In the fall of 2011, the El Irrigation District completed an extensive Cost-of-Services Study to review our rates and ensure that costs were fairly allocated for all of our customers. As a result of the study, a model was developed to allocate the district’s operating and debt costs equitably among water, wastewater, recycled water, and customer classes. We discussed the study at 13 public board meetings and two community workshops.
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As reported in October of 2011, in order to ensure more reliable revenue that is not heavily influenced by wet or dry years and allows the district to meet our financial needs, the model for calculating rates was changed from a 70-30 to a 50-50 formula, which means that 50 percent of the rate will be based on variable (commodity) charges and 50 percent will be based on fixed (base) charges. This change moves the formula back to what was used prior to 2008, when it changed to a 70-30 formula. As this goes to press, staff will be doing final refinements to the study model, which we will share with our customers in early 2012.
What does this mean to you as a customer? It means that we will need to make some changes in our rate structure. The overall impacts will differ among rate classes. For some customers, monthly bills will go up, and for others monthly bills will go down.
For instance, medium-use single family residential wastewater customer rates will go down about $3.70 per month. For medium-use dual-plumbed (water, wastewater, and recycled water) customers; rates will go down by $1.13 per month.
For medium-use single family residential water and wastewater customers, rates would increase by about $2.37 per month. For medium-use single family residential water customers, rates would increase by approximately $6.08 per month.
Because of the change to the 50-50 allocation method and changes in customer classes, there is no across-the-board percentage increase proposed. The proposed changes depend on individual customer class and each customer’s water use.
Why does the district have to do this so soon after the last round of rate changes? The district is only proposing this after eliminating 30 percent of our workforce over the last few years and reducing our expenditures from $46.7 million in 2008 to $42.9 million in 2012.
However, the short answer is that we have to have money to pay for the required infrastructure replacements that have been constructed over the last 10 years which were mostly mandated by the state and federal government; we have to continue to replace deteriorated infrastructure; and we need revenue stability to provide safe and reliable water, wastewater, and recycled water services even during wet years, as we experienced last winter.
EID is not alone in facing the challenge of rebuilding necessary infrastructure and coping with revenue shortages. Other agencies in our region and across the country struggle with the same thing. The utility infrastructure in the United States, much of it built in the mid-1900s, is wearing out as evidenced by the tragic pipeline failures at PG&E, as well as the numerous water main breaks throughout the country or the canal failure that happened in Placer County last fall.
EID does not want to end up in the same predicament as these agencies with water shortages or service interruptions, that’s why we are “planning forward” to replace infrastructure before catastrophic failure looms and costs district ratepayers even more.
Each customer will receive detailed information in the form of a Proposition 218 letter describing all proposed changes to our rate structure prior to a rate change implementation. Customers will have an opportunity to provide feedback to the district prior to rate changes, which we are planning in early spring of 2012.
I look forward to presenting you with the detailed report on the Cost-of-Services Study which outlines exactly what changes we will be proposing. In the meantime, if you would like to review materials produced in the 15-month study, please visit our website at eid.org and click on the Cost-of-Services tab.