Staff tells council 8.5% utility rate rise likely as city seeks to replenish reserves, fund CIPs

Manassas City staff told the City Council on April 7 that electric and water rates are likely to rise about 8.5% in the coming rate-setting cycle to restore fund reserves and pay for planned capital improvements.

The rate increase is driven in part by a projected 18% increase in purchase power costs for the electric fund in fiscal 2026, staff member Anna said, along with multi-year capital needs and steps to rebuild reserves after recent drawdowns. "The expenses are expected to increase by about 18% in FY26 based on the forecast we just received," Anna said. She added that the 8.5% rate recommendation is intended "to cover our reserve policy, which is 60 days of operating, 1 year of debt service, and 1% of net assets."

Why it matters: staff said several enterprise funds have used reserves in recent years for maintenance and emergency work, and the recommended rate changes are meant to replenish those buffers and avoid future service interruptions. Council members asked for clearer, itemized breakdowns to show how purchase power and other line items map to the proposed rate changes.

Electric operations and capital: staff presented details on the electric department’s budget and capital-improvement program. Tarek, the utilities CIP presenter, said the T&D maintenance and improvement project (E‑30) was increased to about $1,200,000 and remains the largest single electric CIP. He reported that crews replaced roughly 74,000 feet of underground cable in 2024, most of it more than 35 years old, and that at current funding the city can replace roughly 25,000–28,000 feet of cable per year. "With the current funding level of 1,200,000, this will allow us to do roughly about 25 to 28,000 feet of cable every year," he said.

Tarek also discussed E‑31, the generation-maintenance initiative. Staff briefed the council on plans to upgrade five generators across two sites (Church Street and Gateway) and said bids came back from three firms; one bid was substantially below earlier estimates. For substation work, staff proposed raising E‑37 funding to $600,000 per year to address rising equipment costs and noted a vendor can refurbish voltage regulators for about $5,000 each compared with $15,000 for a new unit.

Undergrounding and neighborhood work: staff outlined a planned undergrounding project along Long Street Drive (from South Grama Avenue to Portner Avenue) that would convert roughly 47 home services and underground overhead lines along that stretch. The full cost was estimated at about $2,600,000; staff said the work would be staged over three years using the current annual allocation of $900,000 plus surplus funds from prior years.

Water and sewer programs: on the water side, staff said chemical costs have increased about 10% with a 3% annual escalation expected for most line items. The water fund is also part of the reserve-replenishment plan and staff recommended a similar 8.5% rate change for water to rebuild reserves. Jeff, the water CIP presenter, described ongoing meter-replacement work (AMR), remote water-quality monitoring pilot work tied to future system modeling, improvements to boat-storage and dock facilities used for Lake Manassas monitoring, and a surge-tank expansion (W‑072) that will increase capacity from 14 to 18 MGD to help operations.

Sewer capital: staff described sewer work focused on main replacements and the Flat Branch interceptor as a larger-scale replacement project. The council was told the city's contribution to a regional UOSA re-rating or MFF project remains under review and that the project budget and outside funding availability (including potential WQIF grants) would influence the timing of sewer capital spending.

Next steps and public information: staff said a consultant will present detailed rate‑study findings and supporting graphics at an upcoming meeting so council can see a clearer, year-by-year picture of proposed rate changes and their effect on typical residential and small-business customers. Council members asked staff to supply a purchase-power breakout and a dollar estimate for the average household impact when that presentation is scheduled.