Utility Watchdog in San Diego

Water Rate Increase 2014


It seems fairly obvious that in order for the San Diego Public Utility Department to continue as a viable self-supporting enterprise (i.e., not funded by local taxes), water rates will have to go up. But what should the price be?  


On July 31st  the San Diego City Council’s Natural Resources & Culture Committee (NR&C) accepted a proposal for a new water rate billing structure, including a rate increase, and sent it to the City Council for a final decision. The committee recommends a new billing method that would use a four-tier rate structure designed to provide a greater financial incentive to conserve water. The current rate structure has three tiers with weaker conservation incentives. The new structure should include more billing tiers and rise more steeply, so that those who elect to use far more water will have to pay the higher marginal cost of providing it.

The new rate structure is an option in the 2013 Water and Wastewater Cost of Service Study delivered at the NR&C meeting. 43 percent of the water ratepayers in San Diego (those who use 10 HCF or less per month) could see lower rates under the new plan, according to Public Utilities Department (PUD) staff that presented Study. Those who consume water at the high end of the scale (19+ HCF) would pay dramatically higher rates (HCF = Hundred Cubic Feet = 748 gallons). 

Water rates should be restructured to incentivize conservation, while still assuring a basic water supply at affordable rates for everyone. The most reliable and least expensive gallon of water is the one we don’t use in the first place. That makes water conservation the top priority. The state has mandated a 20 percent reduction in water use by the year 2020, but much more is needed. Two-thirds of domestic water use goes to irrigating landscaping, so there is a huge opportunity to conserve by using native, drought-resistant plantings and improving the efficiency of irrigation systems.  Newer homes and businesses have efficient indoor water systems, but thousands of older ones need to be retrofitted with more efficient fixtures.

For the past two years PUD has been operating under a requirement to “absorb” rate increases for imported water that it buys from the San Diego County Water Authority, rather than pass the cost on to ratepayers. San Diego imports some 80% of the water it uses.

The decision to do that was made by then-Mayor Jerry Sanders in mid-2011. The news was well-received by the public, likely because of the recession, high unemployment rates, and of course, because nobody likes rate increases. To “absorb” SDCWA’s 2012 rate increase PUD cut back on contracts, supplies, materials, personnel, and drew down reservoir “surplus” so that less imported water would need to be bought, at a fiscal impact of $17.5 million.

This year, the fiscal impact on PUD from SDCWA’s 2013 price increase is estimated to be $20.6 million due to further cuts in contracts, supplies, materials, personnel, and drawdown of reserve funds. The Study (or Rate Case) will be placed on the September 10 City Council agenda. If councilmembers approve the rate proposal, they will schedule a public hearing in accordance with Proposition 218.

That would have to happen fairly soon, since the plan aims for the first rate increases to take effect on January 1, 2014 and the second increase on January 1, 2015.

The Metropolitan Water District (MWD), which delivers most water to Southern California, is steadily increasing its prices, and new sources like the desalination plant being built in Carlsbad are substantially costlier. A court recently validated a deal under which San Diego County is purchasing surplus water from the Imperial Valley, but that, too, is costly and relies on the MWD to transfer the water.

San Diego County Water Authority created a program to offer an incentive in replacing existing turf with WaterSmart Landscaping

Through an ongoing public education campaign, including demonstration projects, stricter drought alerts and greater awareness of the environmental impacts of water use decisions, residents and businesses can cut water consumption by at least a third in the next 20 years without any significant impact on quality of life.