El Paso approves $1.16bn budget and 12% rate hike amid infrastructure failure fallout

El Paso approves $1.16bn budget and 12% rate hike amid infrastructure failure falloutThe Public Service Board has authorized a $770 million capital improvement program to address aging assets and water scarcity, even as clean-up continues from a massive transmission line failure that left 100,000 people without water.

The Public Service Board (PSB) approved a $1.16 billion annual budget for FY 2026-27, including a $770 million capital improvement program (CIP).

Water and wastewater rates for the typical residential customer will rise by 12%, increasing the monthly bill from roughly $82 to $92.

The Board voted 5-2 in favor of the budget, with the Mayor and another member dissenting due to affordability concerns.

The vote occurred days after a 36-inch transmission line burst in Northeast El Paso, leaving 38,000 connections under a boil water notice.

Management cited escalating costs for the Advanced Purified Water facility, which has jumped from an estimated $110 million to over $320 million.

The El Paso Water (EPWater) Public Service Board (PSB) voted 5-2 on January 14 to approve a $1.16 billion budget for the 2026-2027 fiscal year, authorizing a 12% rate increase for typical residential customers. The decision came during a contentious meeting held just days after a catastrophic failure of a 36-inch concrete transmission main left approximately 100,000 residents in Northeast El Paso without water service. Utility management presented the budget as a necessary response to aging infrastructure and water security needs, outlining a Capital Improvement Program (CIP) that has swelled to $770 million for the upcoming fiscal year, up significantly from the previous $592 million program. The primary drivers for the expenditure increase are regulatory requirements for wastewater treatment retrofits and the spiraling costs of new water supply projects. During the budget presentation, staff highlighted that the cost of the utility's flagship Advanced Purified Water facility has tripled since pre-pandemic estimates. Originally projected at $110 million, the facility is now expected to cost upwards of $320 million. Set for completion in 2028, the plant will produce 10 million gallons per day, marking the first large-scale direct-to-distribution direct potable reuse project in the U.S. While the utility has secured $23.5 million in federal grants to offset some expenses, the majority of the funding falls to the capital program. Additionally, the Roberto Bustamante Wastewater Treatment Plant is undergoing a massive multi-year rehabilitation, with capacity costs rising from $1.5 million per million gallons in the 1990s to $28.5 million today. "Deferring projects helps the rates at that particular point in time, but future rate increases would be much higher as a result," a utility representative told the Board, noting that the Bustamante project alone represents a $1.2 billion total long-term investment. The rate adjustment will see the typical residential bill (based on 9 CCF consumption) rise from roughly $82 to $92 per month. Staff emphasized that the utility remains a cost-of-service entity and that 136,000 customers use less than the "typical" benchmark, meaning their bills would be lower. However, the proposal faced sharp criticism from the public, many of whom cited the recent infrastructure failure as evidence of poor management rather than a justification for higher funding. The meeting was dominated by the fallout from the January 10 water main break. Gilbert Trejo, Vice President of Operations and Technical Services, briefed the Board on the emergency, revealing that the failed 1950s-era transmission line had been designed with numerous distribution connections, complicating isolation efforts and draining 15 storage tanks. While pressure had been restored to the 38,000 affected connections by the time of the meeting, a boil water notice remained in effect. The Board approved emergency procurement powers to expedite the repair and investigation of the pipeline. Public comment also focused heavily on the upcoming Meta data center. Residents expressed concern that the rate hikes were subsidizing industrial expansion. Utility management pushed back, clarifying that Meta would not receive a special rate or rebates and would be billed under the "Very Large Water User" category, which pays a higher initial block rate than residential users. Staff noted that while data centers are water-intensive, Meta would not rank among the utility’s top 10 water users. Ultimately, the pressure of the rate hike on low-income residents caused a split in the Board. The Mayor of El Paso cast a dissenting vote, stating, "I cannot support a double-digit rate increase... Affordability has to be part of responsible policymaking." A second board member joined the Mayor in voting against the item, though the motion carried with five votes. Separately, the Board unanimously approved a $95 million budget for the Stormwater Utility, which included a 0% rate increase for the upcoming fiscal year, despite falling short of its accelerated capital spending targets.