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Consultant: Water system is underrecovering by roughly $5.9 million, recommends further analysis
Summary
A Jackson Thornton presentation to Oak Ridge City Council reported a FY25-normalized water revenue requirement of about $17.04 million and a systemwide recovery of ~66%, implying roughly a $5.9 million gap; staff said a master plan and FY26 data are needed before any rate changes.
Jim, the consultant who led the Jackson Thornton cost-of-service review, told the council the water fund's FY25-normalized revenue requirement is about $17.04 million and that one-time grant receipts should not be factored into rates. He said the study excludes depreciation as a non-cash need and emphasized that the residential customer base drives the system: "You're overwhelmingly a residentially driven system," and "94% of your customer base is residential," he said.
Jim walked council through the allocation results and the headline recovery numbers: "Based off the need established, the recovery for the system is at 66%...that represents about a $5,900,000 shortfall from current rate revenue." He explained the Department of Energy (DOE) is a large single customer (the study showed DOE accounts for roughly 51% of water volume) and that the DOE contract and usage allocation will be a focus of future negotiations. Council members asked clarifying questions about benchmarks for fair-cost recovery; Jim said an acceptable recovery range by rate class is roughly 97%–103% in a textbook cost-of-service model.
Staff and consultants stressed these are preliminary findings and recommended several next steps before returning with rate proposals: re-run the analysis using FY26 data, complete the water master plan to clarify capital needs, negotiate DOE contract terms where appropriate, and consider targeted changes (customer-charge adjustments, capacity/impact fees). Council did not vote on any rate changes; staff said they expect to be back with more detailed proposals after the master plan and additional data are complete.
