Monthly utility bills up by 72% in 10 years, Utilities forecasts

Monthly residential utility bills will increase by 72 percent in the next 10 years, according to the latest long-range forecasting conducted by Colorado Springs Utilities.

The forecast, which includes all four services — water, wastewater, gas and power — also predicts the typical commercial bill will go up by 57 percent. An industrial bill will grow by 48 percent between 2009 and 2018. Usage in 2008 by a typical industrial customer wasn't available.

The biggest jump in utility rates will be water, due to the $1 billion Southern Delivery System, a pipeline from Pueblo Reservoir that will increase the city's water supply by a third.

Residential water rates are forecast to more than double, increasing by 138 percent. Commercial water rates will go up by 196 percent.

The forecast also predicts Utilities will issue $1.337 billion in debt between 2009 and 2018, of which $515 million will pay for the pipeline, scheduled to go into service in 2012. The other half of the project, including a reservoir, would be built a few years later.

The second-largest contributing factor to bills is coal. The forecast says the portion of residential bills that pay for coal will go up roughly 80 percent by 2018 and commercial and industrial bills will rise by similar percentages.

The projections are based on inflation, competition and cost of borrowing. They also include cutting 200 full-time employees from Utilities' payroll between 2006 and 2011.

Springs Utilities cautions against taking the forecasts as gospel, and that increases could be higher or lower.

"While we make the best forecasts we can using the information available at the time, the volatility of commodity prices, interest rates, etcetera make utility price forecasts as difficult as trying to predict the stock market," Utilities spokesman Dave Grossman said in an e-mail.

Nearly half of Utilities' nearly $1 billion annual budget pays for coal, natural gas and purchased power.

"Our cost for natural gas has fluctuated from around $2 per MMBTU (million British Thermal Units) in 2002 to $11 per MMBTU in 2005-06," he said. "Coal prices have skyrocketed recently. Basic utility/construction commodities like coal, steel and concrete have doubled and tripled in price over the last few years."

Those types of costs, he said, can't be predicted with much accuracy years in advance.

Another factor that eluded Utilities forecasters was the economic slowdown last year, which caused a sharp drop in late 2007 and early 2008 in new-home hookups, a crucial source of revenue. That decline thrust Utilities into a budget crunch that triggered a hiring freeze and delays in some construction projects and maintenance work. It also triggered a water-rate increase that will be proposed late this year or early in 2009.

Since then, Utilities officials update forecasts monthly, rather than once or twice a year.

Some forecasts are upstaged by new ones the month in which they're produced.

Utilities issued its annual 10-year forecast in July, but gave a different five-year forecast report to the Utilities Board the same month.

The figures reported here are a combination of the two reports. Grossman said the utility updates forecasts "constantly" to reflect the most current data.

Past forecasts prove Grossman's point about predicting the future. The 2002 report, Utilities' first 10-year forecast, predicted the typical residential bill in 2008 would be $120 — 32 percent lower than the actual bill of $158.

The newest forecast shows the largest rate hikes of the coming decade will be enacted in 2009 and 2010, with increases ranging from 18 percent for wastewater to 27 percent for electricity.

Grossman blamed those sharp rises on Utilities' increased coal costs and natural gas prices.

The city's long-term coal contracts expire in the next two years, and officials predict coal costs will double in the next few years before leveling off.

As for natural gas, Grossman said prices already are spiking due to completion of the Rockies Express Pipeline, which makes natural gas in the region available to Eastern markets.

"Costs are expected to increase quite a bit in 2009," he said. However, gas production in the Rockies also is expected to rise in coming years, which should help moderate prices, he said.