Water District looks toward how to best serve its customers with rate study
Fort Collins-Loveland Water District has been conducting a rate study since late 2017. The rate study is winding down and the District is now reviewing the rate study report, which shows the cost of service for different types of customer accounts. The report also shows the impacts of a potential 4% rate increase for current customers and an increase in plant investment fees. Plant investment fees are used to invest in additional water resource and treatment needs and are paid by developers when they build new homes and commercial buildings in our communities.
We thought it would be helpful for our customers to review the rate study report at the same time our Board is reviewing it. We’ve also put together some questions and answers to help you understand how the District will use the report. If you’d like to know more, please come learn about your water system during a Community Open House on April 11 from 6 to 8 pm and April 17 from 6 to 8 p.m. at the District offices at 5150 Snead Drive in Fort Collins. At the open house we’ll have information on how your water system works, how we are securing our water future with participation in the Northern Integrated Supply Project (NISP) and we’ll have staff available to answer your questions about the rate study.
What is a rate study?
Water utilities conduct rate studies on a regular basis to ensure that the utility’s financial health is maintained and that the utility is setting a course toward meeting future financial obligations. The rate study includes reviewing future planned capital investments and develops a cost of service model to ensure that the utility is charging its customer classes equitably based on the demands they place on the water system. A rate study looks at whether current rates meet annual expenditures, target reserves and debt coverage. The report also talks about changes that may need to be made to meet future obligations.
How is cost of service determined?
Rate studies look at cost of service to determine how to recover costs from customers in proportion to their use of the water system. A cost of service recognizes the impact each customer class has on system facilities and operations. One way to look at this is daily and hourly demand on the water system. Because the District must provide water on demand, 24 hours a day, 7 days a week, we must size and maintain a water system that’s capable of meeting those peak demands that can occur primarily during hot summer days. That means that the rest of year we have excess capacity, but we still must have enough water and treatment capacity to ensure that our customers have access to water when they need it the most. Some customer classes cause higher peaks in water demand than others. The rate study has identified those customer classes and assigned costs based on their demand needs.
How is FCLWD funded today?
The District is funded almost entirely by water rates and plant investment fees. The water rates that current customers pay go toward the operations and maintenance of the water utility. Tap fees are paid by developers when they build new homes and commercial buildings in our communities and those funds go toward future acquisition of water resources and treatment needs to provide service for the customers that will live in those homes and work in those businesses.
When is the last time FCLWD raised rates?
The current rate structure and pricing has been in place since 2015.
What are the major findings in the rate study?
There are two major findings in the rate study. The first is that the District is now getting closer to major investments in securing our water future through our participation in NISP and a regional water treatment plant, and we must look at how we can raise revenue to pay for these investments. The rate study also found that some customer classes are placing a higher demand on the water system now than in the past, and that their cost of service is out of alignment and should be rebalanced. Generally, the rate study found that the District should weigh whether it could better meet the needs of securing our water future and maintaining our infrastructure by adopting a practice of small, predictable rate increases over time rather than larger increases every few years.
What are the next steps?
The FCLWD Board is reviewing the rate study. The Board anticipates a public rate hearing at the May 22nd board meeting. At that time, the Board may choose to vote on the rate increases, or delay until a future date.
What does a 4% increase mean to an average residential customer?
A 4% increase would mean an average single family residential customer that uses the same amount of water as they did in 2017 would see their monthly bill increase by 4%. For example, if your June 2017 water bill was $50 and you use the same amount of water in 2018, you’d see a $2 increase on your water bill.
Read the rate study summary here.