About Water Rates
What do water rates fund?
SSWD provides water service to more than 180,000 residential and business customers. Monthly water rates paid by customers are SSWD’s primary source of revenue. Rates fund operations and maintenance, and capital investments to maintain and upgrade its water system, including groundwater pumps, distributional transmission mains, and other infrastructure needed to supply water to homes and businesses.
Water Rate Study Findings and Recommendations
What are the 2019 Water Rate Study’s findings and recommendations?
The Rate Study determined that SSWD’s income and planned expenses are well-balanced and managed, but recommends a rate increase of 3 to 5 percent in each of the next five years to ensure that the District is able to keep pace with inflation in the costs of continuing to deliver safe, high-quality and reliable water service.
Why was a rate increase recommended?
The Rate Study recommends that SSWD increase rates to primarily cover the costs of inflation. SSWD’s capital improvement and preventative maintenance programs help ensure there are minimal if no “expensive surprises.”
Did the Study Consider Where SSWD Could Reduce Costs Before Increasing Rates?
The Rate Study considered where SSWD could reduce or optimize costs before considering if rates should be adjusted. From the review, it was determined that roughly $47 million of Capital Improvement Program expenditures needed to make improvements in the water system could be deferred over the next 10 years, but that operational costs would continue to increase at or slightly above the overall rate of inflation in SSWD’s cost of doing business.
Did the Rate Study make any other recommendations?
The Rate Study recommends the following proposed adjustments to the current rate structure:
- Maintain the two-tiered rate structure for single-family residential accounts with modifications to the Tier 1 and Tier 2 allotments (also referred to as tier widths). For Tier 1, the recommended allotment is based on the average amount of groundwater production the District generates to serve annual demand evenly allocated to all accounts. Tier 2 would capture any water usage above Tier 1 and is driven by the costs of acquiring additional surface water supplies.
- Establish a separate customer class for multifamily residential (MFR) accounts with a uniform rate structure. MFR accounts are distinguished from other customer classes in the billing records and, therefore, it is appropriate to allocate their proportionate share of the costs of providing service based on the total volume of water used, peak demand on the system, and burdens the class places on staff and customer service. A uniform rate provides the most appropriate and equitable rate structure between accounts within this customer class.
- Move from a off-peak/on-peak rate structure to a uniform rate for all Non-Residential accounts. Although terminating peaking rates and implementing uniform rates is recommended, it is important to note that non-residential customer classes would still pay their proportionate share of the costs of providing service based on the total volume of water used, peak demand on the system, and burdens the class places on staff and customer service. A uniform rate provides the most appropriate and equitable rate structure among accounts in this customer class.
Also, when implementing rate adjustments, many public water providers include authorization for five years of proposed rate increases versus a shorter timeframe. Therefore, as part of the proposed rate increases, the Rate Study recommends that the Board adopt a five year schedule of rate increases. The proposed rates are the maximum amount the Board may adopt without re-noticing and holding another Proposition 218 Public Hearing. The Board also may adopt new rates at a lower amount if it believes lesser increases are warranted.
About the 2019 Water Rate Study
What is a Water Rate Study?
A Rate Study is a detailed review of a water provider’s costs and the rates needed to meet those costs and to support the delivery of safe, high-quality and reliable water service. While a rate study is not required, it is a best practice way for a public water provider to provide its customers with the detailed information they need to understand the need and scope for a proposed rate increase. SSWD’s 2020-2024 Rate Study was prepared by an independent, third-party financial expert. The Rate Study includes an in-depth look at current revenues, operation and maintenance costs, capital investment plans, and reserves (essentially the water provider’s savings account). The Rate Study also makes recommendations for any needed rate adjustments for the public’s review and consideration by SSWD’s Board of Directors.
What were the goals of the SSWD 2019 Water Rate Study?
The ultimate goal was to identify rates and connection fees that are fair, reflect the cost of providing service, encourage efficiency, are simple to understand, and meet SSWD’s revenue requirements, including bond repayment obligations. The Rate Study also provides customers with an opportunity to more fully understand SSWD’s costs of providing a safe, high-quality and reliable water supply. Specific study goals were to help ensure:
- Income from rates and other sources fully covers the costs of providing service.
- SSWD can meet bond funding requirements.
- SSWD can adequately fund capital improvement projects.
- SSWD's reserves (essentially its savings account) can be maintained at appropriate levels.
What does the SSWD 2019 Water Rate Study include?
The 2019 Water Rate Study includes an in-depth look at:
- SSWD's long-range financial plan.
- Projected costs for operation and maintenance and capital improvement projects under various scenarios that consider inflation, pending state and federal regulations and other potential impacts.
- Total water revenues needed to address projected costs and capital/reserve requirements.
- How rates might be fairly allocated among SSWD's customer classes.
- Options for structuring rates, including scenarios that maintain rates at current levels and those focused on tiered pricing options that charges customers according to the of water used from various sources.
- Recommendations for rate adjustments.
How is SSWD’s 2019 Water Rate Study being used?
The Rate Study is being used by the Board of Directors and staff to determine whether rate adjustments are needed. If the Board of Directors determines that increases are needed, the Rate Study supports the proposed rates and provides the information necessary for the public to understand the proposed water rate changes.
When was SSWD’s prior Rate Study performed? What was the outcome?
SSWD’s most recent Rate Study was performed in 2013. After considering the information in the 2013 Rate Study and receiving public input, SSWD’s Board of Directors approved a series of 4 percent annual rate increases effective January 1, 2015, 2016, 2017 and 2018. Previously, there were no rate adjustments from 2009-14 and in 2019.
Where can I find SSWD’s 2019 Rate Study?
You can review SSWD's most recent Rate Study.
What is Proposition 218?
Proposition 218 requires local government agencies that provide water, sewer and solid waste services to inform ratepayers that proposed rate increases are being considered, the amount of the proposed rate adjustment, the basis on which the rates are calculated, the reason for the adjustment, and instructions for protesting the rate increases. It also ensures that ratepayers also have a voice in the rate-setting process.