On Sept. 16, the Pagosa Springs Town Council voted to accept a new geothermal water rate study conducted by Roaring Fork Engineering.
The town had sought the new rate study “to identify the revenue requirements to operate and maintain the geothermal system, given the recently identified capital projects … as the system has largely reached the end of its useful life,” the study states.
The town, through a 2009 geothermal discharge contract with The Springs Resort, has leased water to the resort at what the lease calls “a fair market rate.”
In September 2024, the council had decided that it would take two factors — the energy and mineral content of the water — into consideration when setting this fair market rate.
“Last year, we did an internal rate study, when the tap agreement with The Springs Resort expired. We raised the rates, and you guys passed an ordinance to approve that rate,” Public Works Director Karl Johnson said.
Johnson explained The Springs objected to the rate increase and the internal study, “so we commissioned Roaring Fork to do a full-blown rate study.”
Regular customers of the town’s geothermal water system, installed in 1981, use the water for heating floors, sidewalks, handrails and for hot water, with year-round temperatures ranging from 118 to 140 degrees.
But spas, such as The Springs, also utilize “the significant healing mineral attributes of the water for use in their spa and pools,” an agenda document on the matter states.
The document also states that “the traditional geothermal heating utility customers do not have the benefit of direct use of the healing mineral water with the heat exchange to potable water that is circulated in the system.”
This mineral or healing content of the water, which the spas market to their guests, should also be factored into the lease rate for spas, the council decided in 2024.
The new Roaring Fork rate study codifies that both the energy and mineral contents of the water should be factored into the lease rates for spas.
Amy Huff, representing The Springs, spoke out about the new study during the public comment section of the meeting, urging the council not to accept the study until the resort had time to review it more thoroughly.
She suggested that “adopting” the new rate study “this evening” would “set the stage for litigation,” and urged the council to wait to adopt it “either as it is, or with amendments three or four weeks down the road,” once the lawyers from both sides have had time to review and discuss it.
“My client has worked with the town for many, many years and values the cooperative relationship that The Springs Resort has had with the town, and, in order to continue that relationship, we would like to be involved in the rate study and provide comments and having our consultants confer with the town’s consultants,” she said.
Jeff Greer, owner of the Overlook Hot Springs, was also on hand at the meeting, stating that his water attorney “sent me a list of the previous filing that The Springs Resort has done” and that “there was almost 4,000 gallons [per minute] of filings of hot geothermal mineral water that they have filed on but never perfected their claims.”
He noted that his attorney, which he shares with Healing Waters Resort and Spa, “has asked Ms. Huff numerous times to clarify why they file on these but never have perfected those rights or put them to use.”
He added that he gave a “list of these ongoing court filings” to Town Manager David Harris and that Harris could distribute the information to the town council.
Maggie McHugh, representing Roaring Fork at the meeting, explained that the largest cost for maintaining the geothermal system “would be replacement of the distribution system.”
She explained, “After we identified the costs to operate and maintain the system, we then looked at the rate structure, which includes looking at the customer classes and proposed scenarios to meet those revenue requirements.”
The study identified three types of usage classes: residential, commercial and resort/spa.
McHugh explained that the options to fund the ongoing operation of the system could include raising the rates “on everyone” or looking at the different types of usage in the system.
She added that the resort/spas not only use the water to heat buildings and sidewalks, but also have a “mineral use,” and this usage justified introducing a “mineral fee.”
“There’s no system [to use as an example] quite like Pagosa’s. A lot of the systems that we identified, such as Iceland and Idaho, the geothermal water is actually operated by the municipalities themselves, so it’s set up quite differently than it is here, where the water is being passed around to a private entity,” she explained.
She added, “There’s a geothermal resource here that needs to be protected,” suggesting that another option could be to charge a “user fee for each ticket sold at either entity of The Springs or the Overlook, which would help cover the cost” of protecting and preserving the resource.
Mayor Shari Pierce stated that she was “glad we are starting to look at things with a longer-term eye and taking care of our infrastructure so we don’t get in a situation like we did with the sanitation system, and I think this is a really good step for us to have this information.”
Pierce also wanted to clarify to The Springs that all the council was doing tonight was “saying that we acknowledge that we have this report,” but that the actual rates would not be set or finalized until the fee schedule for the 2026 budget is drafted, discussed and passed.
Harris added that the conversation about the fees cited in the rate study would take place during “the budget process” in November, which would allow time for conversations with “the other interested parties.”
Council member Leonard Martinez suggested that the role of a municipality to preserve an “asset like this” is of utmost importance to him.
“To me, this is not a business. I’ve been here five plus generations and I want to make sure that it’s here and protected for another five generations … This is something special,” he said.
When a motion was made to accept the report, it was seconded and passed unanimously by the council.
derek@pagosasun.com
