New analysis endorses S.D. plan for 18% water rate hike — but single-family-home customers may get a break
The legally required second opinion raises questions about fixed costs, firefighting fees and analysis of water use during the COVID-19 pandemic.
San Diego’s proposal to sharply raise water rates over the next two years may be putting too much financial burden on single-family-home customers and not enough on businesses and condominium and apartment complexes, according to a new analysis.
City officials are proposing 17.6 percent overall water rate hikes over the next two years based on a consultant’s analysis last fall that said annual revenue must increase from $566 million to $602 million to cover rising expenses.
Under that proposal, the average monthly bill for a customer in a single-family home would jump 27 percent — from $81.07 to $95.03 this November and then to $103.06 in January 2025. Bills for other customers would rise less sharply.
A second consultant’s separate analysis, which is legally mandated, endorses the earlier finding of the need for more revenue to cover rising costs to buy imported water and replace aging pipes.
A new analysis says more money is needed from ratepayers for the Pure Water sewage recycling system and other projects
San Diego also is building the Pure Water sewage recycling system, the largest capital project in city history. It’s projected to supply half the city’s water once completed in 2035.
San Diego’s water system serves 270,000 customer accounts and roughly 1.4 million people. It serves the entire city except for Rancho Bernardo, plus the cities of Del Mar, Coronado and Imperial Beach.
In addition to infrastructure repairs and upgrades, money from higher rates would pay for salary increases for 950 city water workers and for upgrades to the city’s customer service system, which has been harshly criticized.
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While the second analysis, by Stantec Consulting Services, endorses the need for more revenue, it recommends four significant changes to the methodologies and assumptions made by the first consultant, Raftelis.
One of those changes would lead to lower bills for single-family-home customers and higher ones for businesses, condominiums and apartments, according to the analysis. The effects of the three other changes aren’t yet known.
The first proposed change would reverse a city plan to begin charging all water customers fixed “distribution system” costs regardless of how much water they use.
The goal of the proposed fixed charge is to spread the cost of maintaining the water system more evenly among all the customers connected to it.
The city blames severe staffing shortages for investigations into unusual meter readings taking too long, forcing the city to suspend billing for many months.
City officials hail conservation programs for reducing the use of water, but those programs don’t lower the fixed costs of maintaining the city’s 3,300 miles of pipeline, 49 pump stations, nine reservoirs and three treatment plants.
That causes the city to raise rates, which can seem unfair to customers who have conserved water.
The proposed fixed charge to cover maintenance of the city’s distribution system aims to account for that unintended consequence of conservation, but Stantec said a fixed charge would be unfair to customers who use relatively little water and that it could be legally challenged.
If the city abandons that plan and shifts back to volume pricing, initial bills for single-family homes would drop 0.2 percent instead of rising more than 9 percent, Stantec estimates.
In contrast, eliminating the fixed charge would raise the initial increase for businesses from 4.1 percent to 10.4 percent and raise the initial increase for condos and apartments from 5.1 percent to 10.2 percent.
Another change proposed by Stantec would be a reanalysis of peak usage data, which determines which customers are using the most water.
Raftelis used fiscal years 2019-21 to study peak usage. Stantec suggests substituting fiscal 2022 data for 2021, noting that 2021 data may have been skewed by the COVID-19 pandemic because many people spent more time at home and used more water.
Signed into law last year, a fixed minimum charge will vary by household income; the CPUC is scheduled to come out with a plan in mid-2024.
The third proposed change is about water fees based on firefighting needs. Stantec questioned some of the data used by Raftelis, including estimates of the typical number of fires and their duration.
The fourth proposed change suggested that water charges based on the meter a customer uses should focus on the cost of the meter. This issue has been complicated by the advent of “smart” meters, which can cost more than traditional meters.
City water officials emphasized that rate increases are subject to City Council approval and could be softened or delayed when the council debates them, which is scheduled for June.
The rate hikes would be the first since 2015. They’ve been delayed partly by ongoing litigation challenging tiers in the rate structure that reward customers who use less water and penalize customers who use more.