The Colorado Springs City Council approved a $1.56 billion budget for Utilities on Tuesday that anticipates rate increases for water and wastewater services and investments in the new fiber optic system.

The 2023 budget is 26.3% higher than last year’s adopted budget, mostly because of the rising cost of natural gas, said Tristan Gearhart, chief planning and finance officer for Colorado Springs Utilities.

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The price of gas has been pushed up in part because of global factors, such as Russia limiting its natural gas exports to Europe. When fuel costs are not counted, the budget is 5.6% higher than last year, Gearhart said. 

The board unanimously approved the budget and informally supported the water and wastewater rate increases expected to take effect in January. The water and wastewater rates have not been adjusted in two years.

“We think it’s very reasonable,” said Council President Tom Strand, noting the budget supports raises for employees.

Residential customers on average could see monthly bills reach about $307 a month with a 7% increase on the water portion of their bills to cover labor, benefits and system maintenance, a Utilities presentation showed. The increase could help raise an additional $10.4 million needed for water services. Some of that money could help pay for new smart water meters and new storage in the Arkansas Basin where Utilities is purchasing water, the Utilities budget stated. 

Water rates are tiered based on how much water residents use to encourage conservation and residents are billed 90% of the cost to deliver water in that tier. The lowest tier is less than 999 cubic feet in a month and about 92% of all residents fall into the lowest tier, said Scott Shirola, pricing and rates manager.

Wastewater costs for residents may go up around 2.5% from $33.38 to $34.22 a month to help raise an additional $2.8 million annually to help cover rising labor costs and projects. For example, Utilities is planning to put in new scrubbers to capture and repurpose methane from biogas digesters near the Nixon Power Plant. 

Next year, Utilities is also planning to spend about $78 million on the expansion of its existing fiber network that will serve private providers and support internal functions, Gearhart said. The 2,500-mile system is expected to cost $600 million to build out by 2028. A system specific to Utilities’ needs would have cost about $400 million, and Utilities wouldn’t have had an opportunity to recover cost by leasing unused fiber to private companies. 

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The estimate Gearhart offered is the top end of the construction estimate Utilities offered last year, when it said the cost of the project could range from $270 million to $600 million.

Last year The Gazette reported that Ting, an internet service provider, contracted with Utilities to pay $593 million over 25 years to lease extra fiber space, according to filings with the Securities and Exchange Commission. 

Utilities could bring in an additional $200 million to $800 million from fiber leasing that would offset the cost as well, he said. 

Electric base rates are not going up to support the fiber build, Gearhart said. 

The upgrades to Utilities internal network could help with internal monitoring and help predict and prevent major pipeline breaks, such as one Utilities had last year on a raw water line, he said. 

“We see more and more applications where our system needs to be connected to our network,” he said.