The board of directors for Birmingham’s regional water utility made no decisions during a rate-setting workshop Friday, but it didn’t rule out a rate increase later this year or in 2027.
The topic of potentially supplying water to AI data centers also came up, and the utility’s CEO said Central Alabama Water is eager and able to do so.
The board heard a two-and-a-half-hour presentation from Peiffer Brandt, president of Raftelis, the financial consulting firm working with CAW. Brandt said the talk was aimed at educating the new board overseeing the utility, which is facing financial challenges. The board has slashed the utility’s 2026 budget, and managers have cut a quarter of its workforce.
“We want to give you the information to make the decision,” Brandt said. “It's not to tell you what the right thing is. It's not even to recommend something to you. We need to give you the data so you can decide what makes the most sense for you and for this community.”
Brandt said he favors small annual rate increases to keep up with inflation, but that might not be enough for CAW right now.
“There does need to be maybe a little bit more in the near term to maybe refill some of the reserve buckets that have gotten drained down,” he said.
The board, which has been in place since a state law restructured the utility a year ago, didn’t raise rates at the beginning of this year. Rates increased in 19 of the previous 20 years.
Despite CAW losing approximately 40% of its treated water to leaks in aging pipelines, Brandt said the system has plenty of excess capacity.
That led board members to ask questions about supplying water to data centers, including a massive, controversial center being built in Birmingham’s Oxmoor Valley neighborhood.
Data centers typically use lots of water to help cool down their equipment. According to the Brookings Institute, large data centers can use an estimated 5 million gallons of water each day, equivalent to the needs of a town of up to 50,000 residents.
CAW chief executive Jeffrey Thompson said the utility’s untreated water is well suited for data centers, and CAW has been promoting its ability to supply those facilities. He said CAW has been proactive in meeting with Alabama Power because AI data centers typically approach electric companies before water utilities.
“We have certainly expressed to them that we have an abundance of cold, high-quality, raw water at low prices,” Thompsons said.
Brandt said most water utilities are having to figure out how to supply data centers, but CAW is in a better position to quickly pivot in that direction because of decreased demand from Birmingham’s declining steel industry.
Board member Sheila Tyson asked whether raw-water pipelines extend to the Nebius data center site in Oxmoor Vvalley.
"We do not have raw water in that area,” replied Ray Sloan, chief reliability officer for CAW. “The closest that we have raw water in that area is downtown at UAB."
