Moving Toward Monthly Billing: Measure of Improvements to Cost-of-Service Equity

Many water utilities are considering moving from bi-monthly or quarterly billing cycles to a monthly billing cycle. Many factors influence these considerations. Examples of influencing factors include cost, customer service, and the impact on the utility's working capital. This paper looks at another aspect of the monthly vs. bi-monthly billing cycle question: cost-of-service equity.As utilities adopt more aggressive conservation-oriented rate designs, the underlying goal is often to sharpen the pricing signal received by customers. If billing cycles are too long, the price signal can be diluted. That is, a longer billing cycle results in the customers' consumption being average over a longer period. The length of the billing cycle over which consumption is measured can affect customers' bills. That means, theoretically, that a utility can have two customers that consume the same quantity of water over the same time period receiving differing bills. If this theoretical possibility is commonly encountered for customers, a longer billing cycle might introduce inequities.This study uses historical water utility billing information from actual utilities at the customer level to develop measures of customer equity on a cost-of-service basis. This type of analyses allows utilities to include the potential benefits of cost-of-service equity when considering the length of its billing cycles.