CWA sets June 22 hearing for proposed rate increase

San Diego County Water Authority (SDCWA) staff proposed what would equate to a 3.7 percent rate increase for SDCWA water rates, and on May 25 the CWA board set a June 22 hearing date for the proposed 2018 rates.

The cost per acre-foot on a countywide basis will increase from $1,546 to $1,603 for treated water and from $1,256 to $1,303 for untreated supply. The proposed rate changes also include replacing a per-acre annexation cost with a single annexation application fee.

The CWA's rates are based on a melded rate which melds the cost of water delivered from the Metropolitan Water District of Southern California (MWD), water purchased from the Imperial Irrigation District under the Quanitification Settlement Agreement (QSA), and water produced by the Claude "Bud" Lewis Carlsbad Desalination Plant.

The CWA also has transportation, storage, and customer service charges along with fees and charges for fixed expenditures which are incurred even when water use is reduced. Debt coverage targets are also incorporated into the CWA rate structure; the CWA has a target debt coverage ratio, or ratio of cash available to debt obligation, of 1.5:1 for senior lien debt (debt secured by collateral in the event of default) and 1.4:1 for overall debt.

The QSA included scheduled rate increases over the multi-decade agreement period; the price of Imperial Irrigation District water is now tied to an inflation index.

MWD increased the cost of untreated water by 4 percent and its transportation cost by 4.5 percent. MWD costs, which include a "wheeling" charge to transport the QSA water through the MWD aqueduct system, account for 53 percent of the CWA's water supply costs while QSA supply is 23 percent of the cost, desalination is responsible for 22 percent of the supply expenses, and operational storage utilization comprises the other 2 percent of the supply cost.

The desire to avoid steep increases has also led to raising rates over a multi-year period to cover a specific cost, and the CWA also has a rate stabilization fund which allows increases to be spread over multiple years. The CWA will draw $5 million from its rate stabilization fund for 2018, which will reduce next year's rates by approximately $13 per acre-foot.

The CWA's rate per acre-foot of untreated water for municipal and industrial (M&I) customers will increase from $855 to $894. The untreated water rate was $365 during 2007, $390 for 2008, $463 in 2009, $532 for 2010, $597 during 2011, $638 for 2012, $714 in 2013, $732 during 2014, $764 for 2015, and $780 in 2016.

The surcharge for treated water was increased from $290 to $300. That surcharge was $164 in 2008, $168 during 2009, $215 in 2010 and 2011, $234 during 2012, $256 in 2013, $274 for 2014, $278 in 2015, and $280 during 2016.

The Special Agricultural Water Rate which was increased from $666 to $695 per acre-foot was $412 in 2009, $484 for 2010, $527 during 2011, $560 for 2012, $593 in 2013 and 2014, $582 in 2015, and $594 during 2016. The per-acre rate for SAWR treated water increased from $580 in 2009 to $699 during 2010 to $742 in 2011 to $794 for 2012 to $849 in 2013 to $867 for 2014 to $860 during 2015 to $874 in 2016 to $956 for 2017 and will be $995 in 2018.

The CWA's transportation rate is a uniform rate set to recover capital, operating, and maintenance costs of the CWA's aqueduct system and will increase from $110 to $115 per acre-foot. The rate per acre-foot was $64 in 2009, $67 for 2010, $75 during 2011, $85 in 2012, $93 during 2013, $97 for 2014, $101 in 2015, and $105 for 2016.

The Infrastructure Access Charge is used for CWA fixed expenditures which are incurred even when water use is reduced. The rate per meter equivalent was $2.87 in 2017 and will increase to $3.01 for 2018. The IAC per meter equivalent was $1.90 during 2009, $2.02 for 2010, $2.49 in 2011, $2.60 during 2012, $2.65 in 2013, $2.68 for 2014, and $2.76 in both 2015 and 2016.

A meter under one inch has a 1.0 meter equivalent; the rates are multiplied by 1.6 for one-inch meters, by 3.0 for 1.5-inch meters, by 5.2 for two-inch meters, by 9.6 for three-inch meters, and by larger factors for meters larger than three inches.

The Customer Service Charge is intended to recover costs which support the operations of the CWA and is allocated among member agencies based on a three-year rolling average of all deliveries. The charge which was $16,000,000 in 2009, $18,000,000 during 2010, and $23,200,000 for 2011 has been unchanged at $26,400,000 since 2012.

The Storage Charge recovers costs related to emergency storage programs and is allocated based on a pro-rata share of non-agricultural deliveries. The $65,000,000 total charge for 2017 will not change next year. The total Storage Charge was $22,200,000 in 2008, $23,000,000 during 2009, $34,000,000 in 2010, $44,300,000 for 2011, $54,000,000 during 2012, $60,200,000 in 2013, and $63,200,000 from 2014 through 2016.

In March 2015, the CWA approved a revised rate structure intended to avoid a situation where conservation resulting in a decrease in water usage leads to the need to increase rates. The CWA added a Supply Reliability Charge while allocating non-commodity revenues to all rate and charge categories including treatment and applying the debt and equity payments for the Carlsbad seawater desalination plant to the supply rate.

The Supply Reliability Charge utilizes a fixed charge to recover a portion of the QSA and Carlsbad desalination plant costs. The charge is set equal to the difference between the supply cost of desalination and the Imperial County purchases (including MWD's wheeling charge) and a like amount of water purchased at MWD's Tier 1 rate multiplied by 25 percent.

The charge is allocated to CWA member agencies on a prorated basis utilizing a rolling five-year rolling average of M&I deliveries for each member agency. The initial Supply Reliability Charge for 2016 was $26,000,000; the 2017 amount is $24,800,000, and the 2018 total Supply Reliability Charge will be $28,600,000.

The CWA also has a Standby Availability Charge of $10 per acre or $10 per parcel under one acre. That amount will not change.

MWD's Readiness to Serve Charge, which is set on a fiscal year basis and will take effect July 1, involves credits for the standby charge and administrative costs. The CWA's share is allocated to member agencies based on a 10-year rolling average of demands. The CWA's charge after standby and administrative credits was reduced from $22,406,380 in 2015-16 to $18,623,577 during 2016-17 and will be $16,291,858 for 2017-18.

The MWD Capacity Charge is allocated to CWA member agencies proportionally based on a five-year rolling average of flows during peak periods. The total charge to the CWA decreased from $12,406,380 for 2016 to $9,105,600 in 2017 but will increase to $9,902,340 for 2018.

The CWA also has a System Capacity Charge which is a one-time charge for new system connections and recovers the proportionate cost of the existing and planned system serving the new customers. The System Capacity Charge which increased from $4,840 per meter equivalent in 2016 to $5,029 for 2017 will be increased to $5,099 per meter equivalent in 2018. A Water Treatment Capacity Charge which recovers a portion of the regional water treatment facility but exempts the City of Del Mar, City of Escondido, and City of Poway customers who cannot benefit from that service increased from $123 to $128 per meter equivalent between 2016 and 2017 and will be $141 in 2018.

The CWA has been charging a $3,000 processing fee for annexation requests along with an annexation fee of $2,929 per acre. A cost analysis determined that parcel size had little impact on the CWA's staff time, so as of July 1 a flat annexation application fee of $10,340 will be charged. That fee does not include the CWA member agency and MWD annexation fees, nor does it include the Local Agency Formation Commission processing fee.