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To understand rates, it is important to understand that there are two ways to set rates: Equivalent Domestic Units (EDUs) and metered amounts. One EDU is approximately 5,000 gallons and is considered to be the average used by a household of four people. One domestic household pays for one EDU and each business is set at a certain number of household EDUs. A sample EDU breakdown [PDF] is provided by the Camden County Municipal Utilities Authority. There are meters which measure the amount of water going into a house.For wastewater, the amount assumed is the same as the amount of water going into a house. In some communities there are no water meters (flat rate) or there may not be a municipal water supply. These areas may only have individual wells. In these areas, a flat rate can be set by using the EDU system.
Rates for water or wastewater treatment should be low enough that they are affordable to the user yet provide enough income to cover district expenses. The rates must cover collecting, treating and discharging wastewater or producing, treating, storing, and distributing water. This can be broken down into debt service and operating expenses, including fixed and variable costs. The operating ratio is:
Total Revenues ÷ Total Operating Expenses = Operating Ratio
The coverage ratio is:
Income Available for Debt Service ÷ Annual Debt Service Expenses = Coverage Ratio
1.9 can often be preferred for small systems.
CAP Finance is a system for asset management financing to be used in conjunction with a rate study to develop rates.
The Missouri Department of Natural Resources has their town rate-setting software for both water and wastewater available online. Contact the Missouri Department of Natural Resources, Division of Environment Quality, Water Protection Program, Financial Assistance Center, calling (573) 751-1192 or toll-free (800) 361-3827.
Another good resource is North Dakota Small Community Water System's Handbook on Developing and Setting Water Rates [PDF], written by the Midwest Assistance Program. Please note that the rate guide is for water systems and has a broad application. The guide may be used to understand basic terminology on setting rates.
Once rates have been determined, a rate ordinance must be passed. A sample rate ordinance [PDF] is included in the sample documents section of this guide. A hearing should be held on the ordinance. A sample public hearing notice [PDF] and an accompanying sample press release [PDF] which can be sent to local media to notify them that the ordinance will be discussed and voted upon are also included in the sample documents section. The steps to revising a rate ordinance are provided for you at the end of this section. A guide from Midwest Assistance Program (MAP) called Small Community Water System's Handbook on Developing and Setting Water Rates [PDF] is also included which gives more specific advice. Consultation with nearby municipalities can be useful for obtaining additional information on nearby rates and whether they are based on meters or EDUs.
Indiana Code 13-26-11-12 states that notice of hearings for a rate ordinance must be published two times, one week apart with the second time seven days prior to the meeting. This is different than that for a town and should be examined more closely within the Indiana Code.
Rural Community Assistance Program (RCAP) has provided a brochure which explains some ways to conserve water [PDF]. This can be handed out with the rate change or prior as helpful information. Water conservation can affect rates so distribution of the brochure should be discussed.
Please see the prior section for other resources and example documents relating to rates.
Provided below is an outline of items that your district may wish to consider when determining rates and usage.