Norwich ― Norwich Public Utilities officials presented a proposed $105.9 million 2024-25 budget for all four of its service divisions that calls for a decrease in spending of $3.89 million, a 3.67% drop from this year’s budget.

The budget decrease mainly reflects a dramatic reduction in the cost of purchased wholesale electricity and natural gas, NPU officials said Wednesday, despite next year being “a historic level of construction” for the city-owned utility that provides electricity, natural gas, water and sewer services.

A five-year, $200 million upgrade of the city sewage treatment plant started this year, and planned major upgrades to the city’s drinking water and natural gas systems are budgeted next year.

The proposed budget presented to the Board of Public Utilities Commission includes $108.5 million for capital projects, including $82.33 million for the sewage treatment plan, $14.35 million for gas and water main upgrades and $2.2 million in water storage improvements.

The increase in capital projects led to the proposal to hire five additional employees, including two engineers, two water distribution system operators and one maintenance mechanic, which would bring the total staff to 157 employees.

Wholesale purchased natural gas is budgeted at $2.5 million, down from $5.6 million in the 2023-24 fiscal year, and purchased power cost is budgeted at $31.8 million, down from $35.5 million this year.

The drop mainly is due to the dramatic reduction in the cost of purchased wholesale power and natural gas. Those decreases come after spikes in wholesale power costs in recent years, caused by the Russian invasion of Ukraine and gas line transmission issues.

In one way, those past wholesale cost spikes will benefit the city, with a record $10.3 million revenue sharing payment to the City of Norwich based on past NPU gross revenues. By city charter, NPU is required to turn over 10% of its gross revenues to the City of Norwich each year. The amount of next year’s payment is based on audited budget figures from NPU’s 2022-23 fiscal year.

The payment is up by $1.2 million over last year’s amount, “the highest payment in NPU’s history to the city,” NPU spokesman Chris Riley said.

NPU General Manager Chris LaRose said the utility’s electricity and natural gas customer load is increasing, which contributed to the increased payment to the city, but the increase mainly reflects the past higher cost of power and natural gas.

NPU has budgeted $659,000 for economic development expenses, including $265,000 to fund the operations of the Norwich Community Development Corp., the city’s economic development agency, up from $250,000 this year. The remaining $394,000 budgeted for economic development is not allocated to any specific costs and would require board approval to spend the money, LaRose said.

The Board of Public Utilities Commissioners did not act on the proposed budget. NPU officials will present the proposed budget to the City Council during a workshop Tuesday, and the utilities commission is expected to vote on the budget either at its April 23 or May 28 meeting.

c.bessette@theday.com