Cleveland Utilities residential customers using 10,000 gallons will pay an extra $2.53 per month.
Ken Webb, CU senior vice president and CFO, pointed out the rate hike — which takes effect July 1 — will increase the 5,000-gallon customer’s bill for wastewater service from $28.61 to $30.04 per month. Those using 10,000 gallons will see their monthly statements rise from $50.53 to $53.06.
In spite of the increases — which are being implemented by CU in order to qualify for a $10 million loan to be used toward sewer rehabilitation costs — local utility customers are still faring better than several Tennessee neighbors.
To bring perspective, Webb pointed to the rates charged in a few other cities for residential wastewater services at a 5,000-gallon-per-month usage. Some include Chattanooga, $27.68 (an increase is pending); Johnson City, $28.60; Tullahoma, $34.14; Murfreesboro, $35.86; Hamilton County, $40.15; Athens, $44.50; and Knoxville, $65.25.
“The increase is necessary to allow Cleveland Utilities to participate in the Tennessee Department of Environment and Conservation (TDEC) Clean Water State Revolving Fund (SRF) Loan Program,” Webb explained.
The money will go toward paying a portion of the costs of CU’s massive SCOPE 10 sewer rehab program which is working to curtail inflow and infiltration (I/I) into cracked, damaged or aging sewer lines and manholes. I/I is to blame for manhole overflows, sewer backups and isolated flooding in some areas of the city.
SCOPE 10 is an acronym for Strategic Commitment to Protect the Environment. The 10-year program, which was launched last year, carries a current price tag of about $30 million.
I/I within CU’s sanitary sewer system is at its worst during periods of heavy rainfall.
The $10 million SRF loan comes with a fixed interest rate of approximately 1 percent to be repaid over a 20-year period. An added SRF incentive carries a “debt forgiveness” provision of $451,200, meaning this portion of the loan will not have to be repaid.
“The SCOPE 10 program was submitted to SRF for consideration last year and after a review by SRF officials it was approved for loan participation,” Webb explained. “As a part of that review, a study was conducted by SRF of the current wastewater rate structure to determine if the current rates needed an adjustment in order to provide for the repayment of the loan.”
Subsequently, the SRF study required a 5 percent increase effective July 1. CU staff had previously recommended a 4.5 percent rate increase over the next four years in order to help finance the costly SCOPE 10 package.
“This projection by SRF agreed with the position taken by Cleveland Utilities staff in a presentation made at a joint session of the Utility Board and the City Council last fall,” Webb said. “In order to keep the process moving forward, it was necessary to consider this action prior to the completion of the budget process later in 2013.”
The SRF loan program was created through an amendment to the Federal Clean Water Act of 1987. The loan program is intended to provide low interest loans to cities and other public entities for the planning, design and construction of wastewater facilities.
The federal Environmental Protection Agency awards annual capitalization grants to fund the program, and the state of Tennessee provides a 20 percent funding match, Webb explained. Loan payments are returned to the program and used to fund future loans, he said.
Webb also explained CU’s wastewater billing process.
“Wastewater customers are billed based on monthly readings taken from their water meter,” the longtime CU fiscal officer cited. “Residential wastewater customers are subject to a ‘sewer cap’ in the months of April through November. The program has the effect of ‘capping’ the monthly charge for wastewater to a current maximum of 14 units which is equivalent to 10,500 gallons per month. Billings for the months of December through March are based on water meter readings without the adjustment for the cap.”
The coming 5 percent rate hike will be an across-the-board adjustment.
“This means both the fixed customer charge portion of the bill and the variable charge portion based on usage will be increased 5 percent,” Webb said.
Although CU customers will pay a slightly higher rate for wastewater service effective July 1, Webb said the larger amount is still “... competitive with other service providers in Tennessee.”
The wastewater rate hike was recommended by the Cleveland Board of Public Utilities in a called session held Feb. 4. An ordinance authorizing the increase was approved on first and second readings by the City Council on Feb. 11 and Feb. 25.
CU launched the SCOPE 10 initiative in order to address worsening overflow and flooding issues inside the city. Had CU delayed in taking action, the utility stood the risk of EPA stepping in and handing down mandates similar to those imposed in several Tennessee cities. A few include Chattanooga, Nashville, Knoxville, Brentwood and Oak Ridge, among others.
In those cities, public utility companies are being required to raise wastewater rates from 50 to 300 percent in order to pay for sewer system improvements similar to SCOPE 10.