LCRA staff has revised an earlier proposal to change the rates LCRA charges firm and interruptible customers for raw water.
In January, LCRA staff presented its initial rate proposal to the LCRA Board of Directors. Since then, members of the LCRA staff have spent many hours talking with customers and the public throughout the basin to collect feedback. LCRA staff has revised its preliminary rate proposal for the Board's consideration as a direct result of that information-gathering process. Revisions to the proposal will enable LCRA to recover costs while mitigating future rate impacts to its customers.
LCRA has long been committed to being a responsible steward of the river and the basin's natural resources. LCRA is determined to responsibly manage the water of the lower Colorado River from the uppermost tributaries that feed the Highland Lakes down to Matagorda Bay.
Managing the basin's water system comes with financial costs, known as river management costs. LCRA is committed to allocating these costs among firm and interruptible customers in a fair and equitable way. After evaluating feedback from customers and the public across the basin, LCRA is proposing to allocate river management costs among firm and interruptible customers based on the amount of water they use.
LCRA also recognizes that proposed rates need to consider key factors, including:
After considering these factors and input from customers and the public, LCRA staff is proposing a change in water rates that differs from the January proposal. The revised proposal:
The revised rate proposal for interruptible water takes a significant step toward achieving full cost recovery.
The proposal calls for the new rates for Lakeside and Gulf Coast interruptible supply to be effective January 2015, with a goal to raise rates to reach full cost recovery over time. New rates for the Garwood Irrigation Division could be approved for 2014 as part of a separate rate process.
All rates are per acre-foot of water. An acre-foot is the amount of water needed to cover an acre with one foot of water, or 325,851 gallons.
*As part of a separate rate process, LCRA is working on rates for 2014 that may be retroactively applied to Garwood and other irrigation customers that use LCRA groundwater and run-of-river water, or make use of LCRA canals to transport their own groundwater.
The proposed firm water rate fully recovers river management costs in all years, including years when interruptible supply is not provided.
In years when interruptible supply is provided, the revenues from interruptible sales will be used to benefit customers in areas such as:
All rates are per acre-foot of water. An acre-foot is the amount of water needed to cover an acre with one foot of water, or 325,851 gallons.
LCRA staff will continue to meet with customers and the public across the basin to discuss water rates and collect feedback for the LCRA Board to evaluate. Proposed rates are subject to change.
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. By law, LCRA's water rates are designed to 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.
As this drought persists, new rates are needed to enable LCRA to recoup its costs, which are not being recovered today largely because of the curtailment of water for most irrigated agricultural customers in 2012, 2013 and 2014. LCRA's proposed rate changes would increase rates for both firm and interruptible customers, and would bring irrigation rates much closer to full cost recovery.
LCRA's water management costs 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 Rates Committee directed staff to analyze the cost of water service to develop rates that fully cover costs and pay for new supplies. LCRA staff performed this analysis and presented its initial recommendations for a rate increase on Jan. 14, 2014. Since that time, staff has talked with customers and the public and gotten their feedback. Based largely on that feedback, staff revised its proposal in late March. LCRA will continue this public input process. The Board is expected to vote on water rates in June 2014.
Who buys water from LCRA?
LCRA, as a raw water provider, has two classes of water customers: firm and interruptible.
Firm customers are mainly municipal and industrial customers. Firm customers include many cities and community water providers in Central Texas, as well as lakeside residents who have contracts with LCRA to 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, the 1947-57 drought.
Interruptible customers are mainly agricultural customers. They buy interruptible water at a lower cost than firm water, with the understanding that interruptible water can be cut back or cut off during severe drought. Because of the extreme drought, water from the Highland Lakes was not available for most downstream irrigation in 2012, 2013 and 2014.
Will my household water rates go up?
As a raw water provider, LCRA does not set rates for individual residents or businesses that receive treated water from their local supplier. LCRA can't speak to how each provider would deal with new rates.
LCRA does provide raw water to lakeside residents with domestic use contracts. See question 7.
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. Specifically, the proposed firm rate and rate projections include all costs LCRA incurs in providing water to customers throughout the basin.
The current draft five-year projections are that the firm-water rate would increase from $151 an acre-foot to $175.46 an acre-foot in 2015, and increase an average of 3 percent a year from 2016-2019. See the firm water rate fact sheet for a range of projected rates and more information.
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 rate 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 and costs LCRA incurs to maintain agricultural irrigation operations even when not providing interruptible water.
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 debt retirement, new supply development (not including the Lower Basin Reservoir Project and groundwater wells at the Lost Pines Power Park), and potential rate credits. See the firm water rate 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 for Garwood customers that keep the same structure and fully recover LCRA's costs consistent with the long-term agreement between LCRA and Garwood Irrigation Co.
LCRA staff proposes the rate structure for all interruptible customers be converted in 2015 to a single per-acre-foot charge for water delivered in the three irrigation divisions. Rates for Gulf Coast and Lakeside customers would gradually increase over time to fully recover LCRA's costs of providing interruptible supply to customers in those divisions. In the Lakeside and Gulf Coast divisions, the per-acre-foot 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 rate fact sheet for more information.
Would domestic use customers be affected?
Customers who draw water directly from the Highland Lakes for domestic use are firm customers who would be affected by new water rates. The current five-year projections are that the firm water rate would increase from $151 an acre-foot to $175.46 an acre-foot in 2015, and increase 3 percent each year to 2019. See the firm water rate fact sheet for a range of projected rates and more information.
Why didn't LCRA stop releases of water to irrigated agriculture in 2011?
On Jan. 1, 2011, the combined storage of lakes Travis and Buchanan was 1.55 million acre-feet, or 77 percent of capacity. With the lakes that full on Jan.1, LCRA followed its state-mandated Water Management Plan and made water available for interruptible customers.
LCRA contracted for the entire irrigation season (both first and second crops) early in the year because the plan required LCRA to meet downstream farmers' irrigation needs, particularly for rice, for the entire year if combined storage was 1.4 million acre-feet or more on Jan. 1. Releases for second crop began about Aug. 1, when the combined storage was more than 1 million acre-feet. With the contracts in place, LCRA was obligated to make the water available and the LCRA Board would not have been able to stop those releases without breaking legally binding contracts. Seeking emergency relief from the Texas Commission on Environmental Quality (TCEQ) was not a viable option because TCEQ does not intervene in contractual relationships.
As the drought worsened and 2011 became the state's hottest and driest year on record, LCRA took unprecedented action to seek emergency relief from the Water Management Plan and cut off most downstream farmers from Highland Lakes water in 2012. This was the first time in the history of the organization this had happened, but the Board believed the unprecedented move was necessary to protect firm customers if the drought continued. It has secured similar emergency relief in 2013 and 2014.
The Board also has changed the way LCRA contracted for crops, splitting the decision for first and second crops to give LCRA more flexibility in water management decisions. More recently, LCRA changed the way contract with Garwood are handled, so LCRA no longer guarantees the amount of acres farmers can irrigate, but only the amount of water. This allows LCRA to more closely monitor water use.
As this was happening in 2011, LCRA also worked aggressively to update the 2010 Water Management Plan to ensure LCRA would never again be required to release such large amounts of water downstream during a severe drought. As in past updates, we enlisted an advisory committee of members representing interests throughout the basin that depend on the Highland Lakes. The 16-member committee included representatives from lake-area communities and businesses, municipalities, industry, agriculture and environmental interests. Together with the advisory committee, LCRA came up with a number of recommended changes to the plan to offer more protection to firm customers and give LCRA more flexibility to respond to a drought. All but one of the 16-member advisory committee agreed to the proposed changes.
The revised plan is pending at TCEQ.
Why can't LCRA address its costs by reducing the number of employees instead of raising rates?
LCRA has significantly reduced labor costs over the last few years. In fact, more than 500 positions have been eliminated since 2010.
What is LCRA doing to expand its water supply during this historic drought?
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.
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.
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 $35 million to the engineering, permitting 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.
LCRA is exploring low cost methods of financing these new water supplies in a manner that will eliminate short-term impacts on water rates and significantly reduce the need for rate increases for many years. The revised staff proposal on rates does not include funding of these new supplies.
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 fact sheet on how water rates are determined for more information.
What has changed since staff's January 2014 recommendation?
The revised proposal no longer includes costs of developing new water supply; allocates river management costs based on the amount of water used instead of share of committed firm supply; and includes updated cost information that has been developed since the initial proposal in January.
Why doesn't LCRA have a rate for people who use the Highland Lakes for recreation?
By law, LCRA cannot charge people who access the Highland Lakes for recreation. Recreational use of the Highland Lakes is a recognized beneficial use of the water, but this use is secondary to the firm uses of the water supply for municipal, industrial, domestic and other uses. Recreation also is secondary to the interruptible use of water by irrigated agriculture, when that water can be made available without jeopardizing LCRA's ability to meet its firm customer demands.
Why does LCRA supply interruptible water for irrigated agriculture?
LCRA's water rights and its enabling act recognize the beneficial use of the water supplies under its management for multiple competing purposes throughout its entire water service area. This includes the lower basin, which primarily relies on LCRA water supply for irrigated agriculture.
LCRA manages the water supply available in lakes Buchanan and Travis pursuant to a court order and a state-approved Water Management Plan (WMP) that recognizes that certain uses – mainly municipal, domestic, and industrial uses – have a priority to these supplies over irrigated agriculture. The WMP provides operating protocols that help ensure LCRA can meet reasonable demands of firm customers while still providing water for irrigated agriculture as long as possible. The prolonged drought has prompted LCRA to cut off water from lakes Buchanan and Travis for most irrigated agriculture three years in a row. The drought also has prompted LCRA to pursue new supplies for the benefit of all customers and to help reduce the impacts of future droughts in the lower Colorado River basin.
Is it a violation of LCRA's water rights to ask its firm customers to implement conservation and drought measures before it has completely cutoff irrigated agriculture?
The short answer is no. LCRA is required to supply water to users throughout the entire Colorado River basin so long as it can do so while also ensuring it is able to meet the reasonable demands of its firm customers.
LCRA, as a water supplier, also has the authority to issue rules related to water supply and water conservation, including drought response requirements. Further, state law requires all water providers, like LCRA, to adopt and implement water conservation and drought contingency plans and to pass these requirements on to their water customers. The LCRA's Water Management Plan (which is approved by the state) mirrors these requirements.
LCRA modifies its water conservation plan and drought contingency plan from time to time as conditions change, and LCRA customers must adopt and implement changes to their plans consistent with those changes. Although LCRA does not require firm customers to curtail any specific amount of water use prior to reaching a Drought Worse than Drought of Record, LCRA expects its customers to implement their water conservation plans and to implement specific drought response measures, consistent with LCRA's water conservation and drought contingency plans.
How do LCRA water rates compare with those of other regional water suppliers in Texas?
LCRA's rates reflect the reasonable and necessary cost of service considering the water-related services it provides and the customers it serves.
While some have asserted that LCRA's rates are higher than other regional waters suppliers, simply comparing numbers doesn't tell the whole story. In fact, it is very difficult to make an apples-to-apples comparison of LCRA's water rates with other river authorities and similar regional water suppliers in Texas because differences between these entities can significantly affect the rates, including different rate structures, different responsibilities, different infrastructures, and different customer contracts. For example, unlike LCRA, some entities have no costs related to flood control because their reservoirs do not serve a flood control purpose or because the U.S. Corps of Engineers is responsible for these costs; others have taxing authority that help mitigate their rates; and yet others have a larger customer base or larger volumes of water supply over which to recover the costs of managing the supply.
What is the Board going to do with the staff recommendation?
The LCRA Board will thoroughly study the issue and hear from customers and the public before making a decision about changing rates.
LCRA continues to welcome comments on the proposed rates. Comments are passed along to the Board of Directors for its consideration.
How will LCRA let the public know about the water rate changes under consideration?
In addition, LCRA staff will hold meetings with its customers to discuss potential new rates, answer questions and collect feedback for the LCRA Board.
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.
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 rates e-newsletter on LCRA.org.