Primer on Tariff Setting and Regulation
This manual presents the guidelines and fundamentals of the rate making process and related practices and serves as a resource that NWRB or the private water utility may use as a guide in establishing the basis on which rates are founded, in calculating the rates and in the analysis of its validity. It is not intended, nor should it be considered, as a complete text for specific rate making. The complexities of tariff regulation require consideration of many factors not included in this simplified presentation.
The structure of the manual basically follows the tariff process. First the tariff goals and committed levels of service are set as discussed in Chapter 1-Introduction. Chapter 2 - tariff setting and the rate design process follows. Based on tariff goals and committed levels of service, revenue requirements are determined for the next five years. A section on water supply planning is included as a framework for the computation of revenue requirements. Annual base tariffs are determined based on an estimate of consumption levels. A section on rate design follows which sets about considerations in the design of a tariff structure. Chapter 3 deals with Tariff Regulation including documentary requirements and resulting adjustments to succeeding tariff proposals. The next chapters deal with water rate adjustments other than those related to tariff reviews (Chapter 4) and sanctions (Chapter 5). Chapter 6 discusses the tariff approval process including documentary requirements, timeframe and public hearing. The last chapter pertains to the guidelines in preparing the Annual Report that will be used to regulate the water utilities.