McCleary utility rate study forecasts hefty increases

Utility rates may be increasing for McCleary residents following a rate study completed last month.

Utility rates may be increasing for McCleary residents following a rate study completed last month.

Increases could come to electricity, water and sewer — with the highest increases for electricity and sewer.

Light and power rates could increase by as much as 20 percent in 2017, if the city council follows the direction given by the study. Another rate hike of 15 percent could follow in 2018. Those two hikes would be the largest the study recommends. An increase of 2.5 percent are recommended for 2019, 2020 and 2021.

To give perspective, the study supplied a sample monthly bill of 1,200 kWh. Currently at about $95, next year would see that bill climb to more than $115, and grow to more than $132 in 2018. Following the 2.5 percent increases in the remaining years in the study, that same monthly bill would be more than $144.

The increases are necessary, according to the study, because the current rates do not cover its revenue requirements and is supplementing operating and capital expenses. The city has about $2.5 million in operating expenses, but only generates some $2.2 million in rate revenue. The city utility purchases power from Bonneville Power Administration. The study calculated a 6 percent increase to that purchase price every other year. The rate increases were calculated based on the lack of revenue and the potential increases.

A capital project to replace the 7th Street substation will result in a loan in 2020, about $1.4 million, which will increase expenses by $124,000 a year.

“It’s basically a Third World substation — they don’t use that type of technology anymore here in the United States,” public works director Todd Baun explained during the Sept. 28 city council meeting.

The sewer utility has a large capital investment of $234,000 in 2016, followed by repair and replacement projects through 2022, varying each year from $75,000 to $125,000. Currently, the city pays $167,000 annual for debt payments in the sewer utility. Those debt payments will reduce to $146,000 after 2021 through 2036.

“We have lines that are leaking,” Baun explained. “On a normal day we treat 100,000-125,000 gallons of wastewater per day, and when it rains it goes up to maybe 2 million gallons per day. We have water creeping into our system and I don’t think it’s right that ratepayers are paying to treat rainwater, so we’re trying to tighten up our system.”

Like the light and power utility, the revenue does not cover expenses for the sewer utility. And like the light and power utility recommendation, the study recommends hefty rate increases in the next two years to balance the gap between revenue and expenditure.

An average residential sewer bill of about $82 was used in the study. In 2017, following a 15-percent rate increase, that bill would climb to more than $94. A 7-percent increase in 2018 would increase the bill to more than $101. Both 2019 and 2020 would see increases of $2.5 percent each, followed by 1 percent increases for both 2021 and 2022 each. By 2022, the average bill will have ballooned to more than $108.

The water utility currently has existing debt at about $109,000 per year which will not be paid off until 2031. Ongoing maintenance varies per year with costs ranging from $57,000 to $250,000. In 2012, however, a $1.1 million replacement project is forecast for the Simpson Avenue water main. To pay for the project, the city is planning to take a $1 million loan in 2021, an annual cost of $53,000.

“We have a lot of old asbestos cement lines that are at their useful life, and basically we’re on borrowed time with them, and we’re trying to go through and do a replacement program with them,” Baun said. “Over the years it’s just been put off saying, ‘Oh, we’ll do it next year, and next year,’ but there aren’t too many next years left.”

The study recommends increasing water rates by 5 percent each year. A sample water bill of about $70 per month, would increase to more than $73 in 2017, more than $77 in 2018, and continue with 5-percent increases through the end of the study (2022).

During the city council meeting on Sept. 28, Mayor Brent Schiller said the situation wouldn’t be easy.

“It was kind of alarming when they told us where we were sitting with our funding source, and that a lot of our utilities were sort of at the bottom. We have some decisions that are going to be hard to make because we always know that the pressure the citizens are under is very high in the local area. It’s not going to be a fun road when we go down it,” Schiller said. “We’ve heard that term ‘We’re always kicking the can down the road,’ well they pretty much kicked the can into our face.”

Councilwoman Pam Ator suggested the council might look for a happy medium between the recommendations and what the city can afford.