Denver Water, faced with dwindling revenues from a drop in consumption, might have to boost rates by as much as 45 percent by 2008 or cut costs by $63 million, utility officials said Wed nesday.
That’s under the “mother of all monster scenarios,” said David LaFrance, Denver Water’s finance manager, and not likely to affect the utility’s 1.1 million customers.
A combination of smaller rate hikes and budget cuts is more likely to help compensate for dwindling revenues resulting from record lows in water use, with consumption dropping 26 percent since 2000.
A rate increase of 8 percent in each of the next three years is already planned. The worst-case scenario would add about 20 percent.
The utility’s board of commissioners directed staff to consider the worst-case scenario – in which demand remains 24 percent below average consumption – as they prepare demand and revenue forecasts.
Water managers say it has been difficult to craft those plans because no one has been able to figure out why water use has plummeted in recent years, even as the number of customers continues to increase.
Denver Water expected a drop after the drought struck Colorado in 2000 – a trend called the “drought shadow.” No one expected water use to decline to levels not seen since 1969.
“That’s the debate around here,” said Chips Barry, Denver Water manager. “The question is, how much of it is a change in behavior and how much is weather-related?”
While the board won’t be making any decisions about long- range financial plans any time soon, it will likely be asked to approve a new rate structure this fall.
Utility staff on Wednesday unveiled the concept behind a new rate structure, which divides customers into four “blocks” with those who use more water paying higher rates.
LaFrance said the existing three-tiered rate structure does not differentiate between customers with different lot sizes, but the new structure will.
Western Resource Advocates, a nonprofit environmental law and policy group, applauded the utility’s preliminary plan.
“It’s an important concept – the bigger lot you have, the more water you use, the more you pay,” said Bart Miller, the group’s water program director. “In the end, it’s good news for conservation-minded customers.”
Staff writer Kim McGuire can be reached at 303-820-1240 or kmcguire@denverpost.com.
