New water rate model shifts infrastructure risk from Bentonville to wholesale customers

Bentonville is restructuring how it charges neighboring cities and systems for wholesale water, adopting a new cost-of-service model that shifts more infrastructure risk onto wholesale customers, most notably Bella Vista.

The changes stem from a newly completed wholesale water rate study presented to the Bentonville Utility Board, which outlines a transition away from a usage-heavy pricing structure toward higher fixed monthly charges paired with a direct pass-through of raw water costs from Beaver Water District.

Under the proposed framework, wholesale customers would pay the Beaver Water District rate per 1,000 gallons plus a 3% markup, while the remaining costs associated with maintaining supply lines, transmission mains, storage tanks, and billing infrastructure would be recovered through fixed base charges. Bentonville officials say the structure better reflects how costs are actually incurred in a system built to meet peak demand, not just average consumption.

For Bella Vista which accounts for roughly 10% of Bentonville’s total water revenue the revised structure is projected to increase wholesale water payments by about 10% in 2026, even as the per-unit water charge declines slightly. The increase is driven by higher fixed charges designed to recover long-term infrastructure costs regardless of monthly usage fluctuations.

Consultants emphasized that the shift is rooted in cost causation principles commonly used in utility rate setting. Because water systems must be sized to meet maximum-day demand, infrastructure costs are largely fixed and persist even when consumption drops. By increasing fixed charges, Bentonville reduces its exposure to revenue volatility while ensuring infrastructure costs are fully recovered.

The memo also signals a more constrained approach to future regional growth. According to the study, Bentonville’s existing infrastructure can accommodate current wholesale customers only if demand remains within newly negotiated limits. No new capital facilities are assumed for wholesale service under the proposed rates; however, any future infrastructure expansions required to serve wholesale customers would need to be incorporated into their rates at that time.

That policy direction places greater responsibility on wholesale customers to manage growth within existing capacity or absorb the cost of expansion — a notable shift in regional water dynamics as Northwest Arkansas continues to develop.

In a related action on the same agenda, the Utility Board is also considering a sewer cost-share agreement tied to development at McAuley Place, reinforcing the broader theme that system capacity constraints are increasingly being addressed through targeted cost allocation rather than general rate increases.

Together, the measures reflect a strategic pivot in Bentonville’s utility governance: prioritizing long-term system stability and cost recovery while transferring more financial risk to the entities driving demand.