Water & Wastewater Cost of Service Scenarios 2023

August 3, 2023 Update

The District’s Board of Commissioners met July 31st at the final Water/Wastewater Special Meeting to evaluate all proposed rate scenarios. Staff recommended 3 scenarios for the Board’s consideration. The Board voted and passed resolutions establishing rate schedules for the District’s Water and Wastewater systems. Additionally, the Board passed a resolution adopting a revised Schedule of Deposits and Charges which included an updated Capital Facilities Charge. The adopted rate schedules can be found using the links below. A summary table of the revised Capital Facilities Charges can also be found below:

WATER RATE SCHEDULE EFFECTIVE OCTOBER 1, 2023

WASTEWATER RATE SCHEDULE EFFECTIVE SEPTEMBER 1, 2023

What does this mean for me?
For 2023, Wastewater rates change September 1. Wastewater customers will see new monthly charges beginning with their September statement. Starting in 2024, rate changes will be effective March 1.

For 2023, Water rates change October 1. Water customers will see new rates applied to their basic and volumetric charges beginning with their October Statement. Starting in 2024, rate changes will be effective March 1. Residential customers can use the calculator below to compare the new rates with the existing rates by entering a volume of water (in cubic feet in the orange box below. Water usage, in cubic feet, can be found on current or previous bills near the middle of the page (see bill example below).

 

Calculator (will open as an Excel file)

 

What is a Capital Facilities Charge?
Capital Facilities Charges (CFCs) are imposed on new water service installations or changes in water service size as a condition of service. These charges are paid when a water service installation is requested, typically by a developer or property owner, when a home is being constructed, land is being divided or changes in land use require a different water service size than was originally installed. These charges intend to recover an equitable share of the cost of the PUD’s water system from growth. The CFC recovers a share of costs associated with facilities of general system service, such as storage reservoirs, pump stations and wells. The PUD’s CFCs are assessed on a meter capacity equivalent (MCE) basis, or meter size, starting at a 5/8×3/4-inch meter. Larger meters pay a proportionately higher CFC (see table above)

July 26, 2023 Update:

The District’s Board of Commissioners met July 24th at a Special Meeting to review water’s long term capital plan and evaluate rate scenarios for recovering water system costs. The Board requested additional scenarios for review at an additional Special Meeting scheduled for July 31st. All rate scenarios and related outcomes can be found below. At the July 31st Special Meeting, staff will recommend three scenarios to the Board for consideration. Resolutions will be presented for Board approval and include: Water Rate Schedule, Wastewater Rate Schedule and Schedule of Deposits and Charges reflecting revised Capital Facilities Charges for all water systems.

A special meeting has been scheduled for July 31st at 10:00 am for the Board of Commissioners to take final action and adopt rate schedules for the District’s Water and Wastewater Systems and update the Schedule of Deposits and Charges. This will be a hybrid meeting. Attendance is available both via Zoom and in person at the Lake Crescent Boardroom located at the District’s Main Office – 104 Hooker Rd. Sequim WA. Zoom meeting information can be found on the BoardDocs  Commission Meetings portal. In-person attendance will be limited by the capacity of the Lake Crescent Boardroom.

PUD No. 1 of Clallam County (the District) and its consultant, FCS Group, are in the final stages of completing a Cost of Service Study for the District’s Water and Wastewater Systems. The purpose of this study is to determine the revenue requirements associated with the District’s ongoing Operations and Maintenance expenses and Capital Improvement Plan, to identify an equitable allocation of those costs between customer classes and to design rates that will meet the needs of the systems and further the District’s mission, to provide reliable, efficient, safe and low-cost utility services in a financially and environmentally responsible manner.

FCS Group presented their findings and a proposed rate design to the District’s Board of Commissioners at their regular meeting on June 12th. At this meeting District Commissioners requested the development of alternate rate design scenarios and strategies for their review. An additional public meeting was held July 10th. At this meeting District staff provided background to key drivers of increased costs to the Capital Improvement Plan (CIP) over the next 20 years.  FCS presented alternate rate design scenarios and created additional alternatives during the course of the meeting after receiving input from District staff and Commissioners. Three potential rate design scenarios were selected as the most feasible.

Staff CIP Presentation from meeting July 10

Interactive CIP Overview: https://clallamcountypud.maps.arcgis.com/apps/dashboards/84d62b8b756d4a4f85e81d950f395a81

Full CIP Project Table

Link to June 12th meeting Recording: https://clallampud.net/wp-content/uploads/2023/06/GMT20230612-202950_Recording.mp3

Link to July 10th special meeting Recording: https://clallampud.net/wp-content/uploads/2023/07/GMT20230710-160121_Recording.mp3

Please see a summary of water rate scenarios below:

Scenario A

This scenario explores the outcome of a larger 2023 rate increase aimed at building cash reserves in the near term, reducing the magnitude of future increases to typical inflationary percentage rates during the 5-year period and reducing the need for near term borrowing.

Assumptions:

  • No changes to current Water Dept. staffing through 2028
  • PUD financial policies maintained (minimum 120 days cash on hand, 40% maximum Debt to Net Assets, 2x Debt Service Coverage).

Outcomes:

  • 35% rate increase in September 2023
    • $26.73/month increase for typical residential bill
  • 3.5% rate increases annually 2024-2028
    • $3.61-$4.14 per month increase 2024-2028 for typical residential bill
  • Total increased cost for typical residential water service September 2023-2028= $2,352.66 (cumulative bill impact over 64 months)
  • Reduce new debt proceeds to $9M through 2028
  • PUD financial policy requirements met by 2024

Scenario B:

This scenario plans for the PUD hiring a three-person in-house construction crew in 2027, with a focus on self-performing water main replacement capital investment projects. Scenario B produces long-term savings reducing the magnitude of rate increases after 2029 but requires higher annual rate increases in years 2024 through 2028.

Assumptions:

  • Labor and benefits expense for three-person crew: $530,000/yr beginning in 2027
  • One-time capital investment for construction equipment and vehicles: $650K in 2026-2027
  • Decrease in water main program costs by 30% beginning in 2027
  • PUD financial policies maintained.

Outcomes:

  • 5% rate increase in September 2023
      • $3.82/month increase for typical residential bill
  • 9.75% rate increases annually 2024-2028
      • $7.82 – $11.34 per month increase 2024-2028 for typical residential bill
  • As long-term cost savings accrue, rate increases become more inflationary in 2029-2031
  • Total increased cost for typical residential water service September 2023 – December 2028 = $1,753.88 (cumulative bill pact over 64 months)
  • PUD financial policy requirements met by 2026

Scenario C:

This scenario aims to combine the short-term benefits of a larger 2023 rate and relaxation of PUD financial policies with the long-term benefits of hiring on an in-house construction crew. This policy also assumes low interest rate loans are available in the near term.

Assumptions:

  • 1.75% loan rates in 2024 and 2026
  • PUD financial policies revised
      • Debt Service Coverage Ratio minimum lowered from 2x to 1.5x
      • Debt to Net Assets increased from 40% to 50%
  • Labor and benefits expense for three-person crew: $530,000/yr beginning in 2027
  • One-time capital investment for construction equipment and vehicles: $650K in 2026-2027
  • Decrease in water main program costs by 30% beginning in 2027

Outcomes

  • 15% rate increase in 2023
      • $11/month increase on typical water bill
  • 4.75% rate increases annually 2024-2028
      • $4.17 – $5.02 per month increase 2024-2028 for typical residential bill
  • Total increased cost for typical residential water service September 2023 – December 2028 = $1,486.98 (this represents the cumulative bill impacts over 64 months)
  • Revised PUD financial policy requirements met through 2030
  • Evaluate financial policy, borrowing rates and CIP in 2026-2027

A special work session with the Board of Commissioners has been scheduled for July 24th at 9:00 am to discuss the potential rate design scenarios and accept public comments. An additional special meeting has been scheduled for July 31st at 10:00 am for the Board of Commissioners to take final action and adopt a rate schedule for the District’s Water and Wastewater Systems. Both meetings will be hybrid meetings and take place via Zoom and in person at the Lake Crescent Boardroom located at the District’s Main Office – 104 Hooker Rd. Sequim WA. Zoom meeting information can be found in the Commission Meetings page: https://clallampud.net/commission-meetings/. In person attendance will be limited by the capacity of the Lake Crescent Boardroom.

 

 

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