Las Cruces Utilities (LCU) Department Inviting YOU to the Utility Ratemaking Process

Vital services provided by LCU LCU provides services. Customer pays bills. YOUR tax dollars do not support LCU

History of Utility Ratemaking In Las Cruces Prior to 2009 – City Council Process Rates were determined by City Council with staff input similar to tax rate setting process Customers lacked effective input Extended periods between rate increases caused “rate shock” to customers when new rates were finally approved Rates did not necessarily reflect true cost of service

History of Utility Ratemaking 2009 to 2016 – RAC Process Utility rates determined by methodology as established for regulated utility industry Methodology was more professional and better reflected LCU’s actual cost of service to each customer group City Council still maintained key role “Arm’s Length” process similar to NM PRC ratemaking Ratepayer Advisory Committee (RAC) represented residents and small businesses. Other customer groups could formally intervene Process proved to be difficult, lengthy, and very costly

History of Utility Ratemaking 2017 – A More Cooperative Approach Established industry methodology for rate review still the prime objective Role of City Council remained unchanged UCAG represents interest of all customer classes “Arms Length” requirement was eliminated LCU and UCAG share same technical consultants Individual customers are still free to intervene

UCAG is an Ad-Hoc Committee comprised of volunteers appointed by Mayor and Council in May 2016

Like you, UCAG members are all LCU customers… We volunteer our time to learn the utility rate review process, Review extensive documents, and Work with an independent consultant.

Reaching out to involve YOU UCAG holds monthly meetings, and Reaches out to educate and involve LCU customers in this process of ratemaking – at Farmer’s Market, the Mall, and speaking to community groups.

UCAG outreach events are published in local newspapers and online

YOUR input is most important in the ratemaking process UCAG members are doing our part; we’ve committed to two-three years to review rates for all four utilities, We are assisted by an experienced independent consultant chosen from a nationwide search, and We ask that you attend our monthly meetings and provide your input.

Utility Rate Making Process Utility Staff Determined Need for Rate Review UCAG Committee created Independent Consultant Hired By LCU Board Formal Rate Study & Preliminary Report by Consultant UCAG Gathers Public Input and Provides Recommendations to Consultant Results Presented to LCU Board Final Report By Consultant Action By LCU Board Action By City Council

Rates 101 Rates are determined separately for each utility. When utility rates need to be changed it is usually done via a highly technical three step process… Revenue Requirement – determines how much the utility will need in total to continue to provide good service. Cost of Service - divides the revenue requirement into fixed & variable charges appropriate to each Customer Class (residential, commercial, industrial etc.). Rate Design – produces detailed “tariffs” that set the charges and conditions of service for each customer class.

Water Customer Classes Residential Small Commercial Large Commercial Industrial Reclaimed Water Bulk Water Parks Park Off-Peak Parks Non-Potable

Probable Order of Rate Reviews Water (currently underway) Wastewater Gas Solid Waste All rates reviews are expected to require 2-3 years to complete.

LCU must budget and meet expenses just like you do: Revenues – income from your job, your spouse’s job; Operating and maintenance expenses – groceries, rent, clothes, car maintenance; Fund Balance – personal savings for emergencies; Debt service – pay off loans for a home, car, education, or credit cards; and Capital improvement projects – buy a home, add on to your home, upgrade bathroom or kitchen.

LCU revenue/expenses: Revenues – monthly payments from customers for utility services provided; Operating and maintenance expenses – staff payroll, office furniture and supplies, facilities maintenance, vehicle repair, fuel, electric bills, routine operational rehabilitation; Fund Balance – mandatory reserve of 2 months worth of operation & maintenance expenses for emergencies; (continued)

LCU revenue/expenses (continued): Debt service – upgrade/replace water, gas, and sewer utility lines in conjunction with Public Works street projects, construction of the new Water Quality Laboratory at the wastewater treatment facility, and/or coordinated projects with NMDOT that require underground utilities to be upgraded; and Capital improvement projects – LCU plans 5 years in advance for design and rehabilitation projects to the water system that will be sent out to bid, and upgrades to monitoring system.

Water Rate Proposal Highlights The water utility needs to add $3.8 million to its revenues as soon as possible in order meet its obligations.

Operating Expenses

Debt Service

Average Residential Water Bill Average Current Water Residential Bill $26.88

You can reach the committee at UCAG@las-cruces.org QUESTIONS? All documents associated with the rate review process are located at www.las-cruces.org/UCAG You can reach the committee at UCAG@las-cruces.org