Local Government

Proposed Water Rate Hikes

Fullerton’s water rates are likely to change significantly on July 1, 2019. How significant the changes will be for your home or business depends on the size of the water meter connected to your home or business and how much water you use.

According to calculations provided by Stantec’s Consultant, Mark Hildebrand of Hildebrand Consulting, at the final meeting of the Water Rate Study Ad Hoc Committee on March 11, a single-family home with a five-eighths inch meter and average water usage (11,000 gallons per month or 22,000 per billing cycle) will see no change, while a single-family home with a one-inch meter and low water usage (5,000 gallons per month or 10,000 per billing cycle) may see as much as a 56% increase in the water portion of their city utility bill.

Proposed Water Meter Charge Increases
The variable impact to different water customers is mostly due to the proposed water meter charge increases that result from two important changes.

Source: Stantec Consuslting with Hildebrand Consulting

Current and Proposed Monthly Meter Charge

To make water meter charges more equitable, a Water Meter Equivalency Schedule would replace the current schedule. There is no known basis for the existing schedule.

Source: Stantec Consulting, with Hildebrand Consulting

Current Water Meter Schedule Compared to Proposed Equivalency Schedule

Note added 4/7/2019: The Meter Equivalency Schedule was revised for the Council Meeting on 4/2 showing a combined 5/8″ and 3/4″ meter rate flow of 30 gallons per minute.

The proposed schedule would set water meter charge according to the diameter of the pipe connected to the meter. The pipe diameter determines how many gallons per minute can pass through the pipe. In general, the larger the pipe diameter, the bigger the water demand, and thus, the greater the charge. Regardless of how little water one might use, the water system infrastructure is built and maintained to support the potential highest demand of all water connections.

Source: Stantec Consulting, with Hildebrand Consulting

Water Rate Structure Cost Categories: Account Costs + Utility Costs = Fixed Water Meter Revenue

The water meter charge is also shifting to cover 40.7% (Fixed Account Charge and Fixed Utility Charge shown above) of the projected revenue needed to operate and maintain the water system, including big projects like replacing water mainlines, digging new deeper water wells, rehabilitating reservoirs, and installing emergency power backup.

Currently only 22% of revenue comes from water meter charges with a greater portion of revenue dependent upon water usage. Shifting rate revenues from water usage to the water meter charge will help stabilize the Water Enterprise revenue and finally fund the water mainline replacement we all have been waiting for.

Water Usage Rate Changes
Though the meter charge will more than double for most customers, the meter charge increase will be offset for most moderate water users by the increased allowance of the lowest cost water.

Stantec Consulting, with Hildebrand Consulting

Current Residential Usage Rates compared to Proposed Usage Rates

Under the proposed water usage rates, the price and amount of water billed at each of the three progressive rates will be proportionate to the cost and availability of the supply.

The Orange County Water District (OCWD) currently allows Fullerton to pump up to 75% of its water from the basin. The cost to produce that pumped water, including a relatively low fee paid to OCWD plus the cost of electricity for pumping, is nearly half the cost of water purchased from the Metropolitan Water District (MWD). Accordingly, the proposed lowest rate will be nearly $1 less per one thousand gallons (TGAL) than it currently is and apply to a greater portion of one’s bill (up to 12.8 TGAL compared to 7.5 TGAL per month for a single-family home).

Water usage above 25.6 TGAL (2 times the 12.8 TGAL per month) in a 2-month billing cycle for a single-family home, would be billed at the next highest rate of water sourced from MWD. Any water usage beyond that carries the additional cost of water conservation projects ($0.38 per TGAL) on top of the MWD price.

Coincidentily, the new pricing has a greater difference between the lowest and the next highest rate – a $2.3 difference per TGAL compared to $0.30 per TGAL previously – that may discourage some water customers from using excessive amount of water.

Increases over the Next 5 Years
While the initial impact of water increases on July 1, 2019 will vary among water customers, follow on increases in subsequent years of the five-year plan will apply equally to all meter charges and water rates.

Source: Stantec Consulting, with Hildebrand Consulting

Rate Increases over the Next 5 Years (FY 2020 Increase is already included in proposed July 1, 2019 rates)

The proposed meter and water usage rates discussed earlier for July 1, 2019 already reflect the first 15% rate revenue increase for FY 2020 shown in the chart above. From there on, each July 1 the proposed rate increases of 14%, 11%, 5%, and 4% will automatically apply if approved by City Council in 2019.

To level out the overall impact of the water rate increases, the number of miles of water mainlines that will be replaced each year will increase each year. By 2024 the water rates should support enough funding to replace 9 miles of water mainlines per year without debt financing, assuming water rates are revisited in 5 years to consider inflationary costs and reprioritization of water system infrastructure needs to maintain the funding required.

Other capital projects funded by the rate increases have been prioritized to maximize the amount of water pumped from the basin, ensure water quality, prepare for emergencies, provide greater safety at facility locations, and avoid more costly repairs at inflated prices in the future. The projects include rehabilitation of 2 wells, replacing 2 wells, rehabilitation of one reservoir, rehabilitating 2 booster pump stations, isolation valve replacements, emergency generators, and control upgrades.

Automatic Pass-Through Rate Increases
The 2013 Water Rate Study had the goal of replacing 6 miles of water mainlines per year but the rate increases implemented five years ago were dependent on water usage and did not anticipate the extreme reduction in water usage that occurred in response to drought and drought-related state mandated water reductions. The rate increases also did not account for the rising cost of water and electricity.

The 2019 Water Rate Study is very different. In addition to shifting some revenue from water usage to the fixed water meter charge, identifying additional water infrastructure needs beyond water pipe replacement, and proposing more realistic rate increases to meet those needs, the 2019 Study proposes automatic pass-through rate increases for the water.

Each year OCWD and MWD revise the rates they charge the water agencies that pump or purchase water from them. The July 1, 2019 proposed rates discussed earlier include the pass-through increases from OCWD and MWD for FY 2020. In subsequent years, the OCWD and MWD rate changes could also be passed-through to water customers without an Prop 218 hearing in addition to the planned annual rate increases each July 1.

Revision 4/7/2019: Removed the statements about the inclusion of electricity cost for pumping ground water in the pass-through increases because electricity costs were removed prior to the study being approved by council on 4/2/2019.

Increased Oversight Proposed
The Water Rate Study Ad Hoc Committee supports the restructured water meter charges and usage rates and the proposed water rate increases to support the capital improvement projects as prioritized by staff. However, some committee members had concerns that the Water Enterprise reserve funds might get too large if the rate increases were to outpace the implementation of planned projects. As well some committee members wanted the City Council to consider other funding opportunities such as grants or low-cost loans that may become available over the next 5 years.

To alleviate committee members’ concerns, the committee agreed to inserted into the Water Study a recommendation for an annual review to compare completed projects against goals. Staff would provide a report to the Infrastructure and Natural Resources Advisory Committee (INRAC) each year showing Water Enterprise reserves, projected revenue, and projects planned for implementation in the next year.

INRAC could recommend to City Council a temporary halt to water rate increases if reserves and projected revenue would be greater than the cost of the projects for the upcoming year. Additionally, the City Council could postpone water rate increases if an alternative funding source became available.

Prop 218 Water Rate Hearing
On April 2 the City Council will be considering approval of the Water Rate Study and scheduling a Prop 218 Hearing for May 7, 2019 for the proposed water rate increases.

Once the hearing is scheduled, notices will be mailed to each water customer who receives a water bill explaining the proposed rate increases and how to protest the water rate increases. If 50% plus one rate payers protest the increases, the City Council cannot implement the new rates. Otherwise, the City Council will consider the rate increases at the May 7 Hearing and if approved, will go into effect on July 1, 2019.

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25 replies »

  1. This is not a fair or equitable rate structure.

    I hope we get a better result by the time this is over. Charging one resident 67% more for access than the neighbors using the exact same amount of water isn’t right.

    • Contact me at fevc@csu.fullerton.edu
      CITY OF FULLERTON DENIES CALIFORNIA’S LONG-TERM DROUGHT!
      They are raising the amount of water city residents can use (up 68%)
      at a lower cost (down 39%).
      They will penalize residents who conserve water.

      STOP THIS TRAVESTY
      Attend Fullerton’s
      City Council meeting
      April 2 at 6 pm!
      “…think of our hydrological bank account – and do more to sustain a healthy level of water assets, regardless of how much rain the… year brings” Los Angeles Times, March 22, 2019

      paid for citizens for water conservation
      fevc@csu.fullerton.edu

  2. Ryan, if you are you referring to the difference between the 5/8″ and 1″ meter charge, it is based on the difference in the rate of flow. It is a standard Recommended by the American Water Works Association.

    The amount of water used is not a factor in current or proposed meter charge.

    • Then it’s a horrible standard.

      The idea that we’re going to charge actual dollars for potential flow is absurd, particularly given the fixed fee serves as the foundation for infrastructure replacement. The idea that I have a 67% larger stake in the city’s water system than my neighbor, who uses the exact same amount of water at the exact same time is not just.

      Build a rate based on real use. If your consultant can’t build a real rate without resorting to water voodoo, get one who can.

      Put differently, no one with a 1″ main uses all available flow all of the time. You’re charging them as if they do, which is not fair. Many if not most never use max pressure.

      Bill them for that they do use. That’s fair and equitable.

      • The AWWA standard is used industry wide and is based on total fixture counts when the home was built. An example on how infrastructure needs to be maintained, if you have a large home with many rooms you still have to maintain the rooms and the roof even though you only have two people living in the home. Same with the water system, the fixed costs stay pretty much the same whether use is high or low. Fixed costs go up when a system is NOT well maintained.

  3. Why can’t a rate be based on actual water use? And equalize the meter rate across the board to the amount needed to cover the infrastructure repair and maintenance which we must do? I agree with Ryan that my neighbor who uses 2 times the water I use but has a 5/8 meter is really getting a deal – not fair to we who have invested in drought tolerant no lawn landscapes and conserve water.
    I hope a lot of people will tune in on this and we can change that factor.

  4. If customers were to be billed only for consumption, we would amplify the lack of funding problem that has caused our water system infrastructure to deteriorate into 80 to 100 water mainline breaks a year.

    Alternatively, we could downsize the overall capacity of the water system to only fund what people are currently consuming. But even then, because of the fluctuation between winter and summer use, you wouldn’t have enough funding in the winter to support the infrastructure you need to provide enough water in the summer.

    If you are instead proposing to continue funding the full system, but by artificially charging higher water rates to subsidize water meter charges for people with a one-inch or larger meter (as we have effectively been doing in the past) you are likely going to run into a Prop 218 challenge.

    We cannot fund programs to help low-income water customers afford their water by charging other water customers more. So why would it be ok to charge customers with a 5/8” meter more to subsidize those with a larger meter size, especially when the 5/8” meters are on older homes in less affluent parts of the city?

    • “If customers were to be billed only for consumption, we would amplify the lack of funding problem that has caused our water system infrastructure to deteriorate into 80 to 100 water mainline breaks a year”

      False. There are other solutions (like bonding) capable of producing a stable revenue stream necessary for infrastructure repairs. This is an issue of appropriation of existing revenue into appropriate buckets: Fixed, variable, and fictional costs. You can absolutely build a predicable stream of funds that has less volatility from consumption. You can also do it fairly.

      “So why would it be ok to charge customers with a 5/8” meter more to subsidize those with a larger meter size, especially when the 5/8” meters are on older homes in less affluent parts of the city?”

      False duality. All users should pay the actual cost for water. Using this rate restructure as a means to achieve social engineering is illegal and you WILL generate a Prop 218 challenge. The cost of participation in the system is dependent on actual use. The myth that a larger diameter meter means every individual with a 1″ meter places a higher burden on the overall water system vs. a 5/8th” meter is fundamentally not true.

      What the current proposal boils down to is a stereotypification of “haves” and “have nots” within the utility, which is as ridiculous as it sounds. Prop 218 forbids this type of generalized class based applications with no tie to individual or parcel use.

      In plainer speak, you are proposing a tax, not a fee, and it will not stand a challenge. Based on your representation and Mr. Shaprio’s, both appointed members of this Committee, it’s quite clear this tax is being imposed to redistribute wealth and avoid true cost burden assignment, which is not legal without a vote.

      Sorry, but we’ve got to do better than this.

    • COF problem is mismanagement & poor planning. Siphoning revenue to pay for ballooning pension&fringes for public-safety officers at expense of basic public water&utilities. COF Citizens have been duped long enough by elected officials who have long been derelict of duty and riddled with conflicts of interest.

  5. A public utility like the Fullerton water department or Southern California Edison has to be prepared to meet peak demand as well as overall consumption. If you look at your SCE bill in detail, you will find that there are components related to consumption, demand, and fixed infrastructure.

    The consumption costs are reflected in the rate tiers. The demand costs are related to the time-of-day surcharges. The fixed infrastructure costs are captured in grid charges.

    Our water system operates in much the same way. While you may seldom use the full capacity of your 1″ water meter, the city is guaranteeing you that it will be able to deliver the full 50 gallons per minute should you need it. As, for example, would be the case if your home fire sprinkler system activates. If you have a 5/8″ meter, the city only has to guarantee that it will deliver 20 gallons per minute to your home, and you would not have enough capacity to install a home fire sprinkler system if you have only a 5/8″ meter even if you wanted to.

    Likewise, the city water system has to be able to provide sufficient flow to our system of fire hydrants to meet insurance industry standards. The revenue the water system receives has to cover those extra infrastructure costs (larger water mains in residential areas) even though thankfully we seldom need to actually use those hydrants.

    While a flat, per gallon, charge for water is a nice theoretical concept, just like a flat fee per kilowatt-hour of electricity is a nice theoretical concept, a charge based only on average consumption that covers all the fixed and demand portions of the costs of operating the systems is almost impossible to implement in the real world.

    • If you look at your SCE bill, you’ll notice you are NOT charged a completely different rate for having 200 amp service vs 120 amp service.

      This is just nuts, Mark. Please recommend a rate service based on true and actual costs.

      If Edison can do it, so can the City of Fullerton.

      • Ryan, Edison’s cost recovery for demand is not based on “true and and actual costs” as you claim. The PUC has approved a “time-of-day” surcharge based on estimates that SCE has provided to the PUC of the extra cost to provide electricity at periods of high demand. The actual cost to meet the demand can vary widely depending on weather conditions. To make up for that to some extent, the PUC also allows seasonal changes in rates. But again, these are only an approximation of extra costs during hot weather vs cold weather.

        Through smart metering SCE knows how much electricity the customer buys when the time-of-day and seasonal surcharge is in effect. But, the extra amount the consumer pays is only indirectly related to the actual costs of generating power during those time periods.

        In order to bill true and actual costs to every customer a business or utility needs to have both an efficient pricing mechanism that captures all the costs at a particular time, and an efficient billing mechanism that charges every customer for the exact amount of product he or she is purchasing at that time.

        The petroleum industry comes close to that ideal, because they can and do change the price of a gallon of gas daily – or even more frequently – to meet their changing costs. And their billing system is efficient because consumers buy gasoline relatively infrequently and in a transaction that lasts only a few minutes, so the price they pay – the pump price – reasonably reflects the seller’s cost plus profit margin.

        On the other hand, what you are asking the city to do is come up with a price per gallon of water that will be fixed for at least a year, and at the same time will allow the city to recover all the costs of delivering that water regardless of how much or how little water is used during the year.

        That would be like asking the petroleum companies to set the price of a gallon of gasoline on January 1st, and not changing it for the rest of the year.

        Because of the lack of both an efficient pricing mechanism – the inability to raise or lower prices frequently to meet changing costs – and the lack of an efficient billing mechanism – no smart water meters here in Fullerton, a different approach is needed. That approach, which is used by almost all water systems is to recover most of the fixed costs through the meter charge, and the variable costs through volume charge. Will this result in some inequities? Yes, but that’s an unavoidable consequence of the Prop. 218 rate-setting procedure and the lack of “smart” water meters here in Fullerton.

      • W-O-W, what a goal post shift.

        Mark, SCE doesn’t charge based on amperage of the panel. That’s what we’re discussing.

        Launching off into TOU issue relevant.

        If Edison can charge based on actual use (they do, sorry) so can Fullerton. You’re proposed rate structure isn’t kind of inequitable, it’s grossly inequitable.

        I don’t have a 67% greater share of infrastructure burden. Not even close.

  6. It is based on “true, actual costs.” Sorry if I have not communicated that appropriately.

    The system costs have been analyzed and distributed according to fixed vs. variable expenses. The cost of the system needs have been analyzed and included into the fixed expenses based on the necessity to maintain the full system to provide enough water for all water customers.

    The revenue to support those fixed costs have been allocated to customers equitably based upon the width of the customers Water connection because that is what determines the size of the system and the size of the system determines the cost of the system.

    • No it isn’t. It’s based on maximum *possible* flow at the meter (not at the home or fixture) and not on actual use. It’s not even based on *measured* actual maximum flow, let alone average measured actual flow.

      This is not a reasonable cost mostly because you’re assigning the full value of the benefit to the consumer at theoretical max pressure and max rate, which occurs nearly none of the time. To Mark’s point, I’m being charged a higher rate because I have access to higher flow, which ignores the physics of my meter’s physical location on the parcel, which is wholly dictated by the city. I don’t have access to higher flow. I also don’t have access to an alternative because the city doesn’t give me any choices.

      Telling the public that this is based on real actual use just doesn’t stand up to the data. You’re charging one class of customer more than another even though they use the exact same product at the exact same time in the exact same quantity.

      Again, that’s not just on its face.

  7. Charging customers based on maximum possible theoretical water flow while ignoring actual use is lazy and stupid. Much like the idiots proposing it.

    • BTW, the “lazy and stupid” people are also recommending a reduction in the cost of the majority of water you consume based on the actual cost of that water.

      Turns out they’re not so lazy and stupid. They just want to fund the water system appropriately and charge rates appropriately.

      The problem really isn’t anyone being lazy or stupid. The problem is that a lot of us have been getting a deal that was too good to be true for too long and now it’s time to pay the piper (pun intended).

    • Contact me at fevc@csu.fullerton.edu
      CITY OF FULLERTON DENIES CALIFORNIA’S LONG-TERM DROUGHT!
      They are raising the amount of water city residents can use (up 68%)
      at a lower cost (down 39%).
      They will penalize residents who conserve water.

      STOP THIS TRAVESTY
      Attend Fullerton’s
      City Council meeting
      April 2 at 6 pm!
      “…think of our hydrological bank account – and do more to sustain a healthy level of water assets, regardless of how much rain the… year brings” Los Angeles Times, March 22, 2019

      paid for citizens for water conservation
      fevc@csu.fullerton.edu

  8. Well since I’m being charged for all the water I can possibly use, then I might as well water the lawn 24 hours a day. and leave the showers running in case I want to take one at a moment’s notice. Hey, I can drain and refill my pool every week! Brilliant move, Fullerton.

  9. “As, for example, would be the case if your home fire sprinkler system activates. If you have a 5/8″ meter, the city only has to guarantee that it will deliver 20 gallons per minute to your home, and you would not have enough capacity to install a home fire sprinkler system if you have only a 5/8″ meter even if you wanted to.”

    Mark Shapiro, what kind of stupid ass elitist comment is this? I’d be willing to wager that more than 95% of homes don’t have a fire sprinkler system, let alone care to do so. Asinine argument.

    This whole thing is just another desperate ploy to screw over the citizens.

  10. So have the city change your water meter from 1″ to 5/8″ –that is about all you can do since it takes 50% of the Fullerton water users to stop this travesty. Go to the June 4 council meeting to protest.

  11. They tried to do this two years ago and recalled the entire water district then voted them out. They reversed the rates back to what they were before the hike. Take action do not accept this.

  12. Go to the City Council meeting June 4 at 6:30 pm to protest this ill conceived rate increase. Yes, we need to solve the problems but the rates penalize residents conserving water in encourage water use for those using a lot of water by decreasing the cost of water by one third!

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