Explanation of Water & Sewer Revenues, Expenses & Rates

Henrico County’s Department of Public Utilities (DPU) operates as an Enterprise Fund. An Enterprise Fund is an organization which supports all of its expenses through the revenues generated by the organization, similar to a private business enterprise. The cost of providing water and sewer services to our utility customers is recovered or financed through charges to the users of these services. County tax dollars are not used to pay any of the costs associated with these water and sewer services. These costs are paid entirely by current and future water and sewer customers. Although we operate like a private business enterprise, there is one key difference between DPU and a private business. DPU does not generate any profits. All revenue received goes to pay expenses. Balances in any account are utilized to meet current or future financial requirements.

DPU revenue must cover all costs associated with operation, maintenance and rehabilitation of existing water and sewer systems, as well as construction of new water and sewer facilities as our systems grow. We are required to complete some projects to comply with regulatory changes and other projects to replace or rehabilitate aging water and sewer infrastructure. Construction projects that increase the capacity of our water and sewer facilities are also needed to meet residential and commercial growth demands in the County. Our customers benefit from a utility that reliably delivers its services and meets all state and federal standards.

DPU expenses fall into three broad categories: operational, capital improvement projects and debt service. Operational expenses include typical business costs such as salaries and benefits for our 322 employees as well as the cost of vehicles, equipment, fuel, electricity and chemicals required to operate and maintain our systems. DPU operates and maintains 1550 miles of sewer piping, 1680 miles of water piping, a drinking water treatment facility (80 million gallons per day permitted capacity), a wastewater treatment facility (75 million gallons per day permitted capacity) and 33 water and wastewater pumping stations along with other utility facilities. Capital improvement projects are major construction projects to replace or rehabilitate water and sewer infrastructure and to construct new infrastructure to meet the growth needs of the County. The Cobbs Creek Reservoir is a major capital improvement project ($280 million) that will take 10 years to complete. This reservoir, owned by Henrico County and located in Cumberland County, will ensure that our residential and commercial customers have an adequate drinking water supply for many years to come. Debt service includes the principal and interest charges to repay revenue bonds issued by DPU to help pay for capital improvement projects.

DPU calculates expenses for all three categories for a twelve year period and proposes rate increases necessary to generate the revenue required to meet those expenses. Each year’s fiscal budget, which extends from July 1 to June 30, and any proposed rate and fee increases are reviewed by the County Manager and his staff and considered by the Henrico County Board of Supervisors for adoption in April. If approved by the Board, water and sewer rate and connection fee increases will take effect July 1 of each year.

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