Understanding Sewer Rates
Several hundred utilities provide wastewater/sewage disposal service to consumers throughout Indiana. While many of these utilities are operated by municipal governments, others are operated by other governmental units (such as conservancy districts and regional sewer districts) or by private companies or investors.
Sewer rates throughout Indiana and the United States have risen in recent years for a variety of reasons including:
- Federal environmental mandates
- Aging infrastructure and the need for capital improvements
- Rising costs for operations and maintenance (equipment, personnel, insurance, electricity, etc.)
- Consumer growth and higher demand
Sewer rates range widely among utilities and depend on numerous factors (including economies of scale, access to loans and other factors listed above). However, the trend of rising rates for all types of wastewater utilities is expected to continue for the foreseeable future. In most cases, the costs for processing wastewater have outpaced the costs for processing drinking water.
- Wastewater Treatment & Compliance
Federal and state regulations require sewer utilities to treat wastewater before discharging it to the receiving stream in an environmentally safe condition. While specific treatment processes may vary, all wastewater utilities use some or all of the following five (5) processes:
- Preliminary treatment: Debris and trash are removed from the wastewater. The water may run through screens and flow into a grit tank that allows sand and heavy particles to settle and then be removed.
- Primary treatment: Sedimentation tanks hold the wastewater for a few hours. This allows grease, oil and other particles that were not removed during preliminary treatment to either sink or float, and then be removed. Settled solids or sludge are removed and further treated in sludge digestion tanks.
- Secondary treatment: Wastewater travels into concrete or steel basins where microbes reduce and eliminate more wastes through a bacteriological process.
- Advanced treatment: Some facilities use filtration after earlier stages of treatment. They may also use other processes to remove nitrogen, phosphorous and other elements so the water is less likely to produce algae or other plant growth in the receiving stream.
- Disinfection: This is the portion of the process where bacteria are destroyed. While chlorine is normally used to kill the bacteria, a growing number of treatment plants use ultraviolet light instead.
After the water has been treated, it is ready for discharge into creeks, rivers, streams or lakes. While the treated wastewater is no longer harmful to the environment and is often the cleanest part of the stream, it is not at drinkable quality either.
- Environmental Regulation
Wastewater utilities must maintain their infrastructure (including treatment plants and sanitary sewer mains) in a manner that provides safe, reliable service and complies with (but often exceeds) federal and state environmental requirements. Most notably, the U.S. Environmental Protection Agency (EPA) has implemented rules and procedures under the federal Clean Water Act that wastewater utilities must follow.
Large systems with combined sewer overflows (CSOs) are among those needing infrastructure upgrades and subsequent rate increases. Combined systems are those that collect rainwater, residential wastewater and industrial wastewater in the same pipes, and are designed to overflow or discharge waste into streams and other bodies of water during periods of heavy rain or snowmelt. This discharge of waste is a result of the sewer system’s capacity being exceeded. 105 Indiana communities have been addressing combined sewer collection systems, which were commonly built in the 19th Century and early part of the 20th Century.
Projects to ensure compliance with environmental regulations are generally considered valid utility costs that may be recovered through rates as a cost of doing business. While many utilities have delayed CSO remediation over the long term due to its high costs and resulting impact on rates, federal regulations to force compliance have taken effect in recent years.
- Other Factors
While many municipally owned wastewater utilities charge lower rates than investor-owned and not-for-profit utilities, it is important to note that municipal utilities have access to federal and state grants that can be used to pay for utility projects, along with access to low interest loans that are only available to governmental and not-for-profit entities. (The links in the "Additional Resources" section offer more information.) In addition, state law allows investor-owned utilities to earn reasonable rates of return.
Stormwater costs, when applicable, may be assessed and collected separately from sewer utility costs. Stormwater services are regulated locally and not under IURC jurisdiction.
- Flat vs. Metered Billing
Some wastewater utilities bill customers on a metered or volumetric basis, depending on the amount of water the customer has used. Others charge flat, monthly rates. Consumers frequently ask why those utilities can do so.
- With most sewer utilities, most costs – including the costs of wastewater collection and treatment – do not vary appreciably over time. Any costs that might vary would likely be minimal and would balance out over time. In most cases involving metered wastewater rates, a large portion of the bill is set at a consistent, flat amount.
- If a customer receives water and sewer utility service from different providers and the sewer utility wants to charge based on volume, then the sewer utility must generally purchase metered usage data from the water utility, leading to higher administrative costs that are passed on to customers.
- Additional Resources
- Indiana Utility Regulatory Commission (IURC) sewer bill analysis
- Indiana Department of Environmental Management (IDEM) Combined Sewer Overflows (CSO) Program
- IDEM Wastewater Permitting
- U.S. Environmental Protection Agency (EPA) Water Information Page
- Indiana Finance Authority
- U.S. Department of Agriculture Water and Environmental Programs
- Rural Community Assistance Partnership Midwest Assistance Program
- Rate Regulation
Under Indiana law, the rates and charges of most sewer utilities are not regulated at the state level with limited exceptions*. Utilities whose rates and charges are regulated at the local level include:
- Municipal wastewater utilities,
- Regional sewer districts,
- Sanitary districts, and
- Wastewater utilities operated by conservancy districts.
In addition, not-for-profit sewer utilities may withdraw from Indiana Utility Regulatory Commission (IURC) jurisdiction under state law. The law also allows investor-owned sewer utilities to withdraw if they serve fewer than 300 customers.
Out of approximately 550 sewer utilities in Indiana, only 24 are under IURC jurisdiction. 17 of those 24 are investor owned. When those utilities seek IURC permission to increase their rates and charges (or to expand their service territories), the Indiana Office of Utility Consumer Counselor (OUCC) participates in the IURC cases on behalf of consumer interests.
According to the most recent available data, the average rate for customers of municipal sewer utilities using 5,000 gallons of water per month reached $48.79 in 2018 (not including water or stormwater charges). By comparison, the average municipal rate in 2012 was $37.28.**
The average rate for an IURC-regulated sewer utility customer at the same usage was $57.81 in 2021.***
Whether rate jurisdiction is at the state or local level, wastewater utilities are legally entitled to fair rates of return on their investments. They must also ensure that their facilities and treatment processes comply with federal and state environmental standards. In an IURC rate proceeding, the utility has the legal burden to prove that its proposed rates and charges are justified and necessary.
* Sanitary districts in Lake County may seek rate changes either at the local level or from the IURC. Limited IURC jurisdiction can also affect main extensions and out-of-city rates for municipal sewer utilities, out-of-district sewer rates for conservancy districts, and campground rates for regional sewer districts,
** Municipal data are from the May 2019 BakerTilly Comparative Rate Study.
*** IURC data are based on the agency's annual sewer bill analyses.