When a utility bill comes in the mail, most of us just write a check and forget it. Some of us worry about being able to pay it, and others grumble about the ever-rising price of cable and cell phones.
On Dec. 14, the Metro Council asked: What goes into those prices?
Metro hosted a two-hour discussion to dig into the best practices that utilities use to pay for services. The meeting is part of a series of events to provide clarity around Metro’s fee-setting and budget development process. Click on the video at the top of this page to watch this discussion.
Metro manages the region’s garbage and recycling system. It operates two transfer stations where residents, businesses and garbage hauling companies can bring their waste, including household hazardous wastes. Metro also cleans up dumped or abandoned garbage sites on public property, licenses other private-sector garbage and recycling operations, and charges fees and taxes on the region’s waste production to pay for operations. In 2019, Metro managed 1.3 million tons of garbage and 1.1 million tons of materials that were recycled or recovered.
Metro Council President Lynn Peterson introduced the panel and said the information from the day will inform Metro’s own fee structures.
“We’re looking at innovative solutions and best practices to ensure the garbage and recycling system uses public money wisely and is responsible, transparent and equitable to everyone who uses, works in or is otherwise impacted by garbage and recycling services,” Peterson said.
The session was facilitated by Angie Sanchez-Virnoche, vice president of FCS Group, a utility management and rate and fee consulting firm. She gave an overview of the best practices in a fee setting process before the panel discussion.
The panel featured speakers from the utilities serving the Pacific Northwest: the Portland Water Bureau, Seattle Public Utilities, NW Natural and the King County (Wash.) Solid Waste Division. Michael Grant, the executive director of the Oregon Public Utility Commission, contributed to the discussion with the perspective of state regulation of utility rates.
The panelists discussed eight topics including the financial policies used to set rates, how to determine revenue requirements and the cost of services and how to structure fees.
Several of the panelists talked about the importance of having adequate financial reserves.
They said that having 30 to 60 days of operating expenses provided flexibility to manage variations in costs that could impact customers. Elliot Lisac, a finance manager at the Portland Water Bureau, said that agency used some financial reserves to keep rates stable, offsetting impacts from the COVID-19 pandemic.
John Walsh, the manager of King County Solid Waste’s strategy, communications and performance division, said King County used reserves to control the cost of recycling after China banned imported waste in 2017.
All speakers said that promoting conservation was a fee-setting priority. Kyle Walker, a regulatory and rates manager at NW Natural, said its fees are structured in a way that allows customers to pay less if they use less of the utility.
Grant, of the Oregon Public Utility Commission, said electric companies are required to offer changing rates to encourage off-peak usage. But, these programs can raise rates for vulnerable people like older people or people with lower incomes. Many of the utilities also offer low-income assistance to counter the higher rates.
After the panel discussion, Metro Councilors had questions of the panelists. Peterson asked how utilities structured their reserve funds to respond to natural disasters.
Lisac said a best practice was to have 200 days’ worth of operating cash on hand to respond to a significant event like a Cascadia earthquake. Walsh said utilities always have to plan for disasters and keep at least a 30 to 60-day “rainy day” fund.
Councilor Juan Carlos González asked how the utilities set their fees while planning for large capital projects. González mentioned Metro’s intention to modernize the garbage and recycling system with the construction of state-of-the-art transfer stations.
The solid waste division at King County has built several new transfer stations to adapt to a changing garbage and recycling market. Walsh said King County serves 37 cities that were engaged about facility upgrades during their comprehensive plan. Other panelists suggested to split capital improvements from the rate-setting conversation and to make their case on both with government partners and other stakeholders.
As the event ended, the panelists expressed gratitude for the conversation and comfort knowing the other utility providers are working on similar challenges. Grant said there were no easy solutions to the big questions. Despite that, the panelists said they are always planning, adjusting and moving forward.
On Dec. 16, Metro Council convened for a special work session to reflect on what staff and the councilors took from the panel and consider how rates will be set in the future. Two more forums will be held on Jan. 26 and April 7 to offer opportunities for local government partners to better understand the budget development process.