Hearing set on utility rate changes

SANDPOINT — Changes to the city's water and wastewater rates are coming and the city wants to know what the public thinks about the proposed changes.

The hearing follows a lengthy study of the city's system, rates and users — the first in more than a decade.

The council voted to hold the hearing after hearings with the city's consultant FCS Group, first on water rates and, on March 1, on wastewater rates.

Under the proposed rates, the city would move to a fixed rate for all residential customers with no usage charges, as well as a fixed rate per unit for multi-family customers. Two residential classes would be created — one for those using under 2,000 gallons and another for those using over.

In addition, tiers would be eliminated for the second of the city's commercial classes due to grease, and billed minimum usage for all classes would be eliminated under the proposed rate changes.

The consultant also recommended the city move forward with cost-of-service adjustments to mitigate rate increases for single-family and multi-family customers. FCS Group also proposed the city increase commercial classes above the city average. Both are due to impact and flow use to the system, Angie Sanchez of FCS Group said.

The city hired FCS Group in October 2021 to perform a rate study of the two systems. The first phase looked at revenue requirements for the two utilities, resulting in an across-the-board increase in October 2022 of 3.8% in water rates and 19% in wastewater rates.

The second phase, involving a cost of service analysis across the different user groups, was presented to council members on March 1 along with the proposed new wastewater rates.

The goal is to treat all customer classes equally with the cost of the service equitably distributed among the four major groups, Sanchez said.

"What we're looking at is how much is that the total pie that we need in order to complete our sewer utilities and meet our sewer utility obligations," Sanchez said. "How does that then become … getting sliced to our customer classes in terms of equitable allocation and who should be paying what in terms of those total costs?"

Also factored into the equation are the number of customers in the city's system and the amount of wastewater flow contributed by the four customer classes.

In looking at the data, Sanchez said single- and multi-family accounts were paying above that range of reasonableness in terms of cost of service while the two commercial classes were paying below that range.

However, as rates are adjusted, she said the proposed rate structure includes a phased-in approach so the impact isn't too great.

The system is designed to be "revenue neutral," collecting the 19% increase previously approved by the city. However, the amount of increase per customer class will vary as impact and flow are factored in, Sanchez said.

A majority of the city's wastewater customers — about 3,000 customers or 61% — are single-family accounts. The rest of the city's customers are either multi-family accounts or one of two commercial accounts.

In reviewing the city's system and different account classes, Sanchez said the study looked at the impact of each type of account on the system and the cost of providing service to that group class.

Once those cost pools are determined, she told the council that the next step was to allocate cost among the customer classes to ensure each group is paying an equitable amount based on their use and impact on the system.

The cost of service is a "snapshot in time" and could look differently if compared to a few years in the past or in the future, Sanchez said. The effort is to be within a "range of reasonableness" of plus or minus 5%.

"If we are putting $1 in your flow bucket, for single family 42 cents of every dollar is going to go to their single-family class because they're 42% of the flow," Sanchez said. "If I put something in the customer or the account bucket 61 cents is going to go to your single family class because they represent 61% of your accounts. And again, similarly for strength."

Before approving the public hearing, council members asked Sanchez about the potential impact on commercial customers, noting that there is the potential for unintended consequences as some commercial accounts pass those rate increase on to customers. They said they were pleased to hear that city staff was reaching out to some of its larger customers to update them on the proposed rates.

Comments can be made in person at the April 5 hearing. Written comments received before March 31 will be included in the meeting packet for council consideration and can be emailed to cityclerk@sandpointidaho.gov.