City staff presented water and electric utility forecasts and customer‑bill examples at the July 19 budget work session, describing how cost‑of‑service recommendations would affect cash reserves and customer bills.

Why this matters: Utility rate adjustments change recurring costs for households and businesses and are subject to public notice and rate‑board review. Forecasts inform the broader FY26 budget and the council’s decision about whether to include a rate change in the adopted budget.

Water: staff showed the cost‑of‑service model and said the consultant’s proposed scenario calls for a notable near‑term revenue increase to maintain operating targets. Staff said the model contained a 12% revenue increase in 2026 in the study scenario (followed by smaller increases in later years to sustain reserves and coverage) and that without any increase the operating fund trend would fall “below that 0 line” in the cash projection. Staff said they would provide the full cost‑of‑service report and a detailed bill‑impact analysis before the public hearings.

Electric: staff offered an illustrative multi‑year scenario that applies a 2% rate increase in FY26 and 2% in subsequent years; staff said the 2% annual approach produces steady reserve rebuild and favorable debt‑coverage indicators in the model. The presentation included customer examples for a variety of residential heating sources (gas‑heat, electric‑heat, heat pump, apartments) and showed the approximate monthly dollar impacts for high‑end customers in each class. For example, staff presented that a higher‑usage electric‑heat residential account would see roughly a $7 per month change in a winter month under a 2% increase and a larger change for very high users under a larger increase; staff emphasized these examples represent above‑average usage for those rate classes.

Council discussed the power‑cost adjustment (PCA) mechanism for electric bills and staff said the PCA has been capped relative to a residential tier and that recent higher market costs resulted in exceeding budgeted PCA recovery in some months. Council members asked staff to return with a two‑year look at how the PCA has performed and whether board discussion should revisit the PCA cap. Staff said the water and light board has already discussed possible percentage adjustments and that staff will bring formal rate proposals through the board and the budget process.

Ending: Staff recommended including a 2% electric adjustment in the FY26 budget model and said they will provide fuller bill‑impact tables, the complete cost‑of‑service study, and communications plans to the council and the utility board ahead of the formal hearings.