2020 Water Rate Study FAQ
The City hired consultants NewGen Strategies and Solutions to begin a cost-of-service water rate study in summer 2020. The study will help determine the rates and rate structure needed to equitably fund the water utility, including all costs associated with operating, maintaining, and expanding the utility. As part of the study, NewGen completed a cost-of-service analysis to determine what cost differences exist between customer types.
The cost-of-service analysis was presented to City Council on Aug. 25. Click here for more information. The Council is expected to hear a second presentation on the water rate study at its Sept. 22 workshop meeting and could consider adoption at its Oct. 13 meeting. If approved, new rates would go into effect Jan. 1, 2021.
To see council agendas, visit agendas.georgetown.org.
Frequently asked questions
Why is the City doing a water rate study?
As an industry best practice and according to the City’s Fiscal and Budgetary Policy, the City is required to conduct a rate study for its utilities every three years. The City’s last rate study was in 2018, which led to changes to commercial water rates and wastewater rates. Residential water rates were not changed. According to the 2018 study, the City’s water rates were forecasted to generate lower revenues than necessary to maintain the system in Fiscal Year 2021; however, because of increased peak demand, several capital improvement projects have been accelerated and additional revenues will be needed sooner than forecasted. The City hired NewGen Strategies and Solutions to conduct a cost-of-service water rate study in summer 2020. The study will provide rate options for the next five years given forecasted revenue requirements.
Accelerated capital improvement projects for the water utility include:
Lake Water Treatment Plant expansion: Design in process on expansion of intake and treatment capacity. Construction to start in early 2021 and complete in 2023.
Southwest Bypass Waterline: In design and expected to be complete summer 2021
New South Lake Treatment Plant: Design and permitting work underway; projected completion 2025-27
These projects are expected to help increase water treatment capacity.
What is included in a rate study?
A rate study reviews all of the costs associated with operating, maintaining, and expanding a utility and projects those costs over a period of time to determine the revenue required to cover those costs. In addition to expenses, cost-of-service rate studies also evaluate how the different types of customers, such as residential, industrial, commercial users, use the system to make sure each type of rate payer is paying their fair share and treated equitably.
How are rates determined?
The recommended rates come from the rate study and are specifically designed to cover the costs of the utility, address customer type equity, and any other policy goals of City Council, such as encouraging conservation. By law, rates may be set only to recover the cost of providing service. Once the rate study is concluded, rates are recommended to the Water Utility Board and City Council. The Water Utility Board recommends rates to the City Council who approves new rates by City ordinance.
What does my water rate pay for?
The water and wastewater rates pay for the costs of operating the utility including personnel, maintenance, water resources, administration, debt service, and capital construction.
When was the last time water rates were adjusted?
Water rates were last adjusted for residential customers in 2014. Nonresidential water rates were changed in 2019. Sewer rates were updated for all customers in 2019.
How does growth pay for CIP projects/expansions?
Growth helps pay for system capital expansion through the collection of impact fees assessed to new residential or commercial buildings when new customers are connected to the system. These new customers also increase total monthly revenue to help with the fixed and variable costs of operating the utility
Does the utility receive and use tax dollars to pay for operations?
No. The cost of operating the water utility is paid by customers through rates. The water utility does use services from general fund departments such as human resources, finance, and IT. However, these services are paid for through a fund transfer to the general fund. The water utility also transfers a return on investment and franchise fee to the general fund. All of those costs, whether direct or indirect costs of the utility, are included in rates paid by customers.