Getting ahead of New Braunfels’ growth to keep the lights on and the water running continues to be a challenge for New Braunfels Utilities.
To keep up with the infrastructure and capacity needed to offset the city’s continuing growth, NBU officials are asking New Braunfels City Council members to approve the implementation of a three-year rate plan that would allow the utility to increase water sewer and electric rates during that period.
NBU CEO Ian Taylor and CFO Dawn Schriewer reviewed utility capacities for water, wastewater and electric and presented the proposed rate plan during a special council session on Monday.
NBU officials have around $533 million worth of capital improvements in the works over the next five years in an effort to keep New Braunfels up to speed. About $386 million of that is water and wastewater capital improvements, with the balance going to electric and service needs.
Taylor said the rate hikes are necessary to pay for current infrastructure improvements and new water acquisitions.
“I’ve been trying for the last four years to get the word out on what the impact of growth has been on utilities,” Taylor said. “It’s affecting critical infrastructure in service providers across town, whether it’s us or other entities. For NBU, ours are really by in large infrastructure and water supply related. It’s consumed capacity in our infrastructure at twice the rate it normally does. The parts of our business that are having the largest infrastructure capacity issues are water and wastewater.”
The proposed water rate increases will be across all classes, but also calls for higher rate increases for commercial and residential irrigation and other high-gallon users that drive the need for the water infrastructure investments.
Under the proposal, water rates would increase by 7% in fiscal year 2021 and by 8% each in fiscal years 2022 and 2023.
However, the plan would also remove the water supply fee for residential customers who use under 7,500 gallons.
For customers using more than 7,500 gallons, the water supply fee would rise to $1.05 per thousand gallons in the first year, $2.49 during the second year and $2.79 in the third year.
With the water supply fee removed, the average residential customer using 6,000 gallons a month would see a lower bill, from $24.08 currently to $23.66 off-peak and from $24.50 to 24.08 on peak, in fiscal year 2021.
That same bill, however, would rise to $25.54 in fiscal 2022 and $27.56 in 2023 off-peak and $26.02 in 2022 and to $28.10 in 2023 on peak.
The plan calls for higher rate increases for commercial and residential irrigation customers.
NBU also plans to initiate a low-income discount program where residents who meet criteria similar to the utility bill assistance program could receive discounts of $3 off their monthly water bill.
Also, NBU plans to roll out a comprehensive utility management plan in March with a specific focus on high use customers and conservation strategies.
“You can’t build water and wastewater facilities as quickly as you can electric,” Taylor said. “The water and wastewater programs are the biggest drivers of our budget right now, and on top of that is water supply. Water, in general, is getting more expensive each year. As we grow and acquire new water supply, that brings on new costs within our portfolio.”
The proposal calls for an increase in sewer rates of 16.5% in fiscal year 2021 and 13% each in fiscal years 2022 and 2023.
The average residential customer using 4,600 gallons would see their bill rise from $38.51 to $44.87 in fiscal year 2021, to $50.70 in 2022 and $57.29 in 2021.
The proposal calls for no increase in electric rates in fiscal year 2021, but a 1.3% increase in 2022 and a 2.6% increase in 2023.
An average residential electric bill would rise from $118.49 in 2021 to $120 in 2022 and $123.18 in 2023.
Taylor said the proposed rates would still keep NBU’s rates among the lowest in the area.
He added that the reason behind proposing a three-year plan is to keep the utilitiy’s high bond rating intact, allowing NBU to borrow at lower interest rates.
“Funding for these projects will come from bonds,” Taylor said. “The rating agencies like to see revenue assurance. That’s one of the big items they look at when they determine the rating for our organizations.”
Fitch Ratings recently affirmed NBU’s ‘AA’ rating for its utility system revenue bonds.
“New Braunfels Utilities takes the responsibility of providing electricity, water, and wastewater for our growing community very seriously,” Schriewer said. “Fitch reviewed our five-year strategic plan and capital expenditures required to support the expansion and development of additional water and wastewater infrastructure and found NBU to be well leveraged in its debt to capital ratio.”
Council members are expected to consider the first reading of the proposed new rate ordinance on Monday.
A second and final reading of the ordinance would come on Oct. 26.
If approved, the rates would become effective on Nov. 1. The fiscal year 2022 rates would go into effect on Aug. 1, 2021 and the fiscal 2023 year rates would go into effect on Aug. 1, 2022.