A local case for rate conditioning
March 16, 2010

Rate conditioning is a process by which public utilities raise their rates by small, incremental amounts year after year, rather than holding rates at a steady level for years and increasing them only in large amounts. The concept is meant to "condition" rate payers to small increases in their utility bills, just as they are conditioned to expect price increases with the other things they buy as a result of ordinary effects like inflation. The board at Muscatine Power and Water voted in November to approve an operating budget for 2010 that includes some 3% and 4% rate increases. The utility put off a lot of capital expenditures in 2009 and still faced a very difficult budgetary year.

Since the utility is a municipally-owned entity, it's not designed to turn a profit -- but even with all of that in mind, customers are complaining anyway with angry letters to the editor about the rate increases. It's simply impossible to make some people understand concepts like "not for profit". Rate conditioning may not solve every utility's customer complaints, and it may be unpalatable in some places (particularly when politics are involved, since it's much easier to run on a platform of "holding the line" on rates than on a platform of "training customers to accept small increases as a reflection of the ever-rising cost of doing business"), but more utilities may find it necessary in the future, since capital improvements cannot be held off forever and a huge amount of infrastructure investment will be required across the United States simply to maintain today's levels of service, much less deliver improved service in the future to deal with emerging challenges to drinking water service, like pharmaceuticals and nanoparticles.

March 2010
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last revised March 2010