Geneva aldermen eye hikes in water, sewer, electric rates

GENEVA – Geneva residents should expect to see increases in their water, sewer and electric utilities in the coming fiscal year as aldermen on Monday heard presentations on the need for more revenue to keep up with costs, maintenance, existing debt and expected new loans for capital projects.

Geneva has not had a water-sewer rate increase in four years, since May 2019, nor an electric rate increase in 10 years, officials said.

By consensus, aldermen approved staff to proceed on a 7.5% increase in the base water, usage and sewer charge in both of the next two years, then a 5% increase in the third year, and incremental electric rate increases over a few years, eventually reaching the recommended 9% increase.

At a special Committee of the Whole meeting Jan. 9, David Hyder of the Stantec Financial Services Team presented a water and sewer rate study that he, along with city staff, worked on over the past nine months. On the electric side, Superintendent of Electrical Services Aaron Holton and Eric Kamm of Stanley Consultants said they were five months into their study.

The recommended water and sewer rate increase would make the average residential water bill of $56.88 go up by $4.28 to $61.16 a month in the first year.

Hyder said the increase was necessary not only to maintain and run the system, but to qualify for low-interest IEPA loans for capital projects planned from fiscal 2023 to 2033.

The city plans to spend $12 million for the sanitary sewer river crossing, $17 million for solids handling improvements and $22 million for water main and lead service line replacements, he said.

Because of the magnitude of the projects, Hyder said they would be expected to be debt funded and result in $3 million to $5 million in annual payments.

“Not adjusting rates isn’t a viable option. You would essentially go negative by fiscal year [20]25,” Hyder said.

“We have seen a significant drop on a per-account basis in water and sewer usage,” Hyder said, speaking industrywide. “Since 1999 through 2016, there has been about a 22% drop per household in water usage.”

While it is great from an environmental standpoint that people are using resources more wisely, Hyder said, water utility costs are fixed regardless of how much water is produced or sewage is treated.

“That is a direct impact on your revenues. That has been placing pressure on utilities,” Hyder said. “Probably the biggest issue in addition to that is aging infrastructure. A lot of infrastructure has been put in place 70, 80, 100 years ago around the country. And the need to repair and replace that infrastructure has placed a significant burden on utilities.”

Fifth Ward Alderman Craig Maladra said not having adjusted rates in the past four year requires action now.

“We face the same challenges the rest of the industry faces. … We can’t avoid this,” Maladra said.

Electric rates

The main cost of the electric utility is the energy demand cost, which is 75%, with everything else, or 25% fixed, Kamm said. The residential service rate does not cover the 25% of fixed cost, so he recommended increasing it.

Capital costs facing the city’s electric utility are $18 million for the new Kautz Road substation and feeders and $5.5 million for the third transformer, switchgear and feeder for the Geneva Business Park III substation and the Old Kirk Road feeder for expected growth at Fabyan and Kirk Road.

The city also maintains a 90-day cash reserve in its electric fund for emergencies.

“Our primary objective is to understand what your expenses are and then understand what our revenue has to do to make up those expenses,” Kamm said.

Ironically, the electric utility faces the same challenges as the water utility, with customers using less.

“We are seeing reductions, especially in residential consumption – that’s pretty standard across the industry right now,” Kamm said. “Things are getting more efficient, people are using less power generally and being more considerate of their power usage. So I would expect to continue to see that residential power usage continue to fall.”

Aldermen were hesitant to support a 9% electric rate increase on the heels of giving the nod to a water and sewer rate increase.

Third Ward Alderman Dean Kilburg said he was concerned that an additional hike in the electric rate would be “sticker shock” to ratepayers and suggested going into reserves to keep the increase lower.

“Is there some way we can draw this out so we’re not looking at these first couple years a dramatic increase?” Kilburg said.

Swanson said he would like to see the recommended 9% electric rate increase spread out over a longer period of time.

Some aldermen suggested using some of the 90-day reserves to reduce the amount of rate hike, but Maladra cautioned the council to consider that option as a matter of last resort.

“We don’t know the type of [electric] use we’re going to have out there.” Maladra said. “We certainly don’t know the price of energy in the future. In some ways, it seems like we’re back where we were 20 years ago with the uncertainty in the energy market. Decreasing reserves in the face of uncertainty seems a little bit tricky to me. I would look to smoothing [rate hikes] first.”

Second Ward Alderman Marks agreed and said he would prefer the city spread out the increases over several years instead.

“We really ought to level out these rates. If it’s 3.5% a year for three or four years, I’m fine with that,” Marks said. “If we go into the fourth year and we’re still raising rates to catch up, I think that’s a little bit easier to swallow, especially since it’s been 10 years. … We probably shouldn’t have let it go that long.”

The presentations will be posted to the city’s website www.geneva.il.us.