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Home My WebLink About1992-05-27; Municipal Water District; 0592-01; Fixing Rates for Water Supplied by Water DistrictCARLSBAD MUNICIPAL WATER DISTRICT - AGENDA BILL FIXING RATES FOR WATER SUPPLIED BY AB# 0592-1 TITLE: 05/27/92 MTG. CARLSBAD MUNICIPAL WATER DISTRICT DEPT. HD. rz ATTY - DEPT. CMWD I IClTY MGR. ~ RECOMMENDED ACTION: Recommend that the Board of Directors hold a public hearing and adopt Resolution No. fixing rates for water supplied by the Carlsbad Municipal Water District. ITEM EXPLANATION: The base price of water supplied by the Carlsbad Municipal Water District is currently $1.15 per unit (784 gallons). If converted to a cost per gallon, the price would be $.0015 (fifteen hundredths of a cent). There are a number of factors that go into the development of the retail water rates. The most significant portion is the wholesale price of water charged to the District by the San Diego County Water Authority. Presently, the Authority's charges, which include the costs incurred by the Metropolitan Water District, comprise 64% of the current retail rate. The second most significant portion of the water rate funds District operations. These expenses include personnel and other operating costs associated with the distribution of the water supply. These costs attributes to approximately 23% of the water rate. Lastly, the District funds depreciation ofthe water system with the remaining 13% of the rate. Current Retail Rate Components Metropolitan Costs SDCWA Costs District Operations Depreciation Cost per Acre Foot $261.00 62.00 113.00 65.00 Cost per Unit $0.60 0.14 0.26 0.15 TOTAL $501.00 $1.15 An increase in one of the three components of the retail rate is being recommended. The rates charged are scheduled to increase on July 1, 1992. The reason for this increase from the County Water Authority is the increase from $261.00 an acre foot charged by the Metropolitan Water District to $322.00 an acre foot. This represents a $47.00 per acre foot increase in untreated water plus an increase of $14.00 per acre foot for the treated water surcharge. CMWD receives treated water from the CWA. Page 2 of Agenda Bill No. The Methodology used in the development rate is as follows: Proposed Retail Rate Components Cost per Acre Foot Metropolitan Costs $322.00 SDCWA Costs 62.00 District Operations 113.00 Depreciation 65.00 TOTAL $562.00 of the proposed $1.29 base Cost Per % Unit Increase 0.74 18.9 0.14 0 0.26 0 0.15 12.2 $1.29 12.2 CMWD presently charges its customers for water through an inclining block rate. The inclining block rate was established during the 1991 calendar year to encourage water conservation during the drought. This present inclining block rate structure is as follows: 1 thru 7 units ..........$ 0.90/unit (single family residential only) up to allocation* .....................$I. 15/unit 1% to 20% over allocation* ............$l. 43/unit more than 20% over allocation* ........$ 1.73/unit *allocation is based on a percentage of conservation required form the base year usage (for example, during stage 4, when 20% conservation was required, the allocation was 20% less than the base year usage, for each customer). Presently CMWD is back to Stage I which asks for 10% voluntary conservation effort. The Metropolitan Water District is not charging the penalty rate through its IICP program and as a result, the County Water Authority will not be charging any penalties for exceeding the base year allocations. As a result, CMWD has three options in charging for water; the present inclining blockrate, the previously used flat rate, and a combination of the flat rate with a life-line rate. 1. INCLINING BLOCK RATE - Continuation of the inclining block rate utilizing the rate increase previously discussed would be as follows: 1 thru 7 units ....................$ l.O4/unit up to allocation ..................$ 1.29/unit 1% to 20% over allocation .........$I. 57/unit more than 20% over allocation .....$ 1.87/unit The base year of 1989-'90 for determining the allocation would still be used. However, the base year will eventually change when additional conservation efforts are required, possibly during the next drought or shortage. A completely different method of calculating the cut-back will be required. Additionally, it would be difficult to charge the penalty rates for those that exceed the allocation since the conservation effort is voluntary and CMWD does not get charged any penalties. Page 3 of Agenda Bill No. 2. FLAT RATE If CMWD re-instituted the flat rate, the rate including the latest rate increase would be $1.29/unit by going to the flat rate the allotments would no longer be needed and no penalties would be incurred. However, there would also be the loss of the lifeline rate. 3. FLAT RATE WITH LIFELINE RATE The third option would involve a flat rate charge with a lifeline rate or basically, a two tier system. In order to utilize a lifeline rate, the base rate would have to be increased to offset the loss of revenue incurred by the lifeline rate. For example, if the lifeline rate becomes $1.04 per unit for the first seven units, the base rate for everyone using more than seven units would have to be $1.48 per unit or an increase over the old base rate of 33 cents (29% increase). This figure is based on a District-wide average single-family residential use of 16 units per month. Continued utilization of a lifeline rate is difficult to justify . There is no reason the District should be delivering water for less than the cost to deliver it. Additionally, lifeline rates, if used, should be offered to customers who meet some type of income eligibility requirements. Applying lifeline rates to all customers assumes that low-income customers used less water than other customers, which is not necessarily true. As a result, all customers received the benefit of the reduced rate. this subsidy must be recovered through higher usage rates in all other blocks. Lifeline rates probably should be considered only when the cost of water is high compared to other similar utilities and/or when a significant percentage of residential customers are perceived to be unable to afford water service. Therefore, staff recommendation is that the District re-institute the flat rate water charge and that charge should be $1.29 per unit for all customer classifications. FISCAL IMPACT: * Retail water rates must be increased to cover the wholesale increases from the Authority or an annual shortfall would exist that amounts to $1,037,000 for 1992-'93. These additional costs are being assessed by the Authority for their budgetary needs. EXHIBITS : None. h b MWD METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA BOB GOMPERZ BOB MUlR LEE GOTTLIEB ROB HALLWACHS OFFICE (2131 250-6866 OFFICE (213) 250-6930 OFFICE 1213) 250-6603 OFFICE I2131 250-6450 tillMt it?'% 791 Ai8 row 17141 SY~ 8057 YOVE (8181 766 1193 hOME 13101 397 4031 Release: on receipt March 10, 1992 WHOLESALE WATER RATE WILL INCREASE IN JULY Metropolitan Water District's board of directors voted today to add $47 to the wholesale price of an acre-foot of untreated water that the agency delivers to its member public agencies, starting in July. The surcharge for water treatment will go up $14 an acre-foot. Metropolitan now sells untreated water at $222 an acre-foot and $261 for treated water. An acre-foot of water is 326,000 gallons, about the amount used by two average families in and around the home in one year. The increase will raise the price of treated drinking water the equivalent of about a $1.25 per month on the average consumer's bill. The actual effect on individual consumers' bills will depend on what local water agencies charge for water service. Michael McGuire, Metropolitan's assistant general manager, said that the proposed increase in the base water rate was necessary to improve the reliability of water supply to Southern California. more . . . . ill1 Smct Boulevard, hs ilngeles, California Mailing address: Box 54153, bs Angeles, California 90054 0153 Teiephone I2131 2511- 6ri!!O t -2- @'The increase in the rate will fund needed new water supply facilities and pay for fixed operating costs,1t McGuire said. 'lour sixth year of drought and accompanying rationing programs underline the need for improved water distribution systems serving Metropolitan's service area," he said. One of the new facilities, authorized by the board in October, is the Domenigoni Valley Reservoir that will nearly double Southern California's existing surface water storage capacity. located in Riverside County and is scheduled to be completed in 1999. The 800,000-acre-foot facility will be McGuire said that the proposed rate increase was developed after the district took a hard look at the timing and need for various projects. Nearly $120 million in capital construction projects was deferred and more than $86 million in budget cuts were made as part of the water rate package presented to the board. When the rate increase goes into effect in July, the price of untreated water will be $269 an acre-foot. Drinking water treated at Metropolitan's five treatment facilities will cost $322 an acre-foot. more . . . . . -3- The $14 per acre-foot treatment surcharge will be used to improve existing water treatment plants and processes. Metropolitan, through its 27 member public agencies, provides water service to nearly 15 million Southern Californians in Los Angeles, Ventura, San Diego, San Bernardino, Riverside and Orange counties. The district imports water from the Colorado River, through the Colorado River Aqueduct, and from northern California as a contracting agency for State Water Project supplies. ###