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By Joe Naiman
Village News Correspondent 

CWA proposes lower rate increases for 2019

 

Last updated 6/1/2018 at 4:31pm



A June 28 San Diego County Water Authority hearing will determine the SDCWA's rates and charges for 2019, but the SDCWA is likely to have a lower rate increase than in past years.

A May 24 CWA board vote set the June 28 hearing date for the proposed rates and charges which included a 2.9 percent increase for untreated water supply and an increase of 0.9 percent for treated water. The cost for member agencies to purchase untreated water including both supply price and other charges would increase from $1,303 to $1,341 per acre-foot while the price of treated water would rise from $1,603 to $1,617 per acre-foot. The June 28 action will also allocate the pro-rata shares of total fixed charges to each CWA member agency.

One of the factors in the lower cost increase for treated water is an anticipated 28 percent increase in water treated through the CWA's Twin Oaks Valley Water Treatment Plant which reduces the cost of treated water for the CWA which otherwise would need to purchase treated water from the Metropolitan Water District of Southern California.

A CWA lawsuit against MWD has resulted in a reduction of transportation costs MWD charges the CWA to transport Imperial County water through MWD facilities, and the Quantification Settlement Agreement (QSA) which provides the CWA with Imperial County water also includes increased supply for 2019. Additionally, the CWA's Rate Stabilization Fund has a maximum funding level of 3.5 years of wet weather so the CWA will withdraw $18.4 million from that fund.

The use of Rate Stabilization Fund reserves translates into a rate reduction of $49 per acre-foot.

"We are pretty much at the maximum and we needed to draw some amount," said CWA director of finance Lisa Marie Harris.

The Rate Stabilization Fund allows the CWA to withstand a 25 percent reduction in water sales and has a target reserve of 2.5 consecutive wet years (although rain is seasonal the calculation of half a year applies to the multiplication) along with the maximum reserve level of 3.5 years. The proposed rate changes would also modify the policy to base the RSF on withstanding a 15 percent reduction in water sales; water efficiency programs have resulted in a 47 percent decline in per capita water usage between 1990 and 2017 so the CWA is less susceptible to significant demand reduction in wet weather years. The reduction would be phased to a 20 percent reduction for Fiscal Years 2019 and 2020 and a 15 percent reduction beginning in Fiscal Year 2021.

The CWA's rates are based on a melded rate which melds the cost of water delivered from MWD, water purchased from the Imperial Irrigation District under the 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's April 10 meeting approved rate increases of 3.4 percent for treated water and 5.2 percent for untreated supply. MWD also has a Readiness to Serve Charge which will decrease by 5.0 percent and a Capacity Charge which will be reduced by 1.1 percent. MWD's "wheeling" charge to transport the QSA water through the MWD aqueduct system will decrease by 6.8 percent due to the lawsuit settlement.

The QSA increases the CWA's purchases of Imperial County water over the long-term agreement and supply from the QSA will increase from 208,700 acre-feet for 2018 to 238,700 acre-feet in 2019.

The CWA's rate per acre-foot of untreated water for municipal and industrial (M&I) customers will increase from $894 to $909. 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, $780 in 2016, and $855 during 2017.

The CWA also utilizes a melded rate for treatment based on the cost to purchase treated water from MWD, the cost of desalinated water from the Claude "Bud" Lewis Carlsbad Desalination Plant, and the costs to treat water at the Twin Oaks, Olivenhain, and Levy treatment plants (the Levy plant is owned and operated by the Helix Water District, and the CWA purchases treated water from Helix). Although CWA treatment costs are expected to increase by 9.3 percent, the increase in treated production at the Twin Oaks facility from 51,800 to 66,400 acre-feet reduces the amount of treated water the CWA will need to purchase from MWD.

The surcharge for treated water is currently $300 and will decrease to $276 for 2019. 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, $280 during 2016, and $290 for 2017.

The Special Agricultural Water Rate for untreated water which is expected to increase from $695 to $731 per acre-foot was $412 in 2009, $484 for 2010, $527 during 2011, $560 for 2012, $593 in 2013 and 2014, $582 for 2015, $594 during 2016, and $666 in 2017. The rate per acre-foot for SAWR treated water was $580 in 2009, $699 during 2010, $742 in 2011, $794 for 2012, $849 in 2013, $867 for 2014, $860 during 2015, $874 in 2016, and $957 for 2017; that rate will increase from $995 in 2018 to $1,007 during 2019.

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 $115 to $120 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, $105 for 2016, and $110 during 2017.

The Infrastructure Access Charge is used for CWA fixed expenditures which are incurred even when water use is reduced. The rate per meter equivalent and remain at $3.01. 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, $2.76 in both 2015 and 2016, and $2.87 during 2017. 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 $26,400,000 charge which was unchanged for Calendar Years 2012 to 2018 will be reduced to $25,600,000. The Customer Service Charge was $16,000,000 in 2009, $18,000,000 during 2010, and $23,200,000 for 2011.

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 will not change next year and has been the amount since 2017. 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 pro-rata basis utilizing a 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 was $24,800,000, the 2018 total Supply Reliability Charge is $28,600,000, and the 2019 total charge will be $30,200,000.

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 becomes effective 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 to $16,291,858 for 2017-18 and will be $14,870,829.

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 will decrease from $9,902,340 for 2018 to $8,262,020 during 2018. The charge was $9,105,600 in 2017 and $12,406,380 for 2016.

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 increased from $4,840 per meter equivalent in 2016 to $5,029 for 2017 to $5,099 in 2018 and will be increased to $5,267 per meter equivalent in 2019. A Water Treatment Capacity Charge which recovers a portion of the regional water treatment facility expenses 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 to $141 in 2018 and will be $146 for 2019.

In 2017 the CWA board approved a change in the annexation fee structure from a processing fee and a per-acre annexation fee to a flat annexation application fee after a cost analysis determined that parcel size had little impact on the CWA's staff time. The annexation application fee is currently $10,340 and will increase to $10,681 for 2019. That fee does not include the CWA member agency and MWD annexation fees, nor does it include the Local Agency Formation Commission processing fee.

 

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