Consultant recommends scrapping declining-block structure in Henderson water-rate study; council to consider action in October

City staff and consultant Will Kerr of Raftelis presented a water-rate study at a Sept. 9 work session that recommends changing Henderson City's water and sewer rate structure.

Kerr said the city has not raised retail water and sewer rates since 2019 while the Kerr Lake Regional Water System (KLRWS) increased rates last year, leaving the regional system paying out more than the city collects. The study identified the city's declining-block rate structure (which provides discounts to higher-volume users) as outdated and potentially harmful to state scoring if the city seeks loans.

Two options were presented to produce equivalent revenue by the end of fiscal year 2026. Option 1 would raise water revenue about 13.5% and sewer revenue about 7% (based on a 500 Ccf usage assumption). Option 2, the consultant's recommendation, would remove the declining-block structure and set a household water-usage allowance at 400 Ccf (instead of 500 Ccf). Staff said Option 2 is fairer to customers and easier for staff to administer.

Mayor Elliott asked whether projected population growth was included in the calculations; Kerr said it was not and the analysis relied on historical usage trends. The consultant also noted that the current differential charged to customers outside city limits is 2.5 times higher than inside; his personal recommendation would be to move that differential closer to two, though the two presented options preserved the 2.5 differential.

Councilmember Lamont Noel asked how over-usage would appear on a bill; Customer Service Manager Shay Bennett said usage would be rounded down to 400 Ccf for the allowance calculation.

Next steps: City Manager Blackmon said staff will return with a CAF in October for council action on the recommended rate structure.