Birmingham Water Works Board now considering smaller rate hike for 2023

Published: Oct. 19, 2022 at 3:42 PM CDT
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BIRMINGHAM, Ala. (WBRC) - After public pushback from ratepayers and public officials, the Birmingham Water Works Board (BWWB) appears to be considering a smaller rate increase for 2023 than the 8.3 percent rate increase initially recommended by the utility’s consultants and executive staff several weeks ago.

The budget plan the board saw Wednesday assumes a 4.9 percent rate increase for the “average” customer, though rates would increase by 15 percent for customers who use more than 3 CCF of water a month under the scenario the board’s latest budget draft is based on. This new budget also assumes the utility will raise residential customer’s rates by the same “average” 4.9 percent every year through 2028.

The proposed 4.9 percent increase is projected to bring in $4.4 million more from residential customers next year compared to 2023, and if projections hold true, the BWWB would be collecting 37 percent more in revenue from residential customers in 2023 than they did in 2021. Under the board’s current projections, in this scenario, the utility will make almost half (48 percent) of its residential revenue from customers in the second tier of its 3-tiered billing system, collecting 40.4 percent more from this group that uses 3-15 CCF per month compared to two years ago.

The majority of the BWWB residential customer revenue will come from this middle tier of users, despite projections that both the middle and upper tier of water consumers will use less water next year, while the bottom, or smallest users will use more. The utility is proposing cutting its base service charge for most residential customers from $26.26 a month to $26.15.

Overall, the utility’s budget scenario under consideration includes a 9.7 percent increase in spending, despite a projected 2 percent decrease in residential water demand and a 3.56 percent cut in commercial water demand.

The utility’s capital budget includes $500,000 to hire a consultant to lead a potential effort to switch the water works to automated meter reading - a process the utility’s management said on Wednesday could take 5-10 years and cost $50 million or more.

Water Works Board members were quick to point out Wednesday that the utility didn’t raise rates at all in 2021, in what they said was a nod to the pandemic economy and the needs of ratepayers. The utility’s board members have also asked the management and budget consultants to work up scenarios for a similar 0 percent rate increase this year, though rate-setting consultants told the board Wednesday that scenario using the current spending plan would require the utility to change its financial policies and bring it “perilously close” to violating lending covenants, something several board members called a nonstarter.

BWWB staff are meeting with representatives of Attorney General Steve Marshall’s office Wednesday as part of the AG’s offices demand to see hundreds of pages of BWWB records and policies before the board votes on any potential rate increase in November.

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