Title
Preliminary Discussion on Water Rate Ordinance
Recommended Action
N/A - Discussion item only
Staff Recommendation
N/A - Discussion item only
Body
The ten-year forecast for the water utility presented with the FY2018 budget includes a series of incremental rate increases to generate revenues needed for current operations and to build cash reserves necessary for future infrastructure needs. Over the course of several meetings of the Board of Public Utilities in the fall of 2016 several alternative scenarios were considered. After discussion, “scenario 40” was selected as the most reasonable balance between increased rates and necessary system expenditures, and was the foundation upon which the ten-year budgetary projection was based. An 8% increase in both retail and wholesale sales is proposed, plus an increase from $1.15 per 1000 gallons to $2.50 per 1000 gallons for non-potable water sales. These rate increases were included in the FY2018 budget, and are proposed for implementation effective with our customer’s first billing period beginning after July 1st, 2017.
The proposed draft water rate ordinance is attached as Attachment A.
Water Distribution and Water Production are separate “sub funds” of the Water Utility. Starting when the water system was transferred from the DOE in 1998, wholesale water rates have been designed to provide for future well replacements, so the Water Production sub-fund has always maintained a significant cash balance. As has been discussed previously, over the past several years the DPU overestimated anticipated distribution system sales, resulting in revenues in DW less than budgeted. Capital replacement projects meanwhile were budgeted and executed based on those higher sales projections. The result is that cash reserve balances in the DW sub-fund are now significantly less than needed to comply with the financial reserves policy and to fund upcoming capital replacement work.
In the last two years, we have adju...
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