City Council approved new residential water, wastewater, and solid waste rates at its regular meeting Oct. 27.
The new water and wastewater rates come after a cost-of-service rate study was completed this summer by consultants NewGen Strategies and Solutions. The study helped determine the rates and rate structure needed to equitably fund the water utility, including all costs associated with operating, maintaining, and expanding the utility.
The new water rates include an increase of $1.50 to the average residential customer’s base rate. The change also includes reducing the number of tiers for the volumetric rate to help meet the council’s conservation goals.
For the average water user using 10,200 gallons per month, the monthly water bill will increase to $46.25 from $40.98.
The council also approved increasing residential wastewater rates, which, for residential customers, will increase to $34.85, up from $32 per month.
The new water and wastewater rates go into effect Jan. 1, 2021.
As part of the study, NewGen reviewed the costs associated with operating, maintaining, and expanding a utility and projected those costs over the next five years to determine the revenue required to cover those costs. In addition to expenses, the cost-of-service rate study also evaluated how the different types of customers, such as residential, industrial, and commercial users, used the system to make sure each type of ratepayer is paying their fair share and treated equitably.
On this page, we have provided a brief summary of the cost-of-service study results, answers to frequently asked questions, presentations and timelines, and a brief history of water rates in Georgetown.
The consultant conducted a cost of service study with a 5-year forecast for Georgetown’s water and wastewater service to identify what each customer class should be paying given their use of the system. NewGen found there is inequity among the classes. As it stands, residential and government are not paying what it costs to serve them, while other classes, such as commercial, are subsidizing this gap. The study also identified that under current rates, the utility would not collect enough revenue beginning in FY2021 to pay for the cost of operations including long-term capital projects.
Council discussions and presentations
The cost-of-service analysis was presented to City Council on Aug. 25. The Council is expected to consider adoption at its Oct. 13 meeting for first reading and for second reading at the Oct. 27 meeting. If approved, new rates would go into effect Jan. 1, 2021.
The Water Utility is funded solely by the rates paid by its customers, impact fees paid by builders for new connections, and proceeds from bond issuance for capital projects. The utility reviews its rates and impact fees every three years to ensure the costs to operate the utility are covered by the combination of rates, impact fees, and bond issuance. The current water rates were implemented in 2014 at the same time as the consolidation with Chisolm Trail Special Utility District.
The most significant change to the rates in 2014 was the structural changes to the rates to ensure the fixed costs of the utility (those not determined by actual water usage) are properly collected in the base rate. A rate study implemented in 2018 resulted in the creation of tiered rates for non-residential customers and an increase in the flat-rate sewer charge to residential customers.
The rate study completed in 2020 was done a year early due to the anticipated need for additional revenue to help fund significant water and wastewater projects that have been accelerated to meet customer demand. The changes in water rates are the first in seven years, while the change in sewer rates comes only two years after the last change in 2019. The 2018 rate study predicted the sewer rate would need to be increased in 2020.
What is cost of service?
A cost of service reflects how the total water utility cost is spread or allocated to the customer classes based on their usage of the system. This cost of service method determines how to equitably allocate the revenue requirements among the various classes of service. The cost allocated to the customer classes is based on the utility’s revenue requirement. The revenue requirement is the level of income necessary for the operation and maintenance of the water utility and helps determine how much revenue needs to be recovered with water rates. Not all customers consume in the same manner or require the same facilities to be served, so a cost of service study answers what cost differences exist to serve the various customer classes of service. This helps in identifying rate setting to ensure all customer classes are paying their fair share based on the data.