The financial health of a utility can mean...

The financial health of a utility can mean the difference between success and failure. A system cannot be financially viable if their rates do not cover the expense of running the system. According to the EPA financial capability means that a utility has the financial resources needed to acquire and maintain compliance with State and Federal regulations.

The federal guidelines define financial capability in these terms:

  • Revenue sufficiency---Are the rates and fees high enough to meet the systems short and long term needs?
  • Credit Worthiness---Can the system borrow money when it needs to?
  • Fiscal Management and controls---Is the money secure and is it being spent for the right purposes?

Revenue can be generated from a variety of sources, with the main source being your user fees. When was the last time you looked at your fees? If it has been more than a few years you are not only cheating the system of much needed revenues but; also the customers who will have to pay the higher increase because revenue didn't keep up with expenses.

Do you pay your creditors when the bill comes in or after they have called you to see when they can expect payment? Are you constantly looking for creative ways to make the revenues stretch to cover the expenses? If your revenues are not sufficient to cover your operating expenses NO lending agency is going to lend you money no matter how badly you need it. If you can't pay the debts you have now, you certainly cannot take on another debt.

Customers want their utility to run like a business. A business without basic financial management does not last long. Good financial controls and methods for accurate record keeping ensure the revenue is being managed appropriately. If good records are not kept how does a system know how much to charge its customers or how the revenue is actually being spent. Good record keeping means maintaining accessible source documents such as invoices, receipts, bills of sale and any other evidence of a transaction.

All utilities are given the responsibility by their customers to provide a reliable safe product and to run the operation like a business.
Having financial capability means that:

  • The rates and fees are set high enough to meet the system's financial needs.
  • The system can borrow money if and when necessary.
  • Funds are secure and expended for the right purposes.

Is your utility financially viable? If your answer is yes, congratulations! If your answer is no, what do you plan to do about it?