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Like cities throughout Washington, Washougal sets rates in order to recover the actual cost of service and invest in system improvements and maintenance. A rate study is periodically conducted to determine the necessary rates to recover operating, capital, and debt service costs. The rates are presented to the City Council for approval. Washougal has been conducting rate study updates on a five-year cycle. By state law, utilities are independent enterprises and are required to pay for themselves. They cannot and do not subsidize other parts of city budgets.
The rate setting philosophy includes the following principles:
While we won’t know the exact rate increase until City Council takes action in early 2024, for the average residential customer the city is currently considering a 2.9% annual rate increase in the combined utility bill each year between 2024 and 2028. This equates to an increase of roughly $8.08 per each bi-monthly bill, or $4.04 per month for the average residential customer. The rate increase amount is consistent with what our consultant is seeing with other cities, and in some cases it is less.
Without a rate increase we would have to reconsider the pressing needs of our aging systems and prioritize those that are most critical to ensuring public and environmental health. We would be forced to defer major infrastructure projects, which would, in turn, leave our existing systems vulnerable. This short-term “gain” of no rate increases would only result in higher costs for needed upgrades, dramatic future rate increases, and possible increased regulatory oversight by permitting agencies in coming years – essentially kicking the can down the road.
There are also regulatory issues to consider. For example, the city’s wastewater treatment plant requires significant upgrades to meet mandated regulatory requirements. If we don’t make those upgrades, we will be out of compliance, which could result in fines and increased costs in the future.
In addition to these capital project issues, the City’s utility cash reserves would be depleted, leaving the utilities vulnerable. Cuts would be required to operations and maintenance, resulting in reduced staffing, compromising our ability to adequately maintain and operate our systems.
In a worst-case scenario, the state of Washington could take control of the utility and manage it without input from the City of Washougal.
The city understands that the format of the current bill can be confusing and is planning on rolling out an improved billing format in early 2024.
The most typical bi-monthly utility bill for Washougal ratepayers varies by billing cycle and season, depending upon water use. However, the average bi-monthly bill for residential customers is $286.14 (comprised of water - $94.28, sewer -$156.69, and stormwater - $35.17). This equates to $143.07 on a monthly basis; water rates include a base rate and a usage charge.
It is true that our utility rates are generally higher than other cities in Clark County. However, compared to other communities in the region and state, our utility rates are nowhere near the highest. There are a number of communities with higher utility rates than Washougal, some much higher. The chart below provides a comparison of utility rates in and outside of Clark County for a residential customer using 15 ccf of water (11,200 gallons of water per year).
Exhibit 1: Utility rates comparison
Rates vary between utility providers for a variety of reasons that can be summarized in four categories: the number and type of customers; the timing of past investments in infrastructure; the current and future need for infrastructure investments; and the specific utility rate policies adopted by the organization. Each city is different, which makes it difficult to do “apples to apples” comparisons, and even though some cities may be similar in one of these categories, differences in the others can have a dramatic effect on rates.
High bi-monthly bills are typically related to high water usage, and most often customers will see higher bills for billing cycles that include the summer months when many water their lawns. Everyone in our system generally pays the same base rate, but customers who use more water pay a higher volume rate. This structure was adopted by city council to encourage conservation.
Like police and fire, operating and maintaining the city’s water, wastewater, and stormwater systems are fundamental to the community’s health. The city strives to find the right balance between affordability, operating and maintaining our systems in compliance with the various requirements and mandates, and providing a high level of service to its customers. A rate study determines exactly how much revenue the city needs to provide these services and develops rates that pay for the operation and maintenance of the utilities – no more and no less.
The City is committed to finding a balance between affordability and the need to ensure that adequate revenues are generated to provide for reliable and safe drinking water, and effective and compliant wastewater treatment and storm water management, now and into the future.
We conduct rate study updates to ensure we are on track and are only charging what is necessary to accomplish this. Particular emphasis has been recently placed on pursuing grant funds and low interest financing, to take some pressure off of rates.
In 2021 we were awarded a $1M low interest loan toward funding design of required enhancements to our treatment plant. In 2022 we were awarded a $1M federal grant toward these upgrades. This year we were awarded a $10M low interest loan (the maximum allowed in the loan program) for construction of these enhancements, and we applied for additional low interest financing. We are waiting to hear if we will be awarded this additional low interest financing. Also, this year there is another $1M grant pending at the federal level. We hope to learn that this has been finalized soon, pending the federal government adopting their new budget.
The city is currently evaluating changing from a bi-monthly bill to a monthly billing cycle. The advantages of this change include giving customers more of a real-time view of their water usage and less of a lag between when their meter is read and when they receive a bill. For example, currently the July-August bill is received at the end of September and under a monthly cycle the July bill would be received at the end of August.
Monthly bills also mean that each bill will be smaller (by roughly half), which makes bill payment more manageable. However, there are some costs associated with monthly billing, including more frequent meter reading, increased administrative costs for printing and mailing bills, as well as software and outreach costs.
The Citizens Advisory Committee considered all of these issues and is suggesting that the Council conduct future outreach to the community to see if community members would support a minor increase in rates to fund the added costs of moving to monthly billing.