Water Authority Proposes 2015 Rates to Maintain Reliable Water Supply

Short Title
Water Authority Proposes 2015 Rates
Increases would be among the smallest in the past decade

Water Authority Rates & Charges Schedule

  • May 22: Presentation to the Board of the proposed 2015 rates and charges
  • June 26: Public hearing on 2015 rates and charges; Board considers adoption “All-in” rates The “all-in” water rate is the estimated average cost of water that includes the Water Authority’s rates for supply, treatment (if applicable) and transportation, along with charges for storage and customer service. Actual figures will vary by member agency.

Carlsbad Desalination Project Water Costs

  • Nov. 2012 projection: $5 to $7 monthly for a single-family home
  • May 2014 projection: $2.27 monthly for a single-family home in 2015; $5.14 for a single-family home in 2016

Transitional Special Agricultural Water Rate Program

The program enables participants to pay a discounted water rate in exchange for a lower level of water supply reliability. The Water Authority Board is evaluating three options that will impact 2015 rates:

Option 1 – End the program as scheduled on Dec. 31, resulting in an “all-in” untreated water rate for municipal and industrial customers of $1,059, a 2.9 percent increase, and a treated water rate of $1,337, a 2.6 percent increase.

Option 2A – Continue the program through 2015, resulting in an “all-in” untreated water rate of $1,068, a 3.8 percent increase, and a treated water rate of $1,346, a 3.3 percent increase.

Option 2B – Continue the program through 2015, and use the Rate Stabilization Fund to maintain the same rates as Option 1.

The San Diego County Water Authority has proposed rates and charges for 2015 that support the agency’s commitment to water conservation during the statewide drought, help maintain its solid financial position, and incorporate new costs related to providing a safe and reliable water supply.

The Water Authority Board of Directors will consider options that would increase the “all-in” rates charged to member agencies by 2.9 or 3.8 percent for untreated water and 2.6 or 3.3 percent for treated water in calendar year 2015. Actual figures will vary by member agency. If adopted, the rate increases would be among the smallest in the past decade.

The final rates and charges will be determined by decisions the Board will make in coming weeks. Alternatives will be presented to the Board during its regular meeting on May 22. The Board is expected to hold a public hearing on the proposed 2015 rates and charges, and consider their adoption, at its regular meeting on June 26.

“These proposed rates reflect the cost of investing in a safe and reliable water supply for San Diego County,” said Maureen Stapleton, general manager of the Water Authority. “That strategy has worked well to help us avoid the worst impacts of the current drought, and it will continue to protect our region’s economic health and quality of life.”

The largest component of the Water Authority’s budget is the cost of water. At $832.8 million over the agency’s current two-year budget, the costs of water supply and treatment account for 56 percent of the agency’s overall costs.

The biggest factor behind the Water Authority’s rates remains the Metropolitan Water District of Southern California. Overall, MWD represents 74 percent of the Water Authority’s cost of water. MWD’s treatment surcharge will jump 14.81 percent in 2015, forcing up the cost of treated supplies purchased by the Water Authority. The Water Authority was able to mitigate some of MWD’s increase by decreasing its own costs related to water treatment by approximately 8 percent.

Proposed 2015 rates also account for increased regional conservation in response to statewide drought conditions that are expected to reduce water sales. The Water Authority in April launched its “When in Drought” outreach campaign to promote voluntary conservation measures across the San Diego region in case dry conditions continue into next year. The Water Authority has declared a Level 1 Drought Watch condition that calls for voluntary conservation efforts such as repairing leaks quickly, washing paved surfaces only when necessary for health and safety, and eliminating inefficient landscape irrigation, such as runoff and overspray. San Diego County residents have significantly reduced water consumption in recent years, but more savings are needed after three consecutive dry winters have reduced California’s water supplies. More information is online at www.whenindrought.org.

In addition, the Water Authority’s 2015 rate proposal was crafted to meet Board targets for fiscal sustainability through the achievement of a debt service coverage ratio of 1.5 and maintaining Board-directed reserve levels.  The rate proposal also helps the Water Authority maintain its strong bond ratings, which minimizes the cost of borrowing and ultimately saves ratepayer money.

The proposed 2015 rates and charges also include purchasing the first water deliveries from the Carlsbad Desalination Project, which could begin commercial production of water as early as fall 2015 – several months ahead of schedule. The desalination project is being developed and financed by a private developer, Poseidon Water, with the Water Authority making system improvements to accept the desalinated seawater. The desalination plant will produce up to 50 million gallons of water per day as the largest facility of its kind in the Western Hemisphere. The Water Authority will be the sole purchaser of water from the project, which is an important component of the agency’s long-term strategy to secure the region’s water reliability.

At its May 22 meeting, the Board will also receive a summary of the second phase of an independent cost-of-service study commissioned by the Water Authority to integrate the cost of desalination into the agency’s rates and charges. That analysis concluded that the proposed 2015 rates and charges are consistent with state legal requirements, cost of service standards and Board policies.

For a partial year of deliveries in 2015, desalinated seawater is projected to cost $2.27 per month for typical households. When construction began on the desalination project began in late 2012, the Water Authority estimated the cost of that water for residential ratepayers would be $5 to $7 per month. For the first full year of desalinated water deliveries in 2016, typical monthly costs currently are projected to be $5.14 per household, at the low end of the Water Authority’s 2012 forecast. (Note: Estimates are based on current cost and sales assumptions.)

After accounting for all its expenses, the Water Authority proposes charging its 24 member agencies the “all-in” rate of $1,059 or $1,068 per acre-foot for untreated water in calendar year 2015, $30 or $39 more than they currently pay. The Water Authority also proposes charging $1,337 or $1,346 per acre-foot for treated water, $34 or $43 more than in 2014. An acre-foot is about 325,900 gallons, enough to serve two typical four-person households in San Diego County for a year.

All of the proposed rates for 2015 are near the low end of the forecasted range the Water Authority provided to its member agencies in 2011.  The final rates will be set after the Board decides whether to continue the Transitional Special Agricultural Water Rate for 2015. That program allows agricultural participants to buy water at a discounted rate in return for a lower level of supply reliability. It is scheduled to end on Dec. 31, but the Board will consider options for extending the program through 2015 as part of the discussion about 2015 rates and charges.

For more information about the Water Authority’s proposed rates, go to www.sdcwa.org/monthly-board-meeting-37, click on the Board packet and go to page 26.