Connection fees are calculated by taking the cost to meet the additional demand and proportioned by the benefit that the new customers will derive from the system. Western looks at the capacity that is needed at build-out in order to calculate fees: how many pumps, how many tanks, how many pipes, how many sewer lift stations, how many manholes, etc. How much this will cost is divided by a unit of equivalent users. Western works with industry experts to calculate this cost apportionment.
There are generally three approaches in calculating connection fees:
Marginal Incremental Cost Approach - calculates the total cost to build additional facilities to meet the proposed additional demand and then divides this by the total additional demand.
Capacity Buy-In Approach - calculates the value of the existing system and then divides this by the current demand of existing users on the system.
Hybrid Approach - a combination of the Marginal Incremental Cost and Capacity Buy-In approaches.
All three approaches result in a fee that’s typically expressed as cost per equivalent dwelling unit (EDU). An EDU is a unit of demand that approximates the same demand that a single residential home would place on the system.