Petersburg assembly hears utility rate study; wastewater plan proposes 25% increase in 2026

PETERSBURG, Alaska — Petersburg Borough staff and consultants presented a long-term financial model for the borough’s utilities at the assembly’s May 5 meeting, warning that the water, wastewater and electric funds will face growing funding gaps without rate adjustments and that immediate steps will be needed to meet new regulatory and operating costs.

Ari, client success team, Waterworth, the consultant that built the borough’s “live” rate models, told the assembly the modeling tool shows how operating costs, debt service and capital projects stack together and affect cash reserves. “I do wanna clarify that my role here today is not to advise you on what to do,” Ari said, adding the dashboards are intended to “facilitate the conversations” about possible rate options.

Water: code requires 3% for FY26

Chris (staff member) told the assembly that the borough’s code already includes a 3% rate increase for the water department in FY2026. “We have currently in our code a 3% increase for the water department for FY '26,” Chris said. Waterworth’s baseline shows the water fund’s cash position trending lower over the 2030s under current assumptions; the model uses 3% annual inflation on expenses and assumes some external funding for specific capital projects. Staff presented scenarios that would extend the fund’s solvency, including an approach of small, steady percentage increases (for example a continuing 3% each year) and larger up-front increases if the assembly prefers that option.

Wastewater: 25% proposed for 2026 to balance immediate needs

Waterworth and borough staff presented a separate baseline for wastewater that showed larger near-term funding shortfalls. To avoid running below the assembly’s operating threshold, the team proposed a 25% across-the-board rate increase in 2026 followed by a series of roughly 10% increases over subsequent years under the scenario shown to the assembly.

Chris described how staff arrived at the 25% proposal: “The 25% figure is what, we arrived at basically just to balance the budget for the next year,” he said, adding much of the immediate increase covers an additional operator position and sharply higher testing costs required by a pending permit.

Staff emphasized the 2026 proposal does not include the capital cost of a likely disinfection project at the wastewater plant; Chris said that project is still uncertain and that preliminary estimates range from about $10 million to $12 million if it must be built. He told the assembly the disinfection capital cost is not built into the 2026 rate proposal and that grant funding remains a possibility.

Assembly members raised concerns about timing, affordability and alternatives. Member Marsh asked whether a 3% annual increase would be sufficient; Member Lynn and others discussed how grant awards or delayed projects would change the needed rate path. Director Carl (staff member) and other staff showed alternative scenarios — for example spreading increases more gradually — and noted the Waterworth tool makes it simple to test many permutations.

Estimated customer impact

Staff provided a sample calculation for a typical residential user (4,000 gallons): the proposed 25% wastewater increase would raise that average monthly combined bill by roughly $12 to $13, according to figures shown during the presentation. Staff also pointed to a senior-citizen hardship rate program that reduces bills for very low-income residents; staff said take-up has been limited because the program’s eligibility threshold is low.

Electric: restructure, 4% revenue increase proposed

For Power & Light, Waterworth and staff recommended a lighter near-term revenue increase and a simpler rate structure. The electric presentation proposed a roughly 4% revenue increase in 2026 and a restructuring toward a single variable (per-kilowatt-hour) charge to simplify billing and encourage conservation. Staff said the proposed electric changes are intended to protect smaller residential users while better aligning each customer class’s billed revenue with its consumption; small businesses with low consumption could see lower bills under the new structure.

Sanitation and other funds

Sanitation was treated as largely stable in staff’s presentation: a modest 3% schedule in 2026 and 2027 was included in the model and staff said they anticipated no large immediate increases pending results of a regional CSW (waste) study that may change cost drivers.

Why this matters

Staff repeatedly cautioned that the models depend on several uncertain elements: grant availability, the schedule for the wastewater discharge permit from state and federal authorities, and the timing and scale of capital projects such as the Clearwell replacement and the Sandy Beach water main. The models showed that without some combination of rate increases, new revenue or major grants, several utility funds will fall close to or below the borough’s operating threshold in the early 2030s.

Next steps

Assembly members did not take a formal vote on rate ordinances at the meeting. Staff said the borough could incorporate some immediate increases already required by code (the 3% water increase for FY26) and use the Waterworth model to update assumptions and return with proposed ordinances and rate language for future readings. The assembly discussed timing for hiring, equipment purchases and whether to delay larger capital work until grant certainty improves.

Ending

Staff emphasized the new rate engine will allow borough officials to update projections quickly as grants, project schedules or permit timelines change. The assembly indicated it will consider ordinance language and public hearings at upcoming meetings before adopting any multi-year rate schedule.