Los Alamos utility staff propose 9% electric increase for FY2026, $250,000 to implement time‑of‑use billing; board weighs lower‑rate alternative funded by Unip�

Los Alamos — Utility staff presented the Department of Public Utilities (DPU) FY2026 budget on Feb. 19, recommending a 9% increase in the county’s electric rates for fiscal 2026, a 7% sewer increase (2% already enacted; an additional 5% was proposed), and a $250,000 line item to implement a time‑of‑use (TOU) billing platform in the county’s Tyler Munis billing system. Staff said the changes respond to falling reserves, higher power costs and capital needs; board members debated an alternate plan that would lower the near‑term rate increase by drawing additional funds from the county’s Uniper settlement.

Utility Manager Philo summarized the department’s annual report and said DPU had used a temporary “sunset recovery” gas surcharge last year that the board approved and which “was recovered within the fiscal year,” while other funds are under strain. “We lost about a million dollars last year” in the electric distribution fund, Philo said, and the average cost to deliver power has risen substantially.

Why it matters: DPU staff and the board framed the budget as a choice between raising revenue now to pay for aging infrastructure and growing operating costs, or using a portion of a one‑time settlement (the Uniper settlement) to smooth rate increases. Staff said the utility must restore reserves and fund a capital program that includes line and equipment renewals, the White Rock Water Reclamation Facility loan, and distribution system replacements that are necessary to avoid repeated outages and water breaks.

Key numbers and proposals - TOU implementation: Karen Darman, senior finance staff, said the budget includes $250,000 “for that implementation in FY ’26” to enable TOU billing in Tyler Munis; staff said the appropriation is to reconfigure the billing system and operational processes, not to set final TOU price levels. - Electric: staff proposed a 9% average revenue increase for FY2026 and — in the baseline long‑range plan presented — an 8% rise in FY2027. Karen said the combined (blended) customer bill impact across utilities in the FY2026 proposal would be roughly a 7.4% increase for a typical residential account. - Sewer: staff proposed a total FY2026 sewer increase of 7% (noting 2% had already been enacted for Oct. 1; the budget would add an incremental 5%). - Gas and water: staff noted previously adopted increases — gas 5.5% and water 6% — already in the FY2026 budget projection. - Reserves and cash: staff reported restricted cash and reserves remain below target. In the presentation, electric distribution showed a projected unrestricted cash shortfall in FY2025; staff said available settlement proceeds from Uniper had been used to shore up the utility and that interest from invested settlement funds is planned to support capital spending.

Major staff points and supporting detail - Philo and finance staff walked the board through the annual report: gas surcharge recovery was completed within the fiscal year; electric distribution posted a roughly $1 million operating deficit in the prior year and rising wholesale power costs are a primary driver. Philo noted system reliability projects (bonnet/valve replacements on water lines, pipe repairs on SR‑4 supply to White Rock) and operational upgrades (standby crew quarters renovation). - Capital program highlights include the White Rock Water Reclamation Facility (in substantial operation), removal of lead paint from the Barranca tank, and Foxtail Flats agreements for 170 MW of solar paired with an 80 MW / 4‑hour battery proposal. - Staff said the county’s Office of Management and Finance (DFA) treats utilities as a joint utilities fund for oversight but the county charter requires each utility (electric, gas, water, sewer) be accounted for separately for rate and reserve purposes.

Board discussion and an alternate plan - The board debated the optics and the pace of increases. Staff offered an alternate that would reduce the proposed electric rate step (staff showed an illustrative 7%/7% option for FY2026/27) while bringing more of the Uniper settlement into operations in FY2026 (raising the internal transfer used to smooth rates from $2 million to $5 million). Staff cautioned the tradeoff: using more one‑time settlement funds reduces interest income and consumes funds that otherwise back reserves. - Karen summarized the effect: under the proposal the typical residential combined bill increases would be larger in the near term (staff’s proposed 9% electric) than in the alternative; the alternative reduced the immediate percent increases only a small amount but added roughly $3 million of Uniper proceeds to cover cash shortfalls and lower the visible percentage change. - Board members voiced differing priorities: some said the steeper near‑term increases are justified to restore financial health and fund capital; others favored a smaller step to reduce the optics of a large single increase and to preserve the option of smoothing customer impacts with settlement funds.

Time‑of‑use (TOU) billing timing and process - Staff said the FY2026 allocation of $250,000 is for software and billing system work to enable TOU billing (metering readiness and billing platform configuration). Karen said, “we’re going to be billing in Tyler Munis… the $250,000 is for that implementation in FY ’26.” She emphasized that approving the FY2026 budget appropriation does not itself set the TOU price design; the board will see an ordinance and proposed rate design (including possible demand charges and service‑charge changes) before any TOU rates are adopted.

What the board asked for next - Board members requested additional detail between now and the March meeting: rate design options, the specific projects that would be delayed if some of the increase is withheld, updated debt coverage and reserve projections, and scenarios showing the effect on longer‑term rates of using more settlement proceeds now. - Staff said March 19 is the board deadline to adopt the DPU budget for county submission; changes after the board’s March action are difficult because of county publication timelines.

Staff cautions and dependencies - Staff and board noted many capital projects are contingent on grants or low‑interest loans; if anticipated external funding is not available, projects would need to be delayed or rates further adjusted. - Staff emphasized that the Uniper settlement is a one‑time resource: using it to reduce near‑term rates trades off interim customer relief against future rate stability and interest income that can support capital.

Next steps and outlook - Staff will return in March with a final FY2026 budget and detailed proposed rate ordinances for any rate design changes, including TOU design. The board asked staff to present clear alternatives that show the tradeoffs of rate levels, the timing of projects, and reserve trajectories.

Ending: The DPU budget discussion framed a fundamental utility tradeoff — accelerate rate increases now to fund capital and rebuild reserves or moderate near‑term increases using finite settlement proceeds. The board set a schedule to finalize the FY2026 budget at its March meeting and asked staff for more granular scenarios and the ordinance language needed to implement TOU billing.