The San Diego County Water Authority board meeting of June 24 included approval of SDCWA rates and charges for Calendar Year 2022 and approval of a two-year CWA budget.
Fallbrook Public Utility District general manager Jack Bebee, Helix Water District board member Joel Scalzitti, and Rainbow Municipal Water District general manager Tom Kennedy cast the only CWA board votes against the $1,693,496,900 budget covering Fiscal Years 2021-22 and 2022-23. Bebee, Scalzitti, Kennedy, and San Diego City Council member Chris Cate were the four CWA board members to vote against the approval of the rates and charges which also allocated the pro-rata share of fixed charges to each CWA member agency.
“While I appreciate the effort by SDCWA to contain costs, I voted against their proposed budget and rate increases due to concerns over its rate structure and long-term debt management strategy,” Bebee said. “I’m concerned that the vote regarding budget expenditures, along with use of additional debt combined with a high probability that water sales will decrease, will result in significant challenges for the region in the years ahead which could unfairly raise water bills on customers in rural water agencies.”
The new rates will on a countywide basis increase the cost per acre-foot from $1,760 to $1,833 for treated water and from $1,474 to $1,523 for untreated supply. That equates to an increase of 3.6 percent for treated purchases and 3.3 percent for untreated delivery. The CWA 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, 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 5.2 percent and its untreated wholesale rate by 2.8 percent. MWD also has a “wheeling” charge to transport the QSA water through the MWD aqueduct system, which will increase by 4.1 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.
“There’s no increase from the Water Authority, and you can’t beat that,” said Lakeside Water District board member Frank Hilliker, who is Lakeside’s representative on the CWA board. “It’s a good thing.”
Due to each agency’s pro-rata share of fixed charges, some CWA member agencies will see up to a 7 percent increase in rates and charges.
Conservation measures, the conversion of agricultural land to crops utilizing less water, and increased local supply have led to a reduction in water sales to many CWA member agencies. “I think that our forecasting for water sales are inaccurate,” Kennedy said.
Kennedy explained that the budget and corresponding rates are based in large part on revenue from water sales. “To be financially sustainable you have to ensure some stability in your revenue,” he said.
“We need to hope for the best but plan for the worst,” Kennedy said. “What we’re doing is planning for the best.”
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 $40.9 million from its rate stabilization fund for Fiscal Year 2021-22.
The CWA untreated water rate per acre-foot for municipal and industrial (M&I) customers will increase from $940 to $1,009. The M&I untreated rate was $909 in 2019 and $925 during 2020.
The melded CWA rate for treatment is based on the cost to purchase treated water from MWD, the cost of desalinated water from the Carlsbad 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 treated water surcharge which is currently $295 will increase to $310 for 2022. That surcharge was $276 during 2019 and $280 last year.
The per-acre untreated Special Agricultural Water Rate which was $731 for 2019 and $755 in 2020 will be increased from $777 to $799. Treated water for SAWR customers will increase from $1,072 to $1,109 per acre after being $1,007 in 2019 and $1,035 for 2020.
The CWA’s transportation rate is a uniform rate set to recover capital, operating, and maintenance costs of the CWA’s aqueduct system. The rate per acre-foot which had been $120 during 2019 and $132 last year is currently $150 and will be $173 next year.
In CWA Annexation Fee which was $10,681 in 2019 and $10,729 during 2020 is currently $10,771. That fee will be $10,801 next year. The annexation fee does not include the CWA member agency and MWD annexation fees, nor does it include the Local Agency Formation Commission processing fee for the annexation.
