Mansfield initiates cost of service study to revamp water and wastewater rate structures

Mansfield initiates cost of service study to revamp water and wastewater rate structuresThe Texas municipality is working with NewGen Strategies and Solutions to evaluate its fixed and volumetric utility rates, aiming to enhance conservation signals while maintaining strong debt service coverage.

The city currently generates 37% of water revenue and 40% of sewer revenue from fixed charges, easily covering its $7.3 million in annual debt obligations.

With 56% of residential water consumption falling within a single 2,000 to 32,000-gallon tier, consultants recommend adding new volumetric tiers to better incentivize conservation.

The study will utilize the AWWA base extra capacity method to allocate costs among residential, commercial, and wholesale customers.

Final recommended rates are expected in June 2026, ahead of budget adoption in October.

The City of Mansfield, Texas, has launched a comprehensive water and wastewater cost of service study to evaluate and potentially restructure its utility rates. During an April 13 work session, city officials and consultants outlined a three-step process to determine revenue requirements, allocate costs across customer classes, and design a new rate structure ahead of the October 2026 budget adoption. Chris Eckroth, CEO of NewGen Strategies and Solutions, praised the utility's current financial management. Mansfield generates approximately 37% of its water revenue—totaling $9.5 million—and nearly 40% of its sewer revenue from fixed charges. This combined $17.7 million in fixed revenue provides strong coverage for the utility's $7.3 million in annual debt obligations, creating significant capacity for future capital projects. Despite the strong financial baseline, the utility's volumetric rate design requires updating to better promote water conservation. Currently, 56% of consumption falls into a single broad tier ranging from 2,000 to 32,000 gallons, with less than 5% of residential consumption reaching the highest tier. Eckroth noted that this structure fails to send an effective conservation signal to the majority of users. The ongoing study will explore breaking these volumes into five or six distinct tiers to more accurately price peak demand and encourage efficient water use. The rate study will employ the American Water Works Association (AWWA) base extra capacity method to allocate costs equitably among residential, commercial, industrial, and wholesale users. Eckroth highlighted the need to review meter equivalency charges, noting that the city currently charges 1-inch meters nearly 2.5 times the 3/4-inch rate, which may need adjustment to align with AWWA metrics. The city will also review its policy of charging outside-city-limit customers a 10% premium, ensuring the surcharge is fully justified by the cost of service to avoid potential protests to the Public Utility Commission. NewGen Strategies expects to finalize the utility's revenue requirements in the coming weeks, proceed with class cost allocation in May, and present recommended rate designs to the city council in June.