For several years, city officials have foreshadowed substantial hikes in water and electric bills.

Those hefty utility bills now may be just around the corner.

The city's staff is considering raising both water and electric rates 12 percent over eight months. Together, the average Austin home owner would pay an additional $20 or so a month.

City officials say the utility increases are coming for a variety of reasons, among them: investments in conservation, rising gas prices and old construction debt that needs to be paid off.

The electric increase is tied to Austin Energy's plans to increase the base rate for the first time since 1994, a technically and politically tricky process that is subject to state oversight.

The utility hikes would be included in the city's 2011-12 budget, which will be cobbled together over the summer and take effect on Oct. 1. The increases are likely to be included in City Manager Marc Ott's proposed budget, to be unveiled in late July. The City Council will approve a budget soon after.

"We think this is necessary for the financial health of the utility," said Greg Meszaros, director of the Austin Water Utility.

Meszaros said the water-rate increase is part of a transition to a fundamentally different way of billing customers. The utility would introduce a flat "sustainability fee" that would add $4.40 to almost all monthly bills (a few customers with larger-than-normal meters would pay a little more). That would pay for water-conservation education, undeveloped land to protect endangered species, new lines that recycle partially treated water for lawn watering, and other conservation measures.

The monthly bill is currently tied to how much water a home or business uses: the more water consumed, the higher the bill.

This approach, although the industry standard, has created "huge revenue swings" tied to the weather, Meszaros said.

In wet years like 2010, customers used less water, and the utility's water sales totalled $53 million less than the $415 million it was expecting to collect.

Charging based on water use also can encourage conservation; on the other hand, the more customers conserve, the less money the utility makes.

City officials say there are advantages to such conservation.

The Highland Lakes are a finite resource, they say, and the Lower Colorado River Authority, which sells water from the lakes to surrounding communities, will charge Austin millions more if the city hits certain water-use thresholds.

But even with the benefits of conservation, the utility has to meet its operating costs.

"One of the effects of conservation is we're not going to sell as much water in the short term, while the (financial) benefits of conservation are long term," Meszaros said.

The sustainability fee will address this dynamic, Meszaros said.

"It will pay for the things that are better for the environment in the long run," Meszaros said. The utility will also continue charging based on how much water a customer uses each month.

The new fee, plus a 5.2 percent increase in the water/wastewater base rate, means the typical Austinite would pay about $8 a month more to the water utility.

Some activists have been criticizing the utility lately for the planned water-rate increases, along with what they see as mismanagement of conservation programs and excessive spending on construction projects, primarily a new water treatment plant the city is building near Lake Travis.

Utility officials say the criticism is misplaced, noting that of the 12 percent rate increase planned for 2012, the treatment plant accounts for 1.7 percent, or about 53 cents a month. Meszaros said most of the rest of the increase is to cover added costs out of the utility's control, such as rising health care costs for employees, debt on construction projects from the 1990s and fuel costs.

Electric rates are also set to jump about 12 percent starting Jan. 1, adding around $12 to a customers' monthly bill.

Austin Energy is still a few months away from redesigning its base rates, so the exact amount of the increase isn't set.

Some customers may get a better deal. For instance, the utility might cut low-income customers or small businesses a break, one that would have to be recouped from some other customers.

But Austin Energy spokesman Ed Clark said that the average increase "will be very close to 12 percent."

The electric utility has not raised its base rate since 1994. One part of the bill, the fuel charge, which pays for things like coal and natural gas, rises and falls based on the market. That represents about one-third of the typical customers' monthly electric bill.

The remaining two-thirds of the bill covers poles, wires, employees and other operating costs. Austin Energy officials say that portion needs to be increased to keep pace with rising costs.

The city's budget office used similar reasoning in a recent financial forecast that assumed a higher property-tax rate.

In one of the options under that forecast, the owner of an average-valued home in Austin would pay $4.73 a month more in property taxes.

mtoohey@statesman.com; 445-3673

(GRAPHIC BOX: SEE MICROFILM)

Residential utility rate increases

Water/wastewater

Electric

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