New rate designs recommended for Springdale water customers

Springdale officials are considering two options for changing the way it bills for water service, one of which could raise rates for residential customers.

The borough in May decided to undergo the rate study, saying that since the $7 million water plant was completed in 2020, officials have not done a cost or rate analysis of water billing.

Both of the options would lower the rate paid by Springdale Energy, the borough’s largest water customer.

Greg Herbert, a rate analyst with Gannett Fleming, presented council with the options this week.

The first option would maintain the current rates for all customers except Springdale Energy, which would see about a 28% decrease in its rates.

Herbert explained the move would bring rates in line with the cost of operating the borough water treatment plant. Springdale Energy accounts for about 41% of that cost. By lowering its rate, the company also would pay about 41% of the cost of operating the borough’s water treatment plant — about $7.40 per 1,000 gallons.

All other customers, including homes and businesses, would continue to pay the current rate of $10.25 per 1,000 gallons of water, with a $41 minimum quarterly billing.

“This rate option is basically cost-of-service levelization, where the revenues produced under this rate design matches the rate of the cost-of-service results and how they’re allocated by those two customer classes,” Herbert said.

The second option decreases Springdale Energy’s rate to $7 per 1,000 gallons and increases the rates for everyone else to $42.64 for the quarterly 4,000-gallon minimum, and $10.66 per 1,000 gallons after. How much more residential customers pay would depend on whether and by how much they exceed the 4,000-gallon minimum.

“It basically mitigates any risk of (Springdale Energy) going to find an alternate water supply,” Herbert said.

Both options aim to keep Springdale Energy as a borough water customer because, Herbert said, the loss of the energy company as a customer would be bad news for the borough’s other ratepayers.

If the borough lost Springdale Energy as a customer, it would result in a 69% increase to everyone else’s rates, where the minimum quarterly charge of $41 would go up to $69.40, Herbert said. Charges afterward would jump from $10.25 to $17.35 per every 1,000 gallons.

“Option 1 or 2 are both reasonable and fair rate designs that we’re proposing and recommending,” Herbert said. “They provide revenue stability for the borough. It sets the borough up well to be a little more proactive than reactive for emergency repairs and helping improve the reliability of the system.”

The rate options would be able to carry the borough through the rest of this year and 2025, Herbert said. He recommended the borough evaluate the rates each year.

Herbert recommended the borough keep its 4,000-gallon quarterly minimum and remove it for Springdale Energy, since it exceeds that minimum quickly. He said the average usage for the residential class per quarter is 8,200 gallons, and about 77% of those customers use the minimum 4,000 gallons per quarter or more.

Herbert also recommended the borough charge Springdale Energy monthly for its water usage.

“The borough already reads the meter daily for this customer, so it’s not going to be a significant cost to bill this customer on a monthly basis,” Herbert said.

A representative for Springdale Energy didn’t immediately return a request for comment Wednesday.

Springdale Council didn’t take any action on the recommendations.

“Everyone will have to absorb this and look it over,” council President Mike Ziencik said.