Avoid a Rate-Gate: Building Customer Support for Your Utility’s Next Rate Structure Change

Originally developed to provide for Denver Water’s revenue needs while encouraging conservation, the organization’s current rate structure had not undergone a full-scale rate structure study in 20 years. Much had changed since that time—water use habits, average demand and peak day needs, available technology, monthly billing, and an increased emphasis on the customer experience—for a start.Rates—and how they touch the customer in the bill that arrives monthly—are a top of mind issue with consumers. An outreach plan to accompany the study was developed with two concepts in mind:Rate structures affect every customer, so it was critical that we research the issues and receive input from specific stakeholder groups to ensure that the structure that we recommend is right for both the organization and its customers.Once we have adopted changes to a rate structure, it must be communicated to customers. To do that successfully we need to research and test both the structure and how we talk about it to ensure that customers have the information they need to make informed decisions about their water use.Strategies used to involve stakeholders in the decisions that will affect them included:Hosting a “Lessons Learned” Workshop on Rate Structure Study ComponentsDenver Water brought in representatives from four utilities and the energy industry to discuss their recent rate structure studies and implementation with a focus on stakeholder outreach efforts. This workshop was attended by key leaders at Denver Water including Board Commissioners and also key influencers in the environmental community, citizens’ advisory committee, and retail and wholesale customers (distributors).Customer ResearchDenver Water conducted a large customer survey on rates and rate structures to determine current attitudes and understanding. 25,000 surveys were mailed and we received an excellent response rate of 13 percent. Feedback from the survey helped frame stakeholder outreach efforts.Affordability AnalysisWe conducted a full-scale analysis of what “affordability” means in our service area related to water rates. Denver Water developed an assessment tool and delved into areas that we haven’t focused on before to ensure that our rate structure study outcomes would be able to address the concern of affordability.Develop communication method for Distributors (our wholesale customers)Our wholesale customers are critical to the process since they make up more than 50% of water use in our service area. A charter was developed together with our distributors to ensure that they would be informed and that we could perform the level of analysis needed to make them comfortable with the process and the new rate structures.Develop a key stakeholder committee to review rate proposalsWe developed a Rate Structure Review Committee made up of selected external stakeholders representing specific components of the service area. Committee members represent the business community, elected officials, community and neighborhood associations, nonprofit organizations, environmental and West Slope interests and representatives of large irrigators and multi-family housing interests.Strategically update the Mayor’s Office and City CouncilWe ensured that the Mayor’s Office and members of City Council are aware of this effort through strategically timed individual updates.Using this multi-faceted strategy of research, education, and stakeholder involvement has paid off – both stakeholder committees have endorsed a rate proposal and presented findings to the Board. This support provides a basis for which Denver Water can approve a new rate structure knowing that Denver Water’s rate payers have been represented in the decision making process. The project is in the final stages; the Board will approve a rate structure in December 2015 with implementation beginning April 1, 2016.This presentation highlights Denver Water’s approach to each of the tactics above. We provide an overview of the benefits that each contributed in successfully approving the new rate structure.