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Amid citywide infrastructure revamp, El Paso Water looks to again boost household water bills

The El Paso Water headquarters on Hawkins Drive.
Danielle Prokop/El Paso Matters
The El Paso Water headquarters on Hawkins Drive.

by Diego Mendoza-Moyers, El Paso Matters
December 3, 2023

El Paso households could see their water utility bills rise by $3.54 per month on average beginning in March, the 10th consecutive year that bills will increase as El Paso Water works its way through a massive and costly renovation of the city’s water systems, the utility’s preliminary budget shows.

The Public Service Board, which governs El Paso Water, previewed the budget Wednesday. If the PSB approves the proposed budget in January, the bill hike would bring the average El Paso households’ water, sewer and stormwater bills to $79.56. That doesn’t include city charges for trash pickup, recycling and the city franchise fee that are also tacked onto water bills.  

Monthly residential water bills in El Paso increased on average by $9 last year and by more than $6 in 2022. Under the proposed rates, customers would pay about $220 more for water service annually compared with three years ago. 

Still, the rate increase the utility’s executives proposed this week was smaller than expected. In its five year financial plan, El Paso Water was planning to request a double-digit rate increase this year before settling on the smaller 4.7% rate hike. 

The rate was “the lowest that we could go to meet our obligations” and be able to service the utility’s debt going forward, Arturo Duran, El Paso Water’s finance chief, told PSB members. 

John Balliew, the utility’s CEO, said small annual rate hikes are “going to be the norm” going forward.  

“There might be some years where we might not have to (raise rates). But I think that that's the normal,” Balliew told El Paso Matters in an interview. “That way, it can be planned for. Businesses can build it into their budget, homeowners can build it into their budget.” 

El Paso Water’s proposed budget for next year totals about $988 million, which includes the utility’s three units: $889 million for water delivery and sewage, and $99.4 million for flood control. That total is an increase from the utility’s $954 million budget last year, and more than double El Paso Water’s $493 million budget for the fiscal year that began in March 2020. 

The $3.54 average bill increase applies to the utility’s nearly-200,000 residential customers. El Paso Water also has about 53,000 industrial, governmental or wholesale customers that pay different rates depending on their meter size. 

El Paso Water workers construct a sewer connector in the Northeast, at Railroad and Dyer. (Courtesy: El Paso Water)

Driving the big increase in spending at El Paso Water is the utility’s multi-year capital improvement plan. El Paso Water is updating much of the city’s water infrastructure – especially the wastewater system and treatment plants – by replacing aging pipes and lining earthen drainage ponds with concrete, for example.

But the big-ticket item on the utility’s budget is the ongoing expansion of the Roberto R. Bustamante Wastewater Treatment Plant in the Lower Valley – a project to boost output from the plant from 39 million gallons daily to 51 million gallons per day. The project is expected to cost $776 million over the next 5 years. 

The Bustamante plant, which treats East Side sewage, began approaching its maximum capacity a few years ago amid growth in that part of town, so the Texas Commission on Environmental Quality required the utility to expand the facility.  

“We're on schedule, well underway,” Balliew said of the Bustamante project. “It's unbelievable, the scale of what we're talking about at Bustamante. It's just a massive project.”

After El Paso Water in 2021 accelerated the pace of its stormwater improvement plan to be completed in 10 years instead of 20 years, the water utility has been spending about $70 million annually on flood control projects such as new drainage ponds and pipes. That will continue for another seven years, Balliew said.

El Paso Water proposed raising the stormwater fee on households’ monthly bill from $5.66 to $6.40 to cover the accelerated spending. 

However, El Paso Water wants to secure this latest rate increase not only to pay for a range of construction projects, but also to satisfy the rating agencies – Fitch Ratings and S&P Global Ratings – that evaluate the utility’s finances and determine the interest rate that El Paso Water must pay on the debt it issues to fund day-to-day operations. 

El Paso Water is trying to strike a balance between preventing customers’ bills from becoming unaffordable, while also hiking rates enough to prove to rating agencies that the utility will have healthy finances going forward. El Paso Water has a strong AA+ credit rating, and in notes published in May, ratings analysts largely praised the utility’s financial health. 

Even so, Fitch analysts said that the utility’s bond rating “could be pressured if rate increases aren't implemented as planned or fail to generate” enough additional cash to pay off debt. And even before the utility requested the rate hike this week, analysts with S&P warned in May that El Paso Water’s rates were “approaching moderately expensive when compared to the service area's incomes and elevated poverty rates.” 

“The negative outlook reflects our view of the El Paso utility system's weakened financial position and pressured rate affordability moving forward,” S&P Global Ratings credit analyst John Schulz wrote in a note. 

However, Balliew said even if the utility saw its credit rating downgraded one notch, it would have little impact. And longer-term, it’s possible El Paso Water will seek fewer or smaller rate increases once big projects like the Bustamante Plant expansion or the utility’s Advanced Water Purification Facility are completed. 

“One good thing is that when we get over the hump of these treatment plants, that's going to take off a lot of the pressure on the rates,” Balliew said. 

The median household income in El Paso is $53,424, according to the U.S. Census Bureau’s most recent estimate. At the proposed rates that would raise household water and sewer bills to $79.56 on average, or $954.72 annually, water costs would account for 1.78% of the median household income in El Paso. That’s still below the 2% threshold that federal water regulators consider affordable for households.

Over the next year, consulting firm Raftelis will work with El Paso Water to “completely take a new look” at the utility’s rates and how it bills customers, which could result in some changes in 2025, Balliew said. 

The plan is to establish a public committee in the months ahead to propose changes to rates. That could include changing the utility’s block structure – in which customers pay more per unit of water after using a certain amount of water every month – because too few customers now are in the biggest-user block thanks to conservation. The utility could look at smaller tweaks, as well, such as reporting water usage on bills in gallons rather than in “CCF,” or 100 cubic feet.

“We'll have some sort of committee to oversee that process. And there'll be a number of public meetings that we’ll do,” Balliew said.

None among the seven-member Public Service Board was critical of the budget presented Wednesday. The group will vote on the annual budget on Jan. 10, and if approved, the elevated rates would take effect at the start of the next fiscal year, which begins March 1.

This article first appeared on El Paso Matters and is republished here under a Creative Commons license.

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