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Water windfall



Water bills for Colorado Springs Utilities customers won't more than double by 2017 to pay for the Southern Delivery System and other upgrades, as previously predicted.

Instead of a 120 percent increase between 2011 and 2017, the hike could be less than half that under a new rate forecast being drafted. The change stems in part from the recession creating more competition among contractors — thus, lower construction costs. But the biggest reason is lower interest rates, which could save $700 million from previous estimates.

While officials won't release new projections until the May 16 Utilities Board meeting, chief financial officer Bill Cherrier says, "What I can tell you is, we probably lopped off several years of rate increases. That would be four years of 12 percent increases, instead of six or seven. Even the ones we need, we believe, will be less than 12 percent. Once we get up to a certain level of rates, we're likely to see virtually no water increases for quite some time."

Council President Scott Hente, also the Utilities Board chair, says the revision will help the economy.

"Any time the government does not have to take money from consumers, that puts more money into consumers' hands to do other things with," Hente says. "So that's a good deal."

SDS, slated to bring water to the Springs from Pueblo Reservoir by 2016, has been criticized for increasing costs since it was first proposed in the 1990s. Originally projected at about $500 million, the current estimate stands at $956 million through the duration of the project, which extends into 2021 with final payment of Fountain Creek mitigation, says Utilities spokeswoman Janet Rummel. She says the price has been influenced by changes in engineering, inflation, project alterations and regulatory requirements.

Those estimates are just for the actual work; they don't include borrowing costs over the bonds' 40-year term. The city originally projected interest at 5.5 to 6 percent, but the city has secured rates of 3.6 percent to 3.8 percent on the $355.5 million issued so far.

"It's crazy how much difference it is," Cherrier says.

Figuring 6 percent on a principal of $880 million created a widely reported estimate of $2.3 billion. Now, Rummel says, Utilities finance officials project a total cost of $1.6 billion, including interest, based on an average of 4.15 percent interest thus far and a range of 4 percent to 6 percent for future borrowing.

Cherrier says the city will issue more debt for SDS in August, and in 2013 and 2014 to finish Phase 1 funding for the pipeline, construction of three pump stations and a water treatment plant, which continues even as the city spars with opponents over a water quality permit. (See Noted, p. 14.)

In 2010, City Council raised rates by 12 percent for 2011 and 2012. Under the initial plan, the typical residential customer's average monthly bill would have leaped by 120 percent, from $37 in 2010 to $82 in 2017. If the last three years of 12 percent rate hikes aren't imposed, the typical increase would be 57 percent, to $58.

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