Area water and electric customers will likely see a jump in rates early in the new year.

Truckee Donner Public Utility District General Manager Peter Holzmeister and district department heads have been preparing the 2006 budget and assessing spending changes for the coming year. Their findings led them to recommend to the board a 7 percent rate increase for both water and electricity, and a 5 percent increase for both developer fees and new property connection fees.

For rate payers, the proposed 7 percent hike add about $6.40 a month for electricity and about $3.50 for water.

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Due to swelling costs of operation, Holzmeister recommended that electric rates be increased by 5 percent, in addition to a 2 percent increase that will be set aside in a reserve fund.

That reserve fund, which the utility district hopes will grow to $1.2 million by 2008, will come into play in the closing days of 2007 when current wholesale power prices are expected to increase from 5 cents per kilowatt hour to almost 8 cents at the source, according to electric utility manager Steve Hollabaugh. And that’s not including the increasing costs of actually getting power from the source to the district and then to customers.

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As for water, a 5 percent rate increase is needed to balance rising operational costs for that side of the district’s service as well, according to Holzmeister. The additional 2 percent will also be set aside in a reserve, this time for the replacement and maintenance of older sections of the water system that are beginning to wear out.

“One of the elements that people tend to forget about is that whatever we put in the ground has a limited lifecycle, and is going to need to be replaced,” said Ed Taylor, the district’s water utility manager. “Our water utility system includes over 200 miles of pipeline, wells and infrastructure. We have a lot of leaks that we repair every year and we are at the point where we need a bigger replacement program.”

The largest cost increase in the water utility is the payment of principal and interest on debt related to replacement of leaking water lines, according to the district. Material costs of plastic pipe, ductile iron pipe and asphalt have also increased dramatically in the past year.

For Truckee customers already paying an average of $50 per month for water, the needed 7 percent will equate to about $3.50 per month, Taylor said.

The other increases don’t have to do with electric and water rates, according to Holzmeister. They have to do with the fees that the utility district charges for the development of new properties in Truckee, and the cost for those properties to be connected to water and electric supplies.

“I proposed to increase those fees by 5 percent to cover gasoline prices, and other such costs,” he said. “There was a 20 percent increase in [the cost of] wire pipe in the past year and the cost of aluminum has also increased.”

At a meeting of the board on Nov. 16, members asked Holzmeister and his counterparts to take another look at the budget and make new recommendations as to where cuts could be made within the utility district in order to find some internal means of funding.

“It’s a bit unusual to have rate increases of the same amount for both utilities in the same budget year,” said board member Pat Sutton. “We know there will have to be some increase, but we would like to see if there is some way to cut back on expenditures so that the increases can be less.”