Owensboro Municipal Utilities shared a five-year forecast for their company last week, with electric rates expected to decrease between fiscal years 2020-2025, though projections showed water rates increasing in 2025-2026.
According to Manager of Planning Jason Potts, who presented the forecast for fiscal years 2021-25, OMU residential customers were expected to continue their trend in using less water each year, while wholesale usage was expected to increase.
Potts said the next proposed rate increase would happen in 2025 and 2026 when residential water rates would increase by 5%. Revenues would also increase for OMU in the two years after raising those rates, he said.
The Cavin Plant expansion would decrease electric rates and help the water system, Potts added. Most water systems costs would remain fixed otherwise. Potts said OMU was expected to have adequate cash for its water system between 2021-25.
“Some of those shared costs are now moving to water as Elmer Smith is reduced out of our expenses,” General Manager Kevin Frizzell said.
Though revenues would trend toward a minimum in 2024-25, those numbers would bounce back in 2026 after the rate increases were complete, Potts said.
“Our water system is in good financial health,” he said. “We should see stable rates through 2024 with reasonable increases in 2025 and 2026.
As for the electrical system, the 4% base rate increase that was previously approved by City Commissioners more than offset the Environmental Control Costs (ECA) rate decrease. Potts predicted customers would see an overall rate decrease in their electric bills over the next five years.
“The rate adjustment did exactly what we said it would do,” he said.
Elmer Smith Station’s Unit 2 officially shut down over the summer and ESS debt service would continue through fiscal year 2026, Potts said, predicting that all capital needs would be paid out of rates and cash on hand.
“Our debt service decreased by our debt restructuring plan that was implemented during 2019 and 2020,” Potts said. “There is no additional debt restructuring included in this forecast.”
However, Potts did say he projected a decrease in OMU’s cash balances, due both to the effects of COVID-19 over the last fiscal year and potentially in 2021.
With more OMU Fibernet subscribers expected over the next few years, OMU’s telecommunications was projected to grow each year. By fiscal year 2026, Potts estimated that telecommunications would grow by $1 million a year.
“Telecom is a growing part of our overall electric system,” he said.
Days operating cash with the CIty transfer would decrease over time, namely in 2025 and 2026. The result would see OMU continuing to maintain and even decrease its rates, Potts said.
“All debts except for a relatively small one in telecom should be paid off by 2027,” he said. “We will continue to watch this as we get closer to 2026.”
OMU’s end-of-year balance for its electric system was expected to decrease to $58 million by 2026, Potts said. Last year, OMU’s end-of-year balance finished at over $90 million.
