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MUD approves 2018 budget with 1-percent water rate increase, no changes to gas rates

OMAHA, Neb. (News Release) — The Metropolitan Utilities District (M.U.D.) board on Wednesday approved a 2018 budget resulting in expected 2018 revenues of $123.2 million for the Water Department and $204.4 million for the Gas Department. Gas revenues are down from 2017's budget of $216.3 due to lower projected usage. The revenues will be used to fund the District's operating expenses, gas purchases, debt service costs, capital improvements, cast iron pipe replacement and to maintain reasonable cash reserves.

"The budget aligns with our mission to provide safe, reliable and cost-effective natural gas and water services to the community while maintaining financial stability. The District continues to manage expenses and look at long-term capital plans to ensure we maintain reasonable rates for our customers," said M.U.D. President Scott Keep.

Directors approved a 1.0-percent overall water rate increase, recovered via a 2.5-percent increase to the variable usage component of a customer's bill. There will be no change in a customer's service charge or water infrastructure replacement charge. The water rate increase is projected to generate approximately $1.4 million in additional revenue in 2018; despite this, the bill for the average residential customer is budgeted to decrease due to lower projected usage. These charges are effective January 2, 2018.

Water use for the 2018 average residential customer is budgeted at 106 CCF (79,288 gallons).

Water use for the 2017 average residential customer was budgeted at 114 CCF (85,272 gallons).

A customer with a 5/8 inch water meter will see a projected monthly water bill decrease from an average of $30.20 to $29.41. This is based on the District's 2017 Budget as compared to the 2018 Budget. Both budgets are based on a normal weather pattern and 2018 shows decreased usage of 7 percent.

Annual budgeted water bill for the average residential customer is projected to be $353 in 2018 compared to $362 in 2017.

Directors announced that there would not be a gas rate increase for 2018. The District's 2018 budget assumes lower projected volumes for an average residential customer, resulting in a lower bill.

Gas usage for the 2018 average residential customer is budgeted at 774 therms.

Gas usage for the 2017 average residential customer was budgeted at 802 therms.

An average residential customer, based on normal weather patterns and decreased usage of 3.5 percent, should see the average monthly gas bill decrease from $52.74 to $50.03.

Annual budgeted gas bill for the average residential customer is projected to be $600 in 2018 compared to $633 in 2017.

"Even with the water rate increase, the average residential customer's total gas and water bill is expected to decrease due to lower water and gas consumption based on normal weather," said M.U.D. Chief Financial Officer Deb Schneider. "Long-term capital plans ensure we are managing rate impacts to our customers. Bonding long-term capital infrastructure, such as the Florence capital improvement plan and our cast iron gas main replacement initiative, allows us to spread these costs over a longer term; thereby keeping these charges manageable to today's customers."

The District plans another bond issuance in the fourth quarter of 2018 to fund ongoing improvements at the Florence water treatment facility. Moody's Investors Service recently upgraded the District's water system bond rating two notches to "Aa2" with a "stable outlook," which will contribute to lower borrowing costs. The District was previously rated "A1" by the rating agency.

The budget will fund improvements to gas plants and a portion of the costs associated with the abandonment of 40 miles of cast iron gas mains, to keep the District on target to complete this infrastructure replacement work in 2027.

"We plan to issue bonds in 2018 to fund a portion of the accelerated gas cast iron replacement and we anticipate two additional future bond issuances to complete the work," Schneider said.

Affordability remains a key consideration as the District prepares its budget and establishes rates. The District's water rates trend mid-range nationally and regionally when compared with other utilities, while the District's gas rates remain below national and Midwest averages. As compared to U.S. utilities that participated in the 2017 Memphis Light, Gas and Water Survey, M.U.D. ranked seventh lowest for residential gas bills and 20th lowest for residential water bills. M.U.D. is one of the few water utilities to operate a system with three water plants, which significantly enhances reliability and the ability for the communities served by the District to grow.

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