TMWA Considers a Rate Adjustment
Updated May 21, 2009
TMWA Rate Adjustment Approved at Final Public Meeting
Average residential bill to increase $1.10 per month
Truckee Meadows Water Authority's (TMWA) Board of Directors voted to approve the adjustment of water user rates at its May 21st meeting. The rate adjustment for all TMWA customers takes effect June 1, 2009. The Board cited that the main reason for the rate adjustment is increased operating and maintenance expenses since the last rate adjustment more than four years ago.
The rate adjustment calls for an increase of $1.10, or 2.79 percent on the average metered residential customer's monthly water bill. Over the past year, TMWA management staff has made cuts to the budget wherever possible. The total savings in operating expense reductions, including all employee concessions and eliminated positions is $1.1 million for fiscal year 2010.
TMWA staff worked closely with the TMWA's union, International Brotherhood of Electrical Workers (IBEW) Local 1245, which gave many concessions including the elimination of pay increases for fiscal year 2009-2010, as well as a reduction in labor expenses of three percent in fiscal year 2010. "IBEW 1245 was very sensitive to TMWA's increased operations and maintenance costs and partnered with TMWA to respond to current financial conditions," said Mark Foree, TMWA general manager.
"We appreciate the Board of Directors and IBEW support. The services we provide require a highly skilled work force and a fixed number of employees to carry out the treatment, delivery, maintenance and planning required to safely serve 330,000 residents every day," Foree added.
The Board also approved the delay of the date to convert the remaining TMWA customers billing on the flat rate to metered billing from January 2010 to no sooner than June 2010.
Review the new rate schedule or view TMWA's budget and financial information.
Frequently Asked Questions
Why is TMWA proposing a rate adjustment?
The main reason is increased operating and maintenance expenses since the last rate adjustment more than four years ago.
TMWA has also experienced decreasing year-over-year operating revenues for a variety of reasons, including decreased hydroelectric power generation due to continued dry weather conditions and low River flows. This reduces the amount of power TMWA can generate at its hydroelectric plants to offset large electric bills. Power costs are one of TMWA's largest expenses.
Additional reasons include:
- Significant loss of interest income from investments (a major component of covering the cost of service for customers), due to economic and market conditions.
- Decreased unrestricted cash reserves, including the unscheduled costs to mitigate damage from the April 2008 earthquake.
- No significant increase in new customer connections for nearly two years.
- The legal requirement to maintain the necessary senior lien debt coverage ratio as required by the bond indentures. The required debt coverage also allows TMWA to access the credit markets under favorable interest terms in the future.
- To protect TMWA's favorable credit standings, which support the ability to issue low-cost bonds, as well as TMWA's tax-exempt commercial paper program. Maintaining excellent credit is the cornerstone of TMWA's financial stability and is currently a source of very low cost of capital.
How much more will an average customer pay?
The rate adjustment calls for an increase of $1.10, or 2.79 percent on the average metered residential customer's monthly water bill.
When will the rate adjustment be implemented?
TMWA staff is recommending June 1, 2009.
How does TMWA determine rates?
A cost-of-service study is completed periodically to determine if revenues are sufficient to cover costs. As a not-for-profit entity, profits are never factored into rates. The primary factor is the cost to deliver water to your home or business. The rates are determined by the following: the amount and types of customers, each customer's demand for water, the source and treatment of the water supply, and the distribution of water and customer-related services. Rates are set to collect enough revenues to cover all costs per customer category.
How does TMWA decide if rates need to be adjusted?
If our revenues are not keeping pace with the cost of service, a rate adjustment proposal is presented to the Board of Directors. Based on our financial performance and cost studies, the Board then determines the timing and size of a potential rate adjustment, just as any business would do.
Is TMWA doing anything to keep costs down?
Yes. TMWA is fiscally responsible and committed to continually assessing all operational costs. Here are some of the ways we keep costs down:
- Water Treatment — We use safe and cost-effective options for treatment. Our treatment plant operators continually monitor and evaluate the processes to ensure your water is safe, clean and reliable.
- Power — Our operating plans focus on using electricity when power costs are lowest, taking full advantage of NV Energy's Time-of-Use Tariffs. With power costs making up 17% of our operating budget, our operators are always looking for ways to conserve electricity or use it at the least expensive time.
- Construction — Projects to improve and rehabilitate our water system are publicly advertised and competitively bid. We award contracts to the qualified contractor with the lowest responsive bid.
- Supplies — All business expenses, such as tools, office supplies and cell phone contracts, are regularly monitored. We obtain the lowest reasonable cost by competitively bidding many of these service and supply contracts.
- Staffing — As a not-for-profit organization, TMWA closely scrutinizes any new or replacement position before hiring. Over the last several years we have reduced staffing levels through the efficient use of our resources and advances in technology.
Additionally, some programs and services are more cost-effective to be outsourced. For example, using vendors/partners to provide our billing, call center, collections and remittance operations saves more than $500,000 annually. - Vehicle Use — We reduce vehicle and fuel costs by: using a Global Positioning System to find the closest vehicle to a customer call, minimizing the use of assigned vehicles for emergency response, using pool vehicles rather than individually assigned company vehicles, and standardizing vehicle types, which allows for streamlined maintenance.
- Automated Systems — With the use of Automated Meter Reading equipment, it takes less than two employees to read an average of 4,500 meters per day, or 90,000 per month, at a cost of approximately $10,000 per month. This compares to manually reading the same number of meters which would cost as much as $50,000 a month.
I have heard that reduced water use may affect rates. If so, why does TMWA encourage conservation?
TMWA always encourages responsible water use. It is our responsibility to plan for droughts and ensure that our water supply is protected. There is a common irony in water industries across the country that when people use less water, revenue goes down. While people have begun to use water more responsibly, our costs for power, chemicals, treatment and operations have risen.
While loss in revenue is one reason rates need to be adjusted, it is one of several and it is not the most prominent. The main reason is increased operating and maintenance expenses since the last rate adjustment more than four years ago.
If the community saves even more water will rates go up again?
As noted, many factors go into considering a rate adjustment. Rather than looking at rates vs. reducing water use, we need to focus on the value of responsible water use efforts – being wise with our precious resource helps maintain a healthy river ecosystem, ensures adequate supply for ourselves and future generations, maintains system functions and prolongs current infrastructure.
