Lafayette residents could face water, power rate hikes over the next 3 years

The Lafayette Utilities System is asking the City Council to approve a three-year rate increase plan for power, water and sewer to offset increasing capital and operating costs.

The request comes as LUS bills have sharply increased this summer thanks largely to a massive jump in the price of natural gas, which is a key component of electricity generation for LUS and other power providers that LUS buys excess electricity from to meet its needs.

LUS uses two rates to determine how much to charge customers for power: a base rate of 4.764 cents per kilowatt-hour and a fuel charge rate that fluctuates with natural gas prices every two or four weeks.

The fuel charge is calculated to directly pass LUS’s fuel costs to customers, while the base rate is set by the City Council to pay for the utility’s other expenses, such as personnel, equipment and capital projects.

Those expenses have increased, LUS Director Jeff Stewart said, particularly over the past year. But LUS’s base rate has not been adjusted by the council since 2017.

Last week: Lafayette Utilities stops late fees as power bills remain high amid fuel price increase

Stewart said he was unhappy to bring a rate increase request to the council, particularly as power bills have spiked this summer.

But he warned that LUS would take a massive financial hit over the next five years without the increase because of the rising costs of buying equipment and maintaining LUS’s existing infrastructure.

LUS's full presentation on next year's budget and its proposed rate increase is available at the end of this report.

“This was all based on the costs of service for what it takes to do what we do every day. That's what it's based on,” Stewart said.

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Why now? What's the cost to families?

“It never is an easy time or a good time to do this. And the last thing I wanted to do in my first five months is propose a rate increase. But the study that we've gone through, the justifications that we have, I feel like we needed to propose it.”

At the current base rate, LUS’s annual budget for necessary equipment and upgrades could drop from $4 million this year to negative $8.7 million by 2025, leaving the utility without the funds it needs to maintain its infrastructure, according to finance calculations by LUS.

To avoid that, LUS is asking for 3% increases in its base rate each year for the next two years. It is also asking to increase water rates by 8% and sewer rates by 9.5% a year for the next three years.

The cumulative impact for the average home using 1,200 kWh of power and 5,000 gallons of water per month would amount to an $8 increase in monthly bills starting in November, then $9 more a month the following year and another $5 the year after that, LUS estimated. That amounts to a total increase of $22 per month by 2025 in that scenario.

Council asks for a revised plan

City Council members were hesitant to consider the proposed rate increase at a budget hearing Tuesday, with a majority of the council’s five members saying the timing was extremely unfortunate given the sustained increase in LUS’s fuel charge.

“I'm very concerned about this because the increases that my constituents have seen on their bills is anywhere from $400 to $700 or $800 from previous months, previous years,” City Councilwoman Liz Hebert said.

Lafayette Utilities fuel costs drop.Customers will save on electricity rate.

“I'm just terrified to see this in addition to what they have already seen in increases. Seeing this increase on top of that is … I don't know how some people will be able to afford to have utilities,” Hebert added.

“There’s no perfect time but it seems like the perfect storm is happening right now between cost of fuel and interest rates and everything,” City Council Chair Nanette Cook said.

The council asked Stewart and his staff to look into delaying any equipment purchases and other expenses as a way to lower the proposed rate increase and to bring a revised plan back to the council at its Aug. 30 budget hearing.

As it stands, the council is set to give initial consideration to the rate increase at its Aug. 16 meeting and cast a final vote at its Sept. 6 meeting.

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This article originally appeared on Lafayette Daily Advertiser: LUS asks Lafayette City Council for 3-year power, water rate increase