Like cities throughout Washington, Washougal sets rates in order to recover the actual cost of service and invest in system improvements and maintenance. A rate study is periodically conducted to determine the necessary rates to recover operating, capital, and debt service costs. The rates are presented to the City Council for approval. Washougal has been conducting rate study updates on a five-year cycle. By state law, utilities are independent enterprises and are required to pay for themselves. They cannot and do not subsidize other parts of city budgets.
The rate setting philosophy includes the following principles:
- Adequate Revenues: The rates and fees must generate adequate revenue to operate and maintain the system and invest in the system to provide necessary and mandated improvements.
- Equity Among Customer Classes: Rates are evaluated to provide equity among and between all customers and customer classes (residential, multi-family and commercial), so that one customer or customer class is not subsidizing another.
- Stability: The proposed rates must provide a stable revenue stream in order to provide reliable operation of the system.
- System Growth is Supported by Growth: System expansion (treatment capacity, piping requirements, etc.) is supported by fees, called System Development Charges (SDCs), collected with new development. The Council has adopted SDCs at the highest lawful rate to ensure that growth is paying its fair share. The cost of operations and capital replacements are paid by existing and new customers.
- Maintain Credit Ratings: Rates are set to maintain good credit ratings in order to lower the cost of borrowing funds for large capital projects.