On Sept. 19, the Pagosa Springs Town Council adopted new rates for the geothermal water that the town sends to The Springs Resort.
The new rates are based on what the council deemed as the “fair market” values of the heat and mineral content of the water.
The council decided that a fair market rate for the heat/energy of the water should reflect the same percentage of rate increases that general customers have experienced.
Geothermal utility customers saw a 100 percent rate increase in the 2022-2023 heating season and a 50 percent increase for the 2024-2025 season.
The council’s calculations deem that if The Springs Resort also paid these rate increases for the geothermal energy, its rate would be $2,084 per month or $25,007 annually, and this rate would be the fair market value for the heat/energy component of the water.
On the mineral component, the council decided that the fair market value would be determined by the daily entry fee that The Springs charges its nonresident visitors. Currently, the resort charges out-of-town guests $67 per day to soak in its hot spring pools.
An agenda brief on the matter states, “There’s currently no better way to represent fair market value for the mineral benefit than what the spas charge for an individual daily soak.”
The council ultimately decided on $1,675 per month, or $20,100 annually, for the usage of the water’s mineral component, which was calculated by multiplying The Springs’ daily nonresident price of $67 by the number of its soaking pools (25).
Since the original agreement in 2009, the town has been supplying geothermal water year-round to The Springs, with temperatures ranging from 118 to 140 degrees, at about 450 gallons per minute (GPM), according to the agenda document.
The energy from the water goes to heating the floors, sidewalks and handrails of the resort, and also “provides significant healing attributes” within its soaking pools “from the mineral content of the water,” according to the document.
The council also decided that the rate for the heat/energy would rise 2 percent annually, setting future rates going forward beginning in 2026, rather than using the Consumer Price Index (CPI), which currently stands at 2.5 percent.
However, the rate for the mineral content would be based solely on the annual entry price that the Springs Resort charges nonresidents when the town sets its fee schedule.
The fiscal impact to the town of these rate increases amounts to an “increase in revenue for the Geothermal Utility of up to $45,107,” the agenda document states.
The council first discussed these rate changes at an Aug. 29 work session when council members Gary Williams and Leonard Martinez brought findings about their investigation into the fair market rates of geothermal water.
At that work session, Williams suggested that the town has been “way undercharging our biggest user.”
“Our basic recommendation is this: There should be two components to the fee,” with the first being the heat of the water and the second being the mineral content, he said.
Noting how novel the idea was to set a market value for the mineral content of geothermal water, Martinez explained that their investigation looked “far and wide” for other examples of setting a price for therapeutic minerals, but could not find any.
Council member Matt DeGuise wondered if it would be “onerous for the staff ” to determine the yearly market rate based on The Springs Resort’s entry fee.
Public Works Director Karl Johnson answered that town staff would need to “just walk in the door, and look on the board” to see what the resort is charging.
Johnson explained that the way he understood the town’s current agreement with The Springs is that the town has the “right to re-establish a rate” and the rate is not set for any “period of time.”
He said that The Springs would have “the first right of refusal to take that water in perpetuity” at the town’s established rate.
At the previous work session, there was some discussion about what the town would do with the water if The Springs walked away from the agreement.
Martinez said, “A community pool for this community is a real option,” adding that the town has the potential to start doing things with the water that it has not even thought about yet if The Springs were to walk away from the agreement.
Mayor Shari Pierce said, “I am so impressed with the staff and council members Martinez and Williams for coming up with this idea of charging for the value of those minerals. I think it’s great.”
Council member Mat deGraaf motioned to approve the new rates, with the motion reading: “I move to adopt new proposed rate of fair market value for energy of $2,084 per month, or $25,007.40 per year, set to increase at 2 percent per year, and the fair market value for the mineral water of $1,675 per month, or $20,100 per year, based upon the daily nonresident soaking pass as the multiplier for a current total of $45,107.40 annually.”
The motion was passed unanimously by the council.
The new fees will take effect Jan. 1, 2025, should The Springs agree to purchase the water at these new rates.
derek@pagosasun.com
