HomeMy WebLinkAboutMemo - Mail Packet - 5/3/2016 - Memorandum From Randy Reuscher Re: Gradual Rate Increase Philosophy & Neighboring Utility Rate ComparisonsNote – Xcel Energy provides electric service to Greeley and Boulder. The decrease is related to a fuel
cost adjustment which went down, mainly due to lower natural gas prices. The decrease for Greeley’s
wastewater rates in 2014 and 2015 was due to revenue adjustments from model updates on a per rate
class basis, where industrial customers were adjusted higher.
Without attempting to identify exact reasons for any one percentage increase in a given year for
the neighboring communities, it is still worth trying to understand patterns. There are generally a
handful of reasons that a utility is confronted with double-digit increases. Some of those reasons
include allowing cash reserves to fall below a minimum established amount, unexpected capital
needs, inadequate long term planning for an aging infrastructure, along with other reasons. Most
utilities will measure rate increases against the consumer price index (CPI) to see how rates are
tracking over the past couple decades. This provides a measure against smoother annual
increases. If a utility is not reviewing rates frequently (either annually or biannually) and passing
any small increases on to the rate payers accordingly, they may find themselves faced with
double-digit increases. These become challenging to explain as well as for customers to
understand and accept. As shown in the tables above, a few neighboring communities not only
experienced a double-digit rate increase in a single year, but rather in two or three consecutive
years. On the high end, for storm water, there were two neighboring communities that passed a
whopping 68% and 75% rate increase. While storm water is generally a smaller portion of the
total bill and therefore a lower dollar impact to the customer than electric, water, and wastewater,
these large percentage increases can be hard to swallow for a rate payer.
For perspective, the table below shows the 2016 rate comparisons for a typical residential
customer.
Note- Since sharing this data with the Council Finance Committee on April 18
th
, we have added
the bordering water and wastewater district rate comparisons for 2016, as requested during that
meeting.
Summary
Fort Collins Utilities will continue to focus on both short and long term planning to hopefully
avoid large increases in a given year for any particular utility service we provide. By being
proactive in planning for capital replacement needs and maintaining an established minimum
cash reserve within each fund through gradual rate increases, we can help reduce the impacts to
our rate payers and provide reliable electric, water, wastewater and storm water systems to them
for many years to come.
Please do not hesitate to contact me if you have further questions or need additional information.
Average Monthly Charge for Residential Utility Service
Electric Water Wastewater Stormwater Total
2016 2016 2016 2016 2016
Loveland $67.01 $34.00 $25.43 $12.48 $138.92
Longmont $63.25 $31.47 $33.63 $13.05 $141.40
Boulder $79.67 $35.84 $29.08 $13.46 $158.05
Greeley $79.67 $51.35 $20.62 $6.45 $158.09
Ft. Collins $68.21 $43.57 $35.07 $14.26 $161.11
Colorado Springs $85.46 $77.82 $31.27 N/A $194.55
Bordering Districts
Fort Collins / Loveland Water District $43.64
West Fort Collins Water District $44.30
East Larimer County Water District (ELCO) $49.10
Boxelder Sanitation $45.44
South Fort Collins Sanitation $20.00
Cherry Hills Sanitation $38.33