Rate Case Messaging-01

Water utilities are having a hard time getting public support for increasing investment in their infrastructure — a crucial need that underpins the viability and resilience of our cities and suburban communities. More than 250 million Americans are at risk of losing the reliability and safety of their municipal water utilities as these systems reach the end of their useful life. People yell and scream at their elected leaders about rate increases even as they face the warning signs of broken water mains and episodes of contaminated supplies. How can utilities leverage public messaging to generate more support for their mission? How can utilities neutralize complaints and win over their customers to support the necessary improvements in our water systems?

A new whitepaper from Hahn Public Research sheds light on this subject. Research indicate that utilities should design their public messages to focus more on the benefits and features customers will receive and while strengthening perceptions around utility staff competence and character.

When a local water utility decided to raise revenue, we tracked the process to learn from their experience. What we found was that public messaging informed a successful rate process that resulted in the utility gaining approval to change its rate structure — charging some customers more per gallon, charging some customers less, and raising the monthly fixed charge for everyone. Let’s take a look at how Hahn’s report informs what went right, what went wrong, and what lessons can be learned from this experience.

It’s important to know that this local utility, Marin Municipal, was undercharging their customers significantly for a long time. After attending two public forums we learned that Marin has kept water rate increases below the 2.5% average increase in the Consumer Price Index for 25 years running. This performance is even more striking considering average water prices across the U.S. increased by over 7% during that period. This delta between the accelerating needs for reinvestment and the lack of revenue to support it mirrors the national trend towards under-investment in water infrastructure: Water utilities simply aren’t generating enough money to keep up with maintenance and upgrading needs. The American Society of Civil Engineers recently posted this infographic that illustrates how an investment of just $84 billion by 2020, America will avoid costs of over $200 billion from underinvestment in leaky pipes, water main breaks, and polluted water.

Needless to say, we spoke out publicly in favor of the proposed rate increase. For a family of four, with a medium size garden of plants growing food, flowers and succulents, a water bill for January and February totaled just $49. For 2 months. For 4 people. That turns out to be just $0.20 per person per day. By comparison, a typical cable TV/Internet bill is 6 times more per person. A mobile phone bill is 10 times more per person.

Where utilities often get it wrong with public messaging, Hahn says, is focusing on “facts.” The report lists one example of a fact-based statement such as “Your bills may seem high to you, but people with other providers pay more.” This just serves to enrage people. Better to follow Hahn’s four recommendations, which led to a successful (though not uncontested) effort in Marin to raise rates and change the rate structure:

  • First – The Hahn study suggests that utilities should incorporate aspects about the character and competency of utility staff into customer messaging. Marin’s General Manager is a highly experienced water professional with decades of successful management of local utilities. This neutralized the risk of being criticized for lack of competence.
  • Second - Provide as much detail as possible about how previous revenue increases have been spent, and what benefits have been delivered. Marin is one of a handful of utilities that manage its own watershed, which is open to the public for recreational purposes like hiking and biking. Most people in the district utilize these public lands, which carry direct benefits for personal enjoyment.
  • Third - Strengthen the integrity of the utility’s ratemaking process by establishing an independent panel outside the normal leadership structure. Marin was successful in doing this by creating and running an independent rate commission populated by customers, with meetings attended by staff. This independent panel made final recommendations to staff, which were largely adopted, and which dampened criticism of the decision-making process.
  • Fourth - Hahn suggests avoiding generalizations in feature-based messages and instead, try to be specific about the benefits of certain features provided from previous rate increases.

Following these recommendations should prove valuable to water utilities that are seeking to generate public support for future rate increases that are sorely needed to support our communities, our families, and the environment.