The Lehigh County Authority contracted Keystone Alliance Consulting to develop a cost of service rate model for their water system. The primary purpose of the rate model was to calculate a cost of service rate for the Central Lehigh Division. The model also reviewed the cash flow for all divisions to ensure proper revenue return.

Keystone performed the following tasks:

• Reviewed the current and projected operating expenses, current debt service, current usage, and growth projections.
• Developed usage tables to calculate revenues under current rates.
• Determined the annual revenue requirements for the study period.
• Allocated the annual revenue requirements into basic functional cost components.
• Used depreciation schedules of current assets to allocate debt service to basic functional cost components.
• Distributed functional costs to each of the defined customer classes.
• Calculated Cost of Service rates for each of the customer classes as well as both public and private fire service.

The Lehigh County Rate Model was developed in close cooperation with the Lehigh County Authority staff. This working relationship helped to ensure the accuracy of the model’s projections and enabled the model to be customized to suit the needs of the Authority. The study showed that the current fixed and volumetric rates were sufficient to meet revenue needs. In addition the study showed that both the public and private fire service could be reduced.