Consultant outlines preliminary cost-of-service and demand analysis ahead of 2026 rate recommendations

Stantec consultant Danica Katz briefed the Utility Policy Committee on July 10 about preliminary cost-of-service findings and a demand analysis intended to inform 2026 rate design.

Katz said the firm reversed its usual sequencing to analyze cost-of-service first and then complete the financial plan, allowing more detailed interclass allocation before finalizing rate-level recommendations. Stantec recommended calculating seasonal peaking factors using a four-year average to reduce volatility caused by unusually dry or wet years; the change is intended to avoid assigning disproportionate costs to a single customer class for one extreme year.

Using FY2025 data as a snapshot, Stantec showed single-family customers underrecovering relative to cost while multifamily, commercial and industrial customers were roughly at or slightly above cost recovery. As an illustrative example only, Katz showed how a hypothetical 5% total revenue increase might be allocated — single-family might rise about 6.75% while other classes would see smaller increases — but she emphasized that the final percentage for FY2026 depends on the revenue-sufficiency analysis scheduled for August.

Committee members asked for materials a week prior to meetings and discussed participation in the city/staff/Stantec rate conversations; the UPC moved and approved a request that member Peter participate in the upcoming rate-setting sessions with Stantec and city staff. Stantec plans to return with a revenue sufficiency analysis and final class allocations at the committee’s August meeting, with a recommendation to the UPC in September and city commission consideration in October.