Case Study

Rivanna Water & Sewer Authority, Virginia

PFM was retained by the Rivanna Water & Sewer Authority in the Fall of 2002 to address issues raised by the effect of the 2002 drought on the utility. In particular, the Authority's existing rate structure led to declining revenues as conservation measures reduced water usage, and long-standing policies on reserves limited flexibility to deal with the financial impacts of these factors. The Authority engaged PFM to review other wholesale water utilities in Virginia and identify opportunities for the RWSA to better respond to these challenges in the future.

At the end of the engagement, PFM delivered a report that described the wholesale water rate structure of a variety of Virginia utilities, as well as the comparative rate level. The report also reviewed the conservation policies of the selected group of utilities. A description of rating agency criteria for water/ wastewater utilities generally and their specific expectations for AA-rated credits were considered, leading to a comparative analysis of the Authority's debt and cash reserve policies. Finally, the report recommended several steps to improve operating margins, reduce rate volatility, and prepare for future capital borrowings.