The San Diego County Water Authority hearing to approve Calendar Year 2021 rates and charges will be June 25.
The May 28 motion to set the rate hearing date along with the proposed rates and charges passed with 78.139 percent of the SDCWA weighted vote.
Twenty-one CWA board members supported the motion, eight votes were cast against the action, and two CWA board members abstained. A non-voting presentation earlier in the day addressed proposed changes to the CWA’s two-year budget which covers Fiscal Year 2019-20 and Fiscal Year 2020-21; the June 25 CWA board meeting will also include consideration of the budget adjustments. If the rates and charges are approved June 25 the action will also allocate the pro-rata shares of total fixed charges to each CWA member agency.
The new rates would increase the cost per acre-foot from $1,686 to $1,790 for treated water and from $1,406 to $1,495 for untreated water. That equates to increases of 6.2 percent for treated supply and 6.3 percent for untreated purchases. The new rates and charges also include a 15.8 percent increase in the Infrastructure Access Charge which is used for CWA fixed expenditures incurred even when water use is reduced. The CWA’s member agencies have the option of absorbing the rate increase or passing on the additional cost to customers.
The 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 (IID) under the Quantification 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. The CWA also incorporates debt coverage targets into its rate structure with 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 a default) and 1.4:1 for overall debt.
MWD increased the cost of treated water by 2.7 percent and its untreated wholesale rate by 3.3 percent. MWD costs also include a “wheeling” charge to transport the QSA water through the MWD aqueduct system, which will increase by 10.8 percent. The QSA included scheduled rate increases over the multi-decade period, and the price of IID water is now tied to an inflation index. IID deliveries will increase from 192,500 acre-feet for Calendar Year 2020 to 205,000 acre-feet during Calendar Year 2021.
The desire to avoid steep increases has 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 $9.5 million from its rate stabilization fund for Fiscal Year 2020-21, which will reduce next year’s rates by approximately $61 per acre-foot.
“That’s what the fund is there for,” said CWA general manager Sandra Kerl.
The CWA will also draw 30,000 acre-feet of operational storage which will address seasonal demand patterns.
A combination of MWD rate increases, the coronavirus outbreak, and decreased water sales due to reduced demand led to the proposed budget adjustments.
“We’re taking a very strategic and thoughtful approach to our expenditures,” Kerl said.
The budget calls for 255.5 full-time equivalent staff positions. The CWA currently has 239.5 of those filled, and the vacant 16 positions will remain unfilled.
Deferral of non-urgent projects will also reduce near-term expenditures. “We have decided to hold off on the accelerated projects,” Kerl said.
“We’re in a crazy time where we’re looking at a pandemic that has caused a serious recession,” said CWA director of finance Lisa Marie Harris.
Ironically the economic downturn has led to lower interest rates. “It’s in our best interests to preserve our resources and issue debt,” Harris said.
Not only will some projects be funded by bonds rather than by cash, but some existing bonds will be refinanced. The normal CWA protocol is to consider refinancing if savings between 2 percent and 4 percent can be achieved. Harris indicated that refinancing some of the CWA bonds can obtain a savings of 12 percent. “The re-fundings that occur are dictated by market conditions,” she said.
Other bond debt incurred from major projects over the past three decades will be paid off later this decade. “Slowly but surely we are making our path to pay off the debt,” Harris said.
The CWA rate per acre-foot of untreated water for municipal and industrial (M&I) customers will increase from $925 to $940. The untreated rate was $894 in 2018 and $909 during 2019.
The CWA also uses a melded rate for treatment which is based on the cost to purchase treated water from MWD, the cost of desalinated water from the Carlsbad desalination plant, and the cost 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). The cost of treated water from the Twin Oaks plant is less than the cost to purchase such supply from MWD, so an increase in treated production at the Twin Oaks facility allowed for a decrease of the treated water surcharge from $300 in 2018 to $276 for 2019. The surcharge increased to $280 during 2020 and will be $295 in 2021.
The Special Agricultural Rate for untreated water per acre-foot was increased from $695 in 2018 to $731 for 2019 to $755 in 2020 and will be $777 in 2021. The SAWR treated rate will increase from $1,035 to $1,072 and had been $995 during 2018 and $1,007 in 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 $132 to $164 per acre-foot. The rate had been $115 in 2018 and $120 for 2019.
The Infrastructure Access Charge per meter equivalent was $3.01 both in 2018 and in 2019 and increased to $3.66 for 2020. The 2021 IAC would be $4.24 per meter equivalent. A meter under one inch has a 1.0 meter equivalent and 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 had been $26,400,000 from 2012 to 2018 before dropping to $25,600,000 for 2019 and 2020, and the 2021 total charge will also be $25,600,000
The Storage Charge recovers costs related to emergency storage programs and is allocated to member agencies based on a pro-rata share of non-agricultural deliveries. The total charge was $65,000,000 from 2017 to 2020 and will decrease to $60,000,000 for 2021.
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 CWA staff time. The annexation fee was $10,340 in 2018 and $10,681 in 2019. It is currently $10,749 and will be $10,771 in 2021. That fee does not include the CWA member agency and MWD annexation fees or the Local Agency Formation Commission processing fee.
