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Sample Basic Information on Availability Charges Page 1 of 1 Minnesota Rural Water Association Our Mission: "To provide the latest information, education,and technical assistance to protect our public waters and improve the quality of life in Minnesota." Home About MRWA Members Financing Legislative/Security News/Publications Links Sample Ordinances Fast Tracks Basic Information on Availability Charges >Trarg Calendar L tawA Quizzes Excerpt From:Financing Issues and Strategies for Water Utilities Patrick C. Mann,Professor of Economics at College of Business and Economics >Fleet Program West Virginia University >S,r,le Ordinances Morgantown,West Virginia,Phone: 304-293-7872. E-mail: pmann @wvu.edu March 6,2001 >Job Listings C.MRWASearch FINANCING CAPITAL IMPROVEMENTS Minnesota Rural Water Availability Charges Association 217 12th Avenue SE 1. Dedicated-capacity charges involve a financing method for water utilities having the purpose of Elbow Lake,MN 56531 Phone:218-685-5197 recovering costs from customers for capacity constructed primarily for providing service to these specific Fax:218-685-5272 customers. The availability or readiness-to-serve charge is one type of a dedicated-capacity charge. E-mail:mrwa @mrwa.mm 2. The availability charge is a charge designed to recover the costs incurred by a water utility in constructing facilities primarily for the benefit of new or future customers. The availability charge is imposed between the time that service is made available to the future customer and the time that actual water service is initiated. The availability charge may be based on lot frontage or similar bases. When water service is actually initiated,the availability charge is terminated. 3. The availability charge is particularly appropriate in cases where a new housing development is created and the water utility constructs facilities for that development. The initial system costs may exceed the level that can be realistically recovered from the low initial customer base. Thus,it is appropriate that lot owners be charged for having service available,even though at that time they are not actually receiving service. 4. The availability charge is essentially an access charge reflecting the cost of providing consumer access to the water system. The justification for the availability charge is that the water utility incurs certain costs regardless of whether or not consumers receive service. 5. An advantage of the availability charge is that it promotes cost sharing between existing customers and unconnected property owners who eventually derive benefits from the facilities of the water utility. It adheres to the standard of cost-causation where the water utility has incurred significant capital investment to provide service to both existing and future customers. 6. A problem associated with availability charges is that of remedies for nonpayment. Since the customer that is being assessed the charge is not connected to the system,termination of service is not an appropriate response to nonpayment. MRWA is a proud member of jvR National Rural Water Association WA n t ©2005 Minnesota Rural Water Association. All Rights Reserved http://www.mrwa.com/basicavailabilitycharges.htm 7/14/2011