Water, wastewater rate plans proposed to council News Staff Mon, 07/01/2024 - 3:41 pm
(TC GORDON | THE GRAHAM LEADER) Willdan Vice President and Managing Principal Jason Gray presented the final draft of the water and sewer rate study Thursday, June 20 to the Graham City Council. In the study are multiple options that the council could choose from, if they choose to adjust rates.
Tayte Ward news@grahamleader.com
Willdan Financial Services offered the city of Graham reports of its water usage along with two water and wastewater proposed rate plans for residential and wholesale customers.
Willdan Vice President and Managing Principal Jason Gray presented the final draft of the water and sewer rate study Thursday, June 20 to the Graham City Council.
The company claims the rate plans it has designed would benefit Graham and ratepayers by enabling the utility to completely fund all water and wastewater preservation, operation and construction costs, as well as equipping the city to continue to supply quality drinking water and treat wastewater.
The presentation began by sharing some water and wastewater rate facts. Average utility rates in America have been increasing 5-6% each year, and Gray said this will likely continue and possibly accelerate.
Gray said these rate adjustments are due to factors outside of a utility’s direct control, such as inflation, Capital Improvement Plans, wholesale costs and other indirect expenses.
A chart produced by Willdan found that for a 5,000 gallon customer in Graham, the cost averages to $78.04 a month, noticeably lower than the state average, $98.57. The chart also showed Abilene, Nocona, Crowley, Burkburnett and Knox City were below Graham’s average, while Stephenville, Bernon, Granbury, Ranger and Eastland were above.
Gray said serving outside city customers tends to result in higher rates for those customers.
A Willdan report shows for 2024, residential and wholesale rate classes comprise the majority of water consumption, with residential at 39.4% and wholesale at 38.9%. Therefore, both of these rate classes must be affected to create additional revenue for capital improvement program needs and to keep up with inflationary pressures, Gray said.
Both five-year rate plans claim to completely fund all aspects of the water utility according to existing market conditions and assumptions, and would enable the city to fully fund its water-related capital improvements. They also each generate a total revenue of $39,703,255 in capital improvements from fiscal years 2024-2029.
The Scenario I rate plan makes uniform percentage adjustments for base and volume charges while maintaining the existing rate structure.
“There’s a little bit higher rate increases early on in the plan, and then that tapers off down to essentially inflationary adjustments after we get about four or five years in,” Gray said.
Under the Scenario II proposed rate plan, higher wastewater base charge increases based on future wastewater debt.
Gray said Scenario II would ultimately cost residential customers slightly less than Scenario I.
For more information on the rate scenarios, see the PDF included with this story.
Tap fees are subject to changes as well. Gray said the city would be authorized to charge the full cost to install the tap as opposed to providing the subsidies.
In addition to residential costs and tap fees increasing, wholesale customers would also be charged more under a rate plan.
In September 2017, the city council adopted new water rates in which wholesale customers were charged based on the actual cost of production — a flat rate of $6.35 per 1,000 gallons. Costs for Fort Belknap Water Supply Corp. and Graham East Water Supply Corp., Graham’s wholesale customers, nearly doubled.
These rural water providers responded by filing an appeal with the Texas Public Utilities Commission against the city, claiming the city was not abiding by contractual agreements.
In November 2018, the city approved an independent water rate study to be conducted to address the pending appeal. By April 2019, results from the study, which found wholesale customers should be charged $5.52 per 1,000 gallons, prompted the council to approve the creation of an ordinance lowering the rate.
The PUC filed in favor of the city, but wholesale customers appealed the decision to the PUC by February 2020.
Chairman DeAnn Walker filed a memo agreeing with the administrative law judges opinion in favor of the city. Walker said the wholesale customers failed to meet their burden of proof showing that wholesale water rates were of adverse public interest under the Texas Water Code.
Under the current proposed rate plans, wholesale customers would be charged $5.52 this year; it would then increase by $0.50 in 2025 and gradually decrease in the amount of change each year.
Following the presentation, the city council unanimously approved authorizing the city manager to share the proposed wholesale rate plans for fiscal year 2025 with the Fort Belknap Water Supply Corporation and the Graham East Water Supply Corporation for their feedback.
Gray concluded by stating that rate percentages after only two or three years of inaction would be dramatically higher than if they were implemented in the current condition.
“There is no scenario that does not include impactful changes,” Gray said. “These things cost more every year, and the only way to keep up with these costs, unfortunately, is to charge those that are using the service in order to keep up with those cost differences.”
Garretty expressed support toward implementing water and wastewater rate increases beginning this fiscal year.
“If we want our system to survive, we’re going to have to go up on water and sewer rates,” Garretty said. “We’ve invested the time, the expertise and the money to bring this presentation to the public to understand why.”
The council will vote at a later date whether to adopt or reject a proposed rate plan.
For more information on the rate scenarios, see the PDF included with this story.
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