Council faces choices on gas rate hike

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A spike in the rate that the city of Cotulla pays for its gas before pumping the heating and cooking fuel to residents and businesses may leave councilors with little option but to raise prices for municipal customers.
A number of options, however, may be open to the city council if elected officials are prepared to take the plunge. They include a basic rate hike that passes the added expense from supplier to customer; implementing a flexible “pass-through” fee that may fluctuate with the market; and selling the municipal gas system outright.
Councilors balked at the third option during a meeting Thursday, June 23, when Utilities Director David Wright outlined the means by which the city may stem its gas network losses, but made no comment on which of the remaining options they favor.
Both mean customers will pay more per month for their domestic and commercial gas, although residents may see their rates go up by less than a dollar.
For the past year, Cotulla has been shouldering an ever heavier financial burden in its gas utility department, as supplier West Texas Gas has gradually increased its price based on the Houston Ship Channel market rate, and the city has pumped more subsidy into the department monthly.

Presently, the rate Cotulla pays for its gas stands at a little under nine cents per thousand cubic feet (mcf), approximately double the price of mid-2021. City customers, however, are paying an average of just under three cents, with the municipal government subsidizing the remainder.
In an interview this week, City Administrator Larry Dovalina said he believes the current subsidy rate is no longer sustainable, and City Hall may have no option but to devise a rate hike that customers will tolerate.
Dovalina was joined by Wright at a meeting last week in describing the city’s gas utility as losing money now that costs have surpassed revenues.
“That’s become a bit of a problem,” Wright said. “For a long time, city gas customers have been paying comparatively low rates, steadily, and those with economic disadvantages were able still to keep cooking and water heating for their families because we have some of the lowest rates in the region.
“The issue is that this was because the city was subsidizing that utility,” he added. “The city was making it possible for everyone to afford the gas. Now that our costs have gone this high, we can’t viably sustain that. We may not have a choice here but raise the fee.”
Wright noted that Cotulla’s gas rate compares favorably with Pearsall’s, but the cities of Uvalde, Lytle, and Castroville have lower rates. In some cases, he said, municipal governments have alternate revenue sources to support their utility operations costs.
Councilors learned that a basic rate hike for a low-consumption residential account may be as little as a dollar per month, while a commercial enterprise using low quantities of gas may only pay six or seven dollars more.
The hike, however, represents an increase of between 13 and 18 percent that will be felt the most by local businesses and large families who use more gas to heat water and cook.
In the case of a popular restaurant, Wright said, the monthly gas bill could rise by as much as $400 per month.
Among other customers, Wright estimated, gas utility fees could rise by more than $6,000 per year, directly affecting a business budget.
“We don’t want them to leave,” Wright said, “but the gas department has to be run like a business.”
“We have to protect businesses by creating a price structure,” Dovalina said this week. “We can’t use an across-the-board scenario because you would put them out of business. With gas, there are businesses that depend on it, and we stand to lose a lot.”
The city administrator noted that local employment, sales tax revenues and visitor business throughout Cotulla would suffer if commercial gas customers were to close shop due to a sharp rise in utility rates.
Under a 2006 ordinance, the city of Cotulla may activate the pass-through system of defraying expenses by adding a set fee to every account, a move that may be reversed as soon as supply costs dip. Although the option was made available by a council vote in a previous administration, the pass-through has never been activated in its 16 years.
Dovalina and Mayor Javier Garcia said in an interview this week that they expect the council to choose an option at the July meeting, and both agreed that selling the utility system to an independent business “is off the table.”
Three South Texas cities have recently sold their gas systems to a business that will conduct its own billing. The city of Cotulla owns all of its gas pipelines and meters. Gas is injected at a site near FM 117 in Dilley and pumped through Cotulla’s pipeline to the city network. Mayor Garcia said this week that he believes Cotulla’s advantage in owning its pipeline and meters is the ability to be flexible in its business operation and assisting needy families. That customer service, he said, would be in the hands of a separate business if the city were to sell its pipeline and meters.
Dovalina concurred with the mayor and said he believes the council will likewise turn down the option of selling its network.
“The easiest way to deal with it, as an administrator, is not to deal with it,” Dovalina said on Tuesday. “The easiest thing to do is sell it, but to me that is not an option. The independent-owner utilities have to make a profit, and we don’t.
“I hope that the council will choose the option that affects people the least,” the city administrator said. “All the cities in the area are dealing with the same issue.”
Councilors will address the issue Thursday, July 14.