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PRESS RELEASE RUSSELL CONSULTING study shows reported differences in water/sewer rates and charges in several communities in Eastern Massachusetts to be misleading and not directly comparable. In June of 2001, an article in the Boston Globe compared the typical residential bills for water and sewer services for several Massachusetts communities. Reading was one of those communities and was reported to have the highest rates. Presumably then, it cost more in Reading to supply those services, and/or Reading was relatively inefficient in the operation of its water and sewer utilities. However, many factors can affect and distort rate or bill comparisons; and in fact, this study showed that Reading’s rates are very close to average when adjusted for several factors which distort the comparisons. The study compared Reading’s water and sewer rates with those of five other comparably sized communities—Belmont, Burlington, Wakefield, Wilmington, and Woburn. This study clearly showed that several factors did affect and distort the reported rate and bill comparisons. For example, some towns may subsidize their utilities from general fund revenues. In the study performed by RUSSELL CONSULTING, it was found that Burlington, which appeared to have the lowest charges, subsidized its water utility with approximately $1 million per year, whereas Reading had no such subsidy. In order to compare “apples to apples” the effect of this subsidy must be taken into account and Burlington’s rates adjusted upward to what they would be without the subsidy. The study showed that Burlington’s rates would have to be increased by 96%—nearly doubled—to compensate for the removal of the subsidy. Another example—some communities divide their utility customers into classes, such as Residential and Commercial, and charge one of the classes higher unit rates. This is likely to distort a comparison with a community that does not distinguish between customer classes. The study found that Woburn did have separate class rates, and its residential rates, compared to Reading’s, had to be increased by 94% in order to put the comparison on an equal footing. The study by RUSSELL CONSULTING (completed in 2002) found eight key factors that had to be adjusted in order to make a fair comparison between Reading’s rates and those of the other communities in the study. Without adjustment Reading’s combined charges for water and sewer were 39% above the sample average. However, after the adjustments, they were just 1% above the sample average. Clearly, comparisons of “raw” or unadjusted numbers in such cases can be both misleading and inappropriate, and do not fairly rank or compare the operations or effectiveness of the utilities involved. RUSSELL CONSULTING is a management consulting firm specializing in providing management, engineering, and economic expertise to publicly owned utilities, related government agencies, and companies that are large consumers of utility services (electricity, natural gas, water, wastewater, and solid waste). The firm’s founder and president—Mr. David F. Russell, P.E.—is both a Registered Professional Engineer and an Economist and has over 30 years of professional experience as a Utility Manager, Senior Engineer, and Principal Consultant. For more information on this consulting practice, visit www.russellconsulting.org.
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