Memphis Light, Gas and Water’s (MLGW) price hike proposal will be voted on by city council this month, but advocates say it needs more work.

In recent years, MLGW and local advocacy groups have clashed over multi-year rate hikes. 

“It’s painful any time we see increases, but we also want to make sure we have the infrastructure to prevent some of the challenges we don’t want to have to have,” said Memphis Mayor Paul Young in a media meeting on November 9th.

Local advocates argue the financial burden shouldn’t fall on residential households, and have called for doing away with the current declining block-rate structure while freezing residential rates. 

How Does This Compare to Current Rates or Previous Proposals?

To understand the current situation, readers must look back several decades. 

Under a policy known as “Mission 2000,” MLGW maintained a “no rate increases period” for roughly a decade in an effort to keep Memphis among the cheapest utility markets in the country.

While this kept customer bills low, MLGW says it forced them to cut capital investments and defer routine maintenance, creating what CEO Doug McGowen described as a “first place, last place” situation.

Following adjustments in 2022, MLGW avoided rate increases until it introduced, in 2025, a rate hike for water to take effect in the fiscal year of 2026. Protect Our Aquifer’s (POA) executive director, Sarah Houston, realized there was substantial cash on the books for the water department and asked them to postpone by “spending down” their funds for fiscal year 2026 and tabling discussions around rate reforms until 2027.

“And so, we actually kind of got that first win of postponing the water rate structure increase last year,” Houston said. “This year, we knew a rate increase was coming.”

The Math of Water Pricing

At the center of debate is how charges are distributed among customer classes. Under MLGW’s current rate structure, residential customers operate under different rules than industrial and commercial customers.

Residential households currently pay a flat rate of $1.31 per hundred cubic feet (CCF, or roughly 748 gallons) regardless of how much they consume. This rate rises under the new proposal to $2.704 in 2027, $3.137 per CCF in 2028, and $3.639 per CCF in 2029. 

For the average household, water bills will increase by $2.50 per month in 2027, reaching a $10 monthly increase by 2029 alongside a $6 to $18 monthly gas increase, though a low-use discount caps water increases at $3 over three years for approximately 58,000 low-volume households.

To contrast, commercial and industrial customers are billed under a “declining block-rate structure,” meaning the more water they use, the less they pay. They currently pay $3.403 per CCF for their initial 30 CCF, but the rate they pay drops by 58.1 percent down to $1.425 per CCF over 5,400 CCFS. 

What About SpaceXSI [SpaceXAI]?

In regard to in-city data centers, MLGW has created a new rate structure. Under Schedule W-15, a new surcharge that is 30 percent higher than standard commercial rates has been applied.

For an in-city data center such as xAI, this means the initial volume tier of 30 CCF will begin at $3.743 per CCF in 2027, scaling up to $4.342 in 2028 and $5.037 in 2029. 

However, because the declining block-rate structure is retained within Schedule W-15, usage above 600 CCF drops to $1.568 per CCF in 2027, $1.818 per CCF in 2028, and $2.109 in 2029. 

For reference, in the past SpaceXSI has used over 800,000 gallons of water in one day, or 1,069.44 CCFS.

This means even with the new 30 percent surcharge, SpaceXSI can pump millions of gallons of water per month and still pay about 42 percent less per gallon than residential households.

What Do Advocacy Groups and Community Leaders Have to Say?

Advocacy groups argued that bulk volume discounts undermine conservation and rate equity. POA delivered a petition with over 1,000 signatures to MLGW demanding an end to “regressive industrial discounts,” and emphasizes that declining block rates leave heavy pumpers with no incentive to invest in water recycling.

Organizers with 21st Century Memphis or Bust! agreed, with co-founder Ray Bauer stating, “We should be trying to get them to conserve,” and co-founder Glenda Hicks adding, “Charge them more the more water they use.”

POA asks that Memphis City Council limit the approval to one year instead of three, and wants MLGW to model progressive conservation tiers to explore other options. 21st Century Memphis or Bust! has additionally called for independent financial audits of the utility.