RFAs: Understanding the Practices, Policies, and Impacts of System Development Fees and Upgrade Requirements

The proposer should evaluate the pros and cons of different financial methods of collecting funds from developers and evaluate the differences in pay-as-you-go approaches vs. depreciation accounting and ratemaking practices. Proposers should, at a minimum, investigate the following four methodologies:

• Buy-In Approach: New customers pay a set amount per connection equal to the equity in the utility system attributable to existing customers.
• Incremental Cost Approach: New customers pay their embedded share of expansion cost per connection.
• Combined System or Hybrid Approach: New customers must pay the cost of their proportionate share of existing capacity (buy-in) and new capacity available to serve new growth (incremental).
• No Fee Approach: The utility collects no direct system development fee, and the costs are spread across the existing rate base or state/federal funding is used to fund development.

Objectives

• Outline which states have state-enabling legislation that dictates what they can do with system development fees.
• Investigate the different system development fee methodologies utilized by utilities and their impact on their existing ratepayers and new customer base.
• Evaluate the pros/cons of different methods of collecting funds from developers.
• Evaluate the differences in pay-as-you-go approaches vs. depreciation accounting and ratemaking practices and how this impacts the magnitude of development fees collected and practices used in the community to validate that the funds collected are used for growth related assets.

Funding Information

• The maximum funding available from WRF for this project is $175,000. The applicant must contribute additional resources equivalent to at least 33% of the project award. For example, if an applicant requests $100,000 from WRF, an additional $33,000 or more must be contributed by the applicant. Acceptable forms of applicant contribution include cost share, applicant inkind, or third-party in-kind that comply with 2 CFR Part 200.306 cost sharing or matching. The applicant may elect to contribute more than 33% to the project, but the maximum WRF funding available remains fixed at $175,000.
• The anticipated period of performance for this project is 18 months from the contract start date.

Expected Deliverables

• Research Report
• Literature Review
• Case Studies
• Utility Survey Results
• Webcast
• Other optional deliverables may include, but are not limited to:
  • White paper
  • Conference presentations

Eligibility Criteria

• Proposals will be accepted from both U.S.-based and non-U.S.-based entities, including educational institutions, research organizations, governmental agencies, and consultants or other for-profit entities.
• WRF’s Board of Directors has established a Timeliness Policy that addresses researcher adherence to the project schedule. Researchers who are late on any ongoing WRF-sponsored studies without approved no-cost extensions are not eligible to be named participants in any proposals.

For more information, visit WRF.