Richmond Gas Works outlines financial plan, adopted 5.25% rate increase and plan to add in-house crews

Richmond Gas Works staff briefed the Governmental Operations standing committee on an updated financial plan, recent federal grant awards and a proposal to shift pipeline construction from contractors to in-house crews.

Dan Reifenberg, speaking for Richmond Gas Works, said the utility has about 28,000 meters/customers and is forecasting a modest revenue increase under rates the committee said were already adopted. He told members the utility projects revenue will exceed expenditures under the adopted rates and that rate adjustments are intended to rebuild operating and capital reserves after recent years of increased operating costs and significant capital needs.

Key financial points: Reifenberg said the utility had approximately $10 million in free cash flow in the plan illustration, targeted debt-service coverage of about 1.5, limited liquidity (days of O&M coverage in the low 20s under then-current levels) and capital-reserve targets to avoid “rate shock” while preserving bond-credit strength. He identified $65 million in PHMSA (Pipeline and Hazardous Materials Safety Administration) grants the utility has won across multiple years, which will help rebuild capital reserves.

Rates and billing: Reifenberg said a 5.25% across-the-board increase was adopted to support the plan. He and staff described the purchase-gas-cost adjustment as a pass-through component of bills that varies with commodity prices (Henry Hub index) and that monthly purchase-gas-cost adjustments can change bills as commodity prices move.

Construction and staffing: Gas Works described a plan to bring more construction crews in-house rather than relying on contractors after contract renewal evaluations showed higher contractor costs. The department’s staffing proposal would start with two internal crews and ramp up to 18 crews over several years; the presentation showed a break-even point with contract costs after roughly one year of operation for internal crews (year 2), after equipment purchase costs are absorbed.

Committee reaction and questions: Council members asked why the plan prioritized operating reserves rather than accelerating infrastructure replacement, noting many residents face affordability pressures. Staff said the joint revenue-bond structure for the city’s utilities historically ties gas, water and wastewater together and that strengthening reserve positions supports favorable bond terms. Reifenberg said contractors remain constrained by workforce availability and adding internal crews is a multiyear training effort that would increase construction capacity but cannot be done overnight. He also said the utility performs a periodic cost-of-service study (about every five years) that sets classes and cost allocation between residential, commercial and industrial customers.

Operational details: Reifenberg noted the system includes roughly 1,000 miles of main and nearly 2,000 miles of service pipe, and that roughly 50 miles of cast- and ductile-iron replacements remain under the system renewal program. He said 18 filters and 4 out-of-service filters (context: this figure related to the water discussion earlier) and audit updates were included in the presentation; the gas-works audit table listed 41 open recommendations at the time of the briefing with two high-priority items recently closed.

No formal vote on gas policy or structural change was recorded at the committee meeting. Staff said the main extension policy (the utility’s policy determining cost contributions when developers or customers request service extensions) will be provided to the committee for review.