Los Alamos DPU presents $100.1 million two‑year budget, warns of near‑term revenue shortfalls and lower debt coverage

The Los Alamos County Board of Public Utilities reviewed a proposed Department of Public Utilities (DPU) two‑year budget Tuesday that sets FY2027 expenditures at $100,071,991 and projects tighter cash in the near term amid falling sales and higher debt service.

Joanne, DPU budget lead, told the board the proposal grew out of strategic planning, the department’s 10‑year capital improvement program and five‑year revenue histories. She said the packet shows the department’s combined operating, capital and financing plan for electric, gas, water and wastewater.

The budget’s headline numbers reflect several trends staff said are driving the change. Ben, DPU staff, said a major factor in the electric forecast is planned increases in sales to Los Alamos National Laboratory tied to a proposed high‑performance computing facility. "That's currently still in their plans. I don't know whether that's gonna happen or not, but we're planning for it accordingly," he said.

Other drivers include new solar and battery resources (Foxtail Flats), which staff said raise average power costs because battery‑equivalent dispatch is more expensive than solar on its own. Ben noted a recent power purchase agreement with Tenaska as a shorter‑term market reference while long‑term averages reflect higher battery costs.

Projected sales shortfalls in gas and water also tightened the outlook. Joanne said gas sales fell from an adopted 8.4 million therms to a projected ~6.6–6.8 million therms after a warm winter, reducing revenue and producing a projected net loss in the gas fund for FY27. Water distribution sales were revised modestly downward and include planned potable sales of about 15,000,000 gallons to the ski hill this winter.

Those lower revenues, coupled with increased debt service (including the wastewater treatment plant loan and planned electric distribution bonding), reduced DPU's debt service coverage ratio in the staff projections. Richard, who presented the debt analysis, said the ratio is projected to fall to roughly 1.15 in FY27 and about 0.85 in FY28 — below the DPU strategic target of 1.3. "So debt service is going up, revenue is going down," he told the board.

Staff presented an alternative (Option 2) to blunt the FY28 impact: split planned electric distribution bonding so $4.0 million is sought as grant funding and the remaining amount is bonded later, which in the model improved FY28 coverage to about 1.34. Dennis, who discussed grant opportunities, said staff recently applied for state grid‑resiliency funding and will reapply for the state 'Power' grant if it is offered again; he cautioned, "Hope is not a strategy." Board members asked staff to return with more detail and stressed that grants should not be counted as certain revenue.

Joanne previewed proposed rate actions: a roughly 9% gas rate increase and an 8% potable water rate increase for FY27/FY28 are planned to help restore cash positions over the forecast period. Staff said exact ordinances and timing will come back for board action in the next months.

The board requested additional breakdowns of the reserve components (operation reserves, debt service reserve, rate stabilization, capital contingency) and a clearer reconciliation of large swings in beginning unrestricted cash shown in this year’s packet versus last year’s table. Staff agreed to return with the reserve component calculations.

The board did not take a final vote on the budget Tuesday; staff said the FY27 expenditure budget will be brought back for board approval in March and then forwarded to Council in April for final action.