City Council reactivates automatic utility rate increases
Apr. 26—Two years after commissioning a rate study for its water, wastewater and electric utilities, the City of Stillwater has reactivated an automatic rate escalator designed to ensure it collects enough to cover operations and maintenance costs and make improvements.
Rates will go up 3% effective July 1 and will be evaluated in six months.
The automatic rate escalator for electric rates was suspended in October 2018 and the water/wastewater escalator was suspended in April 2019, Special Projects Director John McClenny explained.
He reminded the Council that in early 2020, Avant Energy did a study of water, wastewater and electricity rates designed to move them toward cost of service, limit rate increases and keep each utility financially stable.
It recommended a 3% rate increase for water and wastewater customers while cutting capital expenditures. At the time, water rates were 19% below the revenue needed, McClenny noted.
In October 2020, staff presented the recommendations and showed their impacts on individual customers using actual monthly bills from the late summer peak-demand billing period to provide a view of the worst case scenario, McClenny said.
In December 2020, staff brought resolutions back and waste management rate increases were adopted immediately so some of the recycling issues the City is facing could be addressed, but electric, water and wastewater rate increases were deferred amid concerns about how the COVID-19 pandemic had affected customers. At the time, programs to help people pay their utility bills were being developed.
"The timing just wasn't good for considering those rate increases, at that time," McClenny said.
Since the rate study was completed, additional water and wastewater capital needs that were not factored into the study have been identified.
The Avant recommendations made in 2020 are outdated at this point, McClenny said. Stillwater would currently be in year three of a five-year plan.
The automatic yearly increases were set to the Consumer Price Index — a measure of inflation — or 3%, whichever is less.
Inflation has risen 15.7% since the last rate increase and based on recent budget presentations, utility revenue isn't keeping up with needs.
"Rate increases are needed across all utilities to balance the budget and maintain infrastructure going forward," McClenny said.
He presented three scenarios to illustrate the impact on water and wastewater customers, starting with a 3% increase — the current cap in the suspended resolutions and the minimum amount needed to cover the current shortfall. He followed with an illustration of a 5.1% increase, the inflation rate for 2021, and then the full 15.7% cumulative inflation rate since the last utility rate adjustment.
The first was a family of four living in a 2,300-square-foot house and a current bill of $302.66. Increasing it by 3%, 5.1% or 15.7% would take it to a range of $311.74 — $350.18.
A small commercial customer with a current bill of $1553.79 would rise to a range of $1,600.40 — $1,797.74.
A large industrial customer with a 350,000-square-foot manufacturing facility with a current bill of $147,188 would rise to a range of $151,604 — $170,297.
Reestablishing the resolution at 3% would provide enough revenue to "get the budget straight" without an undue burden on customers, McClenny said.
Doing a new rate study — perhaps one done in-house — is imperative, City Manager Norman McNickle said. Some of the work done in the previous study to rebalance costs would still be applicable.
The Council approved the resolution adopting automatic increases 4-0 with Councilor Kevin Clark absent.
