Analysis endorses San Diego plan for 18 percent water rate hike — but single-family home customers may get a break
The city’s legally required second opinion raises questions about fixed costs, firefighting fees and analysis of water use during the 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, a new analysis says.
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 and was unveiled last week, 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 is also building the Pure Water sewage recycling system, the large 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.
While the second analysis endorses the need for more revenue, it recommends four significant changes to the methodologies and assumptions made by the first consultant.
One of those changes would lead to sharply lower bills for single-family home customers and higher ones for businesses, condominiums and apartments, according to the analysis. The impacts of the other three 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 that new proposed charge is to spread the cost of maintaining the entire water system more evenly over all the customers connected to it, regardless of the volume of water they take from the system.
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 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 forces the city to raise rates when people conserve water, which can seem like unfair punishment for customers who have done the right thing.
The proposed fixed charge to cover maintenance of the city’s distribution system aims to account for that unintended consequence of conservation, but the second consultant said a fixed charge would be unfair to customers who use relatively little water and could be legally challenged.
If the city abandons that plan and shifts back to volume pricing, the second consultant estimates initial bills for single-family homes would drop 0.2 percent instead of rising more than 9 percent.
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 condominiums and apartments from 5.1 percent to 10.2 percent.
Another change proposed by the second consultant would be a re-analysis of peak usage data, which determines which customers are using the most water.
The first consultant, Raftelis, used fiscal years 2019, 2020 and 2021 to study peak usage. The second consultant, Stantec Consulting Services, suggests substituting 2022 data for 2021 data, 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 final proposed change suggested 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 stress that rate increases are subject to City Council approval and could be softened or delayed by the council when it 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 city’s rate structure that reward customers who use less water and penalize customers who use more.
In addition to infrastructure repairs and upgrades, money from the higher rates will pay for salary increases for 950 city water workers and for upgrades to the city’s customer service system, which has been harshly criticized.
