BY ROBERT GIBSON
Chair
Los Alamos County Board of Public Utilities

You’re right. Los Alamos utility rates are increasing – although not as much as some suggest. Why? What can be expected for the future?
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The basic driver of our utility rate increases is inflation.

Inflation pushes up the cost of almost everything. Utilities is no exception. We are most familiar with the Consumer Price Index (CPI) as its measure. That index follows prices of a specific basket of consumer goods.

We are all aware that many products and services often experience increases far higher than CPI. That is true of many things the Dept. of Public Utilities (DPU) buys, too, particularly electric transformers, copper wire, and steel (of which there is a lot in the new White Rock wastewater plant).

Yet, over the past 25 years, the total annual utility bill for the typical Los Alamos customer has gone up slightly LESS than the CPI. Yes, less.

Wait. Aren’t all of our utility rates currently increasing faster than CPI? Yes, they are. CPI is currently up about 4% over the past year. Water rates for the typical customer are proposed to increase 8.0% on October 1. Gas rates are proposed to increase 16.5% on September 1. Wastewater (sewer) and electric rates just went up 7.0% and 8.0%, respectively, on July 1. The latter increase is complicated by the implementation of Time-of-Use and Demand rates, but the overall increase for the typical customer is 8.0%.

The primary reason for these more-than-CPI increases is that utility rates did not maintain pace with inflation for many earlier years. DPU is having to play “catch up.” While customers benefited from unsustainably low rates, DPU’s cash and reserve accounts were depleting. That is not healthy or sustainable.

Utilities stands on its own financially. Per the County Charter, there is effectively a financial firewall – with only a couple small holes – between Utilities and the rest of County government.

Actually, each of the four utilities is separate, too. No tax money is involved, nor can it be. Utility operations are funded entirely from customer charges.

Natural gas is DPU’s most serious financial challenge right now. Thus, the need for the largest increase. Future increases are projected to be much closer to CPI.

While the proposed gas rate increase is large, the typical customer pays about the same total rate for gas as they did twenty years ago. That’s in current dollars without any inflation adjustment.

Few other things cost the same as they did in 2006. What a deal! Due to fracking, gas itself has gotten much cheaper, although its price varies from month to month. However, the cost associated with gas transmission and operating the delivery system have kept going up, again largely driven by inflation.

DPU and the Board of Public Utilities, BPU, have started an in-depth review of Utility financial practices and policies for the first time in a decade. Unless inflation – baked into Washington policy for decades – magically disappears, rate increases will likely continue to be necessary. We can try to make them smaller and more consistent, so future increases will look more like annual cost-of-living adjustments than the larger hikes currently needed to catch up.

This article represents the individual views of its author, not necessarily those of the Board or
Department of Public Utilities.