Charlottesville officials propose utility rate increases as debate intensifies over BP carbon offsets

Charlottesville officials presented a proposed package of FY27 utility rate changes that would raise combined water, wastewater, stormwater and gas charges for an average household by about $9.54 per month, and scheduled the ordinance for a second reading at the next council meeting.

The presentation by Jason Mley, deputy director of utilities, and Chris Cullinin, the city’s director of finance, laid out drivers for the increases: growing debt-service costs tied to the Rivanna Water & Sewer Authority’s community water supply projects, ongoing capital needs to replace aging mains, and higher operating costs. Cullinin said the water utility’s revenue requirement will be about $23 million and wastewater about $20.5 million in FY27; Ravanna/RWSA supply and debt are a growing share of customer bills.

“The largest portion of that increase is the city’s share of Ravanna Water and Sewer,” Cullinin said, pointing to long-running capital projects that will raise the city’s water-related debt service for several years.

Councilors pressed staff on affordability protections. Cullinin and staff pointed to existing programs administered locally: the LIHEAP energy assistance program for gas customers, and expanded water/wastewater bill credits that were increased last year from $150 to $250 per utility for eligible customers. “We increased the water and wastewater credits to $250 to keep pace with rising rates,” Cullinin said.

The public hearing also surfaced a sharp dispute over how the city plans to use a small, but visible, line item in gas rates: funds for carbon offsets. Community Climate Collaborative speakers and other residents urged council to reject renewing a one-year contract with British Petroleum (BP) that had been included in the proposed rates. “Charlottesville must not sign a new contract with BP — not for another year, not for another dollar,” said a community speaker who reviewed projects the BP credits funded and called several projects problematic.

City staff acknowledged the BP agreement had been provisionally included in the rate model and said the contract paperwork had arrived for review. Finance staff said about $600,000 in credits from a prior rate case will be applied to reduce gas revenue requirements, and the ongoing annual offset payment in the proposed gas budget is roughly $300,000. Legal and finance staff warned that utility enterprise funds must be used for costs that are attributable to utility operations and that offsets’ benefits should be traceable to the emissions they are meant to mitigate.

“Enterprise funds need to be used for costs attributable to the enterprise,” a city attorney/finance representative told council during the discussion, urging care in how the city describes and deploys offset spending.

Several councilors said they were uncomfortable renewing the BP contract without more scrutiny and preferred directing staff to explore local, verifiable alternatives — for example, investing directly in weatherization programs through local partners such as LEAP — but they also noted timing constraints. Staff said the proposed rates had already incorporated the offset assumption and that contract deadlines and the pace of rate advertisement limited options before the next vote. Councilors asked staff to research whether the rates could be modified between first and second reading if the council chooses to pause or remove the offset payment from the FY27 proposal.

The utilities presentation also described a multi-year projection of rising water costs, driven in part by large regional projects, with staff estimating average increases in the range of 8–9 percent annually over a multi-year horizon depending on capital plans.

The public hearing remained open; staff said they would return with any necessary legal or budgetary clarifications before the second reading. The council did not vote on the ordinance at this meeting and scheduled final action for the next session.