RPU presents major capital plan and rate proposals; water, electric changes to affect customers

Tim McCullough, General Manager of Rochester Public Utilities (RPU), presented RPU’s enterprise budgets, cost‑of‑service studies and capital plans to the city council and to the city’s budget study session.

McCullough described a multi‑year capital program and several near‑term rate decisions. On water, RPU’s rate recommendation presented to the RPU board and noted for council review would raise the average residential bill by about $2 per month in 2026, McCullough said, driven by investments such as a citywide coordinated water‑main replacement program and an advanced metering rollout. He said the lead service line replacement work planned for 2026 is expected to be reimbursed by grants but that RPU expects to use short‑term debt to manage cash flow until reimbursements arrive.

On electric service McCullough told the council the utility is accelerating resource investments and presenting “a net impact of about $6 of additional cost per month for the average residential customer” in the first year of the proposed trajectory. He also said: “We are recommending a 66% rate change,” and he explained that the trajectory reflected a combination of wholesale power costs, major capital projects and accelerated renewable procurements. McCullough said some of the planned capital includes the advanced metering project and early commitments to renewable projects to preserve federal tax credit eligibility.

Why this matters: RPU operates as a municipal utility and funds its enterprise operations and capital largely through charges for service. McCullough said RPU is entering a phase of very large capital spending to replace and upgrade infrastructure and to add generating capacity; those investments and wholesale power costs are the principal drivers of RPU’s proposed rate trajectory.

Major capital and planning points McCullough cited - Advanced metering: a multi‑year advanced metering project is under way; McCullough described large capital needs and said RPU has already cash‑funded portions of the project. - Lead service line replacement: RPU requested and previously received authority to launch the program; McCullough said the work in 2026 (about $7.5 million anticipated in 2026) is expected to be reimbursable by external grants and that short‑term debt will help manage timing of cash flows. - Generating capacity and Mount Simon Station: McCullough described planned resource add investments, including an anticipated Mount Simon Station project (he cited a planning dollar figure of about $175 million) and said the utility expects to pursue debt financing (he cited an anticipated $240 million debt issuance in 2027 as part of capacity investments). He said the utility is also evaluating renewable energy procurements sooner than previously planned to capture federal tax incentives. - GT failure and rebuild option: McCullough noted a recent failure of one gas turbine (“GT 1”), said RPU is exploring a rebuild option that could restore capacity and reduce near‑term capital needs, and said a successful rebuild could reduce future debt needs.

Timing and governance McCullough said RPU presented the recommended budgets conceptually to the RPU board and that final rate recommendations will return to the RPU board and then to the council (the water and electric rate recommendations were noted for council review and slated to come forward for formal consideration on the council calendar later in the year). He also said the city and RPU are discussing a joint enterprise resource planning (ERP) approach and that RPU expects to add limited‑term staff to support major data migrations.

Quotes and attribution - “We are recommending a 66% rate change,” Tim McCullough said, and he added that the change produces “about $6 a month” for an average residential electric customer in the first year of the proposal. (Tim McCullough, General Manager, Rochester Public Utilities) - On water rates: McCullough said the water recommendation equates to “about $2 of additional cost per month for the average residential customer.” (Tim McCullough)

Ending McCullough told council members RPU will bring final rate proposals to the RPU board and that RPU staff will return to council for a more detailed study session in September to discuss resource planning, renewable procurement and long‑term rate implications.