Why is LCRA considering changing water rates?
LCRA provides water for more than a million people in Central Texas, as well as businesses, industries, agriculture and the environment in the lower Colorado River basin. The prolonged drought has reinforced the need for LCRA to diversify and expand its water supply to meet the anticipated water demands of one of the fastest growing regions in the nation, and LCRA's current rates do not cover all its costs.
LCRA is currently pursuing historic projects to build a new reservoir in Wharton County and develop groundwater in Bastrop County. These projects cost money.
By law, LCRA's water rates must recover the cost of managing and providing water. LCRA does not make a profit on its rates, nor does it have the ability to levy taxes. In addition to the water supply projects, LCRA must recover water management costs. These include daily river operations such as monitoring supply and releasing water to meet customer demand; water supply planning, permitting and development; flood management; water conservation; some dam safety and maintenance; and water delivery costs within three irrigation divisions.
In 2013, the LCRA Board Ad Hoc Committee directed staff to analyze the cost of water service to determine if a rate increase was necessary to cover costs and pay for new supplies. The LCRA staff analyzed rates and presented its recommendations for a rate increase on Jan. 14, 2014. The Board will consider the recommendations and hear from customers and the public for several months.
What customers will be affected?
LCRA, as a raw water provider, has two classes of water customers:
Firm customers are mainly municipal and industrial customers. Firm customers include many cities and community water providers in Central Texas. Most individual households and businesses in those communities are not direct LCRA firm customers, however, except for those who pump water directly from the Highland Lakes for domestic use. Firm water purchases are available without cutback, even through a repeat of the worst drought in the region's history, which is the 1947-57 drought.
Interruptible customers are mainly agricultural customers. They buy interruptible water, which costs less than firm water, but can be cut back or cut off during severe drought. For example, water from the Highland Lakes was withheld for most downstream irrigation in 2012 and 2013, and may be again in 2014.
Will my household water rates go up?
It's too early to know exactly what the new rates will be.
LCRA is a wholesale provider to many water utilities such as cities and municipal utility districts that adopt their own rates. LCRA can't speak to how each water utility customer will deal with the change, but all things being equal, early projections call for LCRA to raise rates to a level that may cost a household $3 to $5 a month more, assuming use of 12,000 gallons of water. The projected average household increase comes from LCRA's proposed rate increase to water used by its firm water customers. Many firm customers also pay fees for water reserved but not used.
What is being recommended by LCRA staff?
LCRA staff is recommending the Board increase LCRA's firm water rate in 2015, beginning in the January billing cycle, to cover existing costs and the costs of increasing LCRA's water supply to serve the future needs of a growing and drought-prone region. Specifically, the proposed firm rate and rate projections include the costs of five new groundwater wells in Bastrop County and building and operating a new reservoir downstream of Austin in Wharton County.
Initial five-year projections are that the firm-water rate would increase from $151 an acre-foot to $179 an acre-foot in 2015 and increase again each year to 2019. See the firm-water fact sheet for a range of projected rates and more information. These rate estimates assume LCRA obtains Texas Water Development Board financing at a 2 percent interest rate for the bulk of the new supply costs.
LCRA is proposing to increase its interruptible rates to cover the cost of delivering water, when available, to LCRA irrigation divisions and the capital costs associated with the irrigation divisions. Proposed rates for customers in the Gulf Coast and Lakeside divisions also cover a share of the costs of managing the Colorado River for flood management, water supply and other river management costs. The Garwood division does not pay these costs because of terms in LCRA's purchase agreement of the Garwood water right.
See the interruptible water fact sheet for projected rates in the three divisions through 2019, and more information.
What is the new rate structure LCRA is considering for firm customers?
LCRA staff is recommending the LCRA Board of Directors approve a new firm rate that would become effective in January 2015. The recommended firm water rate would cover the entire cost of water operations. This includes the costs of river management, new water supply and costs LCRA incurs to maintain agricultural irrigation operations even when not providing interruptible water. The firm rate would be set to cover all these costs because firm customers receive water every year, but interruptible customers, mostly rice farmers, can have their water cut off, as they did in 2012, 2013 and possibly 2014.
In years that interruptible customers receive water, the revenue generated by those customers would be used for the benefit of firm customers. Possible uses of interruptible revenues collected may include building equity, firm-rate mitigation and other lawful purposes. If LCRA is able to provide interruptible water, LCRA's firm rates may not have to increase as much. See the firm water fact sheet for more information.
What is the new rate structure LCRA is considering for interruptible customers?
For interruptible rates, LCRA has historically used a complex, two-part rate structure for rice and turf irrigation based on the number of acres irrigated, the amount of stored and run-of-river water provided, and the cost of delivering that water through LCRA's irrigation canals. LCRA staff is proposing the LCRA Board adopt new rates for 2014 that keep the same structure, but fully recover LCRA's costs of providing interruptible supply. Barring significant increases in combined storage before March, this would largely apply to Garwood customers in 2014.
LCRA staff proposes the rates be converted in 2015 to a single per acre-foot charge for water delivered in the three irrigation divisions. In the Lakeside and Gulf Coast divisions, the per-acre-charge would also include an allocated share of the costs of managing the Colorado River. This would make the rates easier to understand. See the interruptible water fact sheet for more information.
Would domestic use customers be affected?
Customers who draw water directly from the Highland Lakes for domestic use would be affected by new water rates because domestic use customers purchase firm water from LCRA. Initial five-year projections are that the firm water rate would increase from $151 an acre-foot to $179 an acre-foot in 2015 and increase each year to 2019. See the firm water fact sheet for a range of projected rates and more information.
How did LCRA staff come up with the proposed new rates?
In 2013, LCRA conducted a cost-of-service analysis to determine whether water rates needed to be raised to cover costs. A cost-of-service analysis examines the costs of providing water, and the costs associated with providing water to specific customer groups. See the cost-of-service fact sheet for more information.
What is the Board going to do with the staff recommendation?
The LCRA Board will thoroughly study the issue and hear from our customers and the public before making a decision about whether to raise rates, and if so, by how much.
The recommendations presented in January are a preliminary LCRA staff proposal. LCRA welcomes comment and discussion from interested parties and members of the public. LCRA is providing a number of ways for the public to participate in this process.
The recommendations are subject to change based on the feedback received during this public process and/or further policy direction provided by the LCRA Board. LCRA staff reserves the right to amend its preliminary proposal prior to any final decision by the LCRA Board.
Why is it so important for LCRA to add to the region's water supply?
Central Texas is one of the fastest growing regions in the country. It is also prone to severe droughts, such as the one it is currently experiencing. LCRA has, for generations, provided the region with a reliable source of water. Efforts to increase the water supply will help ensure that it is sufficient to meet the needs of a growing population during future droughts.
What new water supply projects are underway at LCRA?
In 2012, the LCRA Board committed to adding 100,000 acre-feet of new water to the region's supply within five years. LCRA is already well on its way to meeting that goal.
LCRA is pursuing a new reservoir in Wharton County that could add as much as 90,000 acre-feet a year to the region's water supply. This historic project is the first new reservoir in the region in decades. It is expected to be complete by 2017. The new reservoir will reduce demand on the Highland Lakes, improve agricultural reliability and efficiency and help reduce the risk of firm water curtailment. LCRA has already committed $18 million to the engineering and land acquisition efforts. The reservoir is projected to cost about $215 million.
LCRA also is pursuing groundwater on LCRA property at the Lost Pines Power Park in Bastrop County. Those wells could produce as much as 10,000 acre-feet in drought years. Two of the wells are pumping now, and the remaining wells are scheduled to be working by this summer. This project costs about $15 million.
How will LCRA let the public know about the water rate changes under consideration?
LCRA will post information about water rates on a webpage on LCRA.org, and will send out information via a new water rates e-newsletter.
In addition, LCRA staff will hold meetings with its customers to discuss potential new rates, answer questions and collect feedback for the LCRA Board.
How can I stay up-to-date on the water rate issue?
For ongoing news about the water rate discussion, sign up for the water rate e-newsletter on LCRA.org.
To comment on the rates, please email firstname.lastname@example.org.