San Diego water rates to go up in March
Posted by George J Janczyn on December 14, 2010
By now, just about all San Diego city residents should have received a notice of public hearing to be held on January 24, 2011 to discuss a requested water rate increase. The increase is needed to cover the new price of water charged by the San Diego County Water Authority (SDCWA) — the imported water wholesaler supplying the City of San Diego and 23 other member water agencies in the county.
Although SDCWA’s price increase to its member agencies takes effect January 1, 2011, the City’s proposed rate increase would not begin until March 1, so there will be a few months where water rate revenues will be out of sync with what the City has to pay for water. The San Diego Public Utilities Department (PUD) believes it can absorb the difference for a few months, but if the March 1 increase does not take effect, something will have to give.
Many water agencies throughout the county have already approved rate increases for the same reason. In addition, some of them have taken the opportunity to bundle in additional operations and maintenance costs into their rate increases, so they are doing more than simply passing along the increased price of water.
San Diegans are not being asked for those extras. The higher price of the water itself is the only thing residents are being asked to pay for. For single-family residences — the majority of San Diego water customers — the increase will amount to about $0.47 per month. [late clarification: that amount pertains only to the increase in the base fee. The overall increase in the bill can be $3.41 for for up to 14HCF of use — see comments]
San Diego is in the middle of the pack. From the 2006 Water Cost of Service Rate Study
Practically speaking, it looks pretty straightforward and non-controversial. But politically there are complications.
For one thing, it is already known that SDCWA will increase the wholesale price of water again in 2012, so San Diego residents will again be asked to approve a “pass-through” rate increase next year.
For another, the City will eventually need to expand its water capital improvement program (to replace overaged water mains, etc.) and cover other higher costs.
The Public Utilities Department has been engaged in longer-term thinking about the water rate structure and the Independent Rates Oversight Committee (IROC) has been monitoring developments and giving feedback on that topic.
To that issue, yesterday the IROC held a special workshop — a presentation from PUD on the framework for the rate setting process. The nearly two-hour presentation by PUD Assistant Director Alex Ruiz went into detail about the many complex issues involved in designing rates. To list a few of the rate drivers: operations and maintenance; pumps, plants, and pipes; bond coverage requirements; rate affordability; current economy; pensions; trust/transparency; taxes; CIP financing; regulations.
The current rate structure was last overhauled via a four-year capital improvement program in 2007. The 2007 program was based on the San Diego Water Cost of Service Rate Study completed in 2006. FY 2011 is the final year for that program and PUD is now gathering information for a new rate review, with a new cost of service study expected to begin in FY 2012.
Mr. Ruiz also briefly characterized ongoing staff discussions about a future revision to the rate structure possibly incorporating some of the techniques used by the Irvine Ranch Water District for taking household needs into account in a rate structure that encourages conservation and penalizes waste.
Meanwhile, City Councilmember Carl DeMaio is campaigning against the increase by introducing tangental arguments that, especially in the City’s current economic malaise, tend to generate emotional responses. Based on a “white paper” he delivered in September, DeMaio makes charges of “empty promises” and “out of control labor costs” and that “flaws and weaknesses” in PUD’s management and the overall rate structure have not been addressed and therefore (as punishment, I guess) this pass-through increase should not be approved until those issues are addressed.
(Incidentally, while observing the IROC workshop I got to wondering if Mr. DeMaio ever attends IROC meetings. IROC’s administrative support person Monica Foster wasn’t sure how many times, but committee member Gail Welch recalled that did he come to one meeting long enough to inform the committee of his priorities as a councilmember.)
Ultimately, the whole rate structure issue can appear to boil down to this dynamic between costs and rates: on the one hand you can total the costs and then calculate what rates should be to pay for them; or you can determine what ratepayers can afford to pay and then decide which costs can be funded with that amount. Somewhere in that mix is the answer.
The immediate rate increase bypasses those difficult issues for the time being. Carl DeMaio’s diversions notwithstanding, the question is simply whether we’re willing to cover the commodity cost of water that the City has to pay SDCWA.
For further information, here’s a report by the San Diego Independent Budget Analyst (see also the City Auditor’s review of calculations used for the proposed increase).
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Burton Freeman said
Thank you again, George, for your reporting. Not only are your comments on the IROC proceedings useful, but the links to related documents make it doubly so.
I think it is particularly timely to consider the topic of the price of water and its delivery because it brings into focus the whole issue of water economics for San Diego, almost the last customer on the long pipeline of imported water. The city of San Diego, but far the largest water retailer in the county, has some advantages over the smaller water districts served by the CWA; these include economies of scale, control of some large water infrastructure components, and strong representation on the CWA and MWD boards of directors. So the IROC and the city council have every right to question price and, particularly, price increases for domestic, agricultural and industrial water. We are, first, rightly concerned with water quality, efficiency of delivery and price at the Utilities Department level.
As we know, imported water pours through the jurisdictions of several agencies before it arrives here; each performs some services and increases the price. The city deals with the CWA; in turn, the CWA has raised legal issues over price with the MWD; if there were space and time, we could go even closer to the sources of water supply.
My comment is that water pricing is a) a lot more complicated than just “pass-through” increases, b) deserves extensive discussion and debate c) deserves reexamination of water sources, their real costs and benefits, and d)is not enhanced by dissing those who bring this discussion to the table.
K. Svet said
I have a correction to the reported $0.47 monthly increase for single-family residential customers – the monthly price increase based on water use of 14 hcf (the City average)is $3.42, or $6.83 per bi-monthly water bill.
The proposed rate increase is based on recovering costs from the CWA price increase which, like the previous pass-through rate increases, is calculated based on a projected water purchase amount. If actual water sales are lower than the projection, the additional costs incurred by the City will be less. San Diego customers have been conserving and using less water for the past few years, exceeding the Water Authority’s reduction target. UCAN is pushing for better accounting of City costs, especially for cost reductions that result from lower water consumption, which include lower electricity (from treatment plant operations and pump stations), chemical and maintenance costs. Also, MWD and SDCWA costs need to be evaluated to ensure that those agencies are being run efficiently and without waste. The best way to start this process is from the bottom up, which is why UCAN is encouraging customers to oppose the scheduled rate increase by returning the protest forms that were mailed out lost week.
George J. Janczyn said
I should have noticed that the average $0.47 amount indicated in the Public Notice actually refers only the the Base Fee…not the commodity fee which, as you point out, can be quite variable. The notice does indicate an average increase of $3.41 for up to 14 HCF of use on a different page. I should have noticed that when I was writing and have added a qualifier in the article.
Thank you for taking the trouble to comment!
George J. Janczyn said
I guess my oversight helps to make the point that these public notices can be confusing.
B. Garcia said
Yes, these notices can be incredibly confusing. The statement that there can be an increase of $3.41 on your bill can also be confusing. It leads people to think that the bill for a customer with average water use will only increase $3.41, when in fact, their bill will increase double that amount because residential customers are billed bi-monthly. When talking about how bills will be affected, we always have to remember to double any reported monthly increase.
brad Gore said
One very important “operational cost driver” that was NOT mentioned is the annual cash BONUS for our brave PUD employees. OOPS-I
forgot that the bonus is paid for out of sham “savings” identified in the annual “Bid to Goal” charade.