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Lessening the Regulatory Burden on Small Systems
I have long been an advocate for the rate-of-return regulatory model that has served American customers so well across regulated utility industries – electricity, natural gas, and water. Despite expanded service and increasing demand, regulated utility rates have increased more or less in line with inflation (although we are now undoubtedly in a rising cost era). However, the regulatory model is set up to reward scale and is full of safeguards to prevent the utility from charging unreasonable rates. While the model works for large companies and those safeguards are necessary, many small regulated water utilities are missing out on the regulatory process either because it is too expensive or too onerous. This ultimately leads to under-investment, losses in reliability, and threats to environmental compliance.
Out of the over fifty thousand water systems in the US, about 83% serve fewer than 3,500 people, and the majority of those are privately owned and operated. NAWC serves a number of those companies and our Small Companies Committee has long recognized a need to engage more small system owners in the regulatory process.
Over the past nine months, we have been working to identify a set of regulatory best practices for small systems that will be presented to the NARUC Water Committee in July of this year, including a sample rate application and survey of current policies. Over the next few months, I will be posting stories on recent developments on small system regulatory issues, as well as explaining some of the best practices we have identified.
If you have any recommendations on states that are proactively working with small companies on the regulatory process, let us know in the comments below.