Denton Municipal Electric is sitting on more cash than its budget planners expected, and city staff will ask the City Council on Tuesday, Oct. 27, how that should shape next year's electric rates.
A presentation prepared for the council's 1 p.m. work session puts the utility's current estimated fund balance at $154.6 million. During budget work, staff had projected a year-end figure of $146.3 million. The council asked on Sept. 15 to review the fund balance before it settles a proposed 3% increase to DME's base rate for 2026-27, according to the agenda sheet.
What a typical bill would look like
The slides compare a residential customer using 1,000 kilowatt-hours a month, who now pays about $135.36:
- Option 1, a 3% base rate increase: the fixed facility charge rises from $8.80 to $9.06 and the usage charge from $64.76 to $66.70, for a monthly total of $137.56.
- Option 2, the same 3% base increase with the energy cost adjustment lowered: the energy cost adjustment drops from $46.20 to $42.40 while the transmission charge rises from $15.60 to $17.20, leaving the total at $135.36.
- Option 3: other direction from the council.
Reserves above and below the line
How healthy the $154.6 million looks depends on the yardstick. Measured against the utility's actual 2026 spending, it equals 49.4% of expenses, or about 168 days. Measured against budgeted spending, which is what city policy uses, it is 31.7%, or about 115 days.
The policy the council adopted in September 2021, after Winter Storm Uri, calls for an electric fund balance between 46% and 69% of budgeted spending. Staff say the 2027 budget and financial forecast bring the fund into compliance within five years, by 2031.
The presentation also cautions against drawing the balance down. It notes that cash makes up only 40% to 75% of the fund balance during the year, dipping to about $55.6 million in February 2026, and that reserves are meant for one-time costs such as paying down debt or emergencies.
Fitch rates the utility system "A" and revised its outlook to negative in 2026, the slides say, and a downgrade could raise borrowing costs and require more cash as collateral for the utility's hedging trades.
