximately $30 million.
Billing accuracy is another issue raised in the workshop. Meter-reading gaps and estimated billing periods have created irregularities, and the utility is planning a major investment in automated meter reading to improve that process. The presentation identifies about $120 million in budgeted spending for automated meter reading, with implementation targeted for 2028.
Ultimately, the workshop shows that the utility is facing a difficult balancing act. It must generate enough revenue to maintain operations, invest in infrastructure, and protect long-term financial health, while also keeping rates fair and understandable for customers. The choices ahead will shape not only how much customers pay, but also how the utility defines fairness, affordability and conservation in the years to come.