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KPBS Midday Edition

San Diego Notifies Customers About Proposed Water Rate Increases

San Diego Notifies Customers About Proposed Water Rate Increases
San Diego Notifies Customers About Proposed Water Rate Increases
San Diego Notifies Residents About Proposed Water Rate Increases GUESTS:Brent Eidson, deputy director of external affairs, City of San Diego Public Utilities Department Don Kelly, executive director, Utility Consumers Action Network

This is KPBS Mid Day Edition I am Maureen Cavanaugh. San Diego city residents are about to get a letter telling them about a proposed water rate hike a very big proposed water rate hike. The lips of the city Council will vote in November on a five step plan that will raise rates. The entire proposal is to boost rates by 40% in less than four years. In fact the first rate hike of nearly 10% would kick in next January. May be a hard pill to swallow for San Diego and Swift responded overwhelmingly to the state-mandated call to conserve water and chronically one present a higher water rates are needed is because we have been conserving so well. Joining me is rent-ites and his deputy director of external affairs for the public utilities Department of the city of San Diego. Brett welcome to the program. They could Maureen . Hearest on Kelly he is to executive [ Indiscernible ] you can and Don welcome. After. Peppering your quoted as saying able likes water increases but a San Diego doesn't make these rate increases the city won't have enough money to buy the water it needs. Can you explain that for us? Sure, that's only part of the equation. Was a relates to buy the water beneath repurchase about 85 to 90% of our water every year from the County water Authority. They interned by a lot of the water for the Metropolitan water District of Southern California. Earlier this or both of those agency voted to raise the rates that their customers the city of San Diego is one is charged to buy the same drop of water that we did last year. And that is projected to continue in fact since 2007. The same drop of water has doubled in cost us to buy from those wholesalers and trends are continuing in the past. And what is our conservation have to do the fact that the water rates me to go up? Said one of the things that's important to note about municipal utility such as the public utilities department if that is that we are guided by the state constitution which is a voter initiative in 1996 proposition to 18. Of the reasons everybody is getting that letter you mentioned is we are required to do so. In that we are only allowed to charge the cost to the each of the customers and so when there was a reduction in sales or when there's a change in the cost to buy the water or there's a need to invest in new infrastructure treatment plans for new water supply which we are also doing we need to be able to increase those revenues in order to meet those challenges. As I understand it, because so much of the revenue that the water department uses to actually purchase the water comes from the amount of sales the amount of water that San Diego residents used, if we use less water you get less revenue and therefore don't have enough money to actually purchase the water is that correct? That is correct. We are large department. A macro to take her to that we won't be able to buy all the water you need but we would need to make some serious decisions on what other aspects of our operations would have to change and that could be replacing that aging infrastructure a very sensational pictures we water main breaks and with great success reducing that we don't want to slip back want to continue investor protection make sure that we have safe reliable systems that we can deliver the water tour customers. How much of San Diego conserved? So the governor asked all of Porn is to save 25% and San Diego's target was 60% said we have Dr. that and I'm about to be clear in the cost of service study into spin 16% reductions of expected and. In our customers have exceeded expectations. We shall say that over the three-month average the we've been reporting to the states over 25% reductions. What does that come out to in terms of a decrease in water revenue to the city? That much of her reduction of water used how much less money are you saying people pay checks connect method and have exact dollar here but again because we operate on the cost of service we don't recover extra revenues is pretty close to a dollar for dollar. As some of the pressures driving up the cost of water Brent authority told us about they are charging more for the water at the Metropolitan water District. We have water money that is allocated to repair the infrastructure the sewer infrastructure to support and is also the[ Indiscernible ] plant talk about the. Sure such as to be sure this is on the waterside only other source I we are proposing an increase on sewer we are still continuing efforts are sure improvements there so T cell is something that this region voted upon years ago he decided that was important part of our water supply portfolio and finally Duplantis finishing construction and will be laboring water by the end of this year's letter County water Authority has told us is a we start paying that new rate on the T cell water starting in January so that's wrapped into that CWA increase of image driller. Before we broaden the conversation and make it on Kelly and I want to ask you how are San Diego water bills determine? How much of the bill is based on text cost as opposed to consumption? So the department budget is essentially about around 80% of our cost six. There's some durability in there with the quarter we purchase and such and so only about 1% variability it's the complete opposite of revenue side.'s of the customers bills received 80% of the revenue from the water we sell and really 20% of our revenue from the fixed charges you see under Bill. So there's a question that has emerged as people have been trying to understand this upgrade in water rate how much they are going up. And think you touched on it to Brent, why doesn't the water department use more of the money that it gets from those fixed charges to buy water? So the fixed charges have specific cost of the go to cover in those her readiness to serve that means when you go to your tap you need to be able to have water delivered will there's a whole infrastructure behind that. Those fixed charges. Customer service meter reading things like that that have to occur the matter at the drop of water is sold are part of that fixed charge. And so there is an opportunity to look at her rate structure and we have committed to her counsel that we will be looking at a rate structure in the future is there a different manner in which we can assign those fixed versus variable cost that are more beneficial to our customers? We promise or cancel we would come back to them in the next year and have to do -- to give them update on a study. A typical let me bring done Kelly from you can't the utility consumers action network is opposed I believe to this proposed series of rate increases. & You think it's too much of an increase coming too fast for consumers to work? Spec that's true Maureen and just to be clear, you can understand that the public utilities needs [ Indiscernible ] to run the department to provide every citizen ascending or adequate water supply and we also believe that the personnel water department or drink extraordinarily good work me a very good relations with them. We are concerned about is the current proposal as it stands is there asking for almost 17% increase between now and July 1 within the next nine months water rate increase will be almost 17% and we are concerned that that's going to result in sticker shock bill shock rate shock in other words when the customer has to find a way to pay that bill to keep on such an essential service and 70% jump in cost is extraordinarily high and we deal with customers who are having so much problem just try to keep their water left on now. My organization receives calls daily for people were having trouble paying their water bills. We understand that the water rates need to reflect what it cost to provide the service. What we would hope is that the water department would provide another option to the Council so for example instead of having an almost 10% increase in January and then a 7% increase in July, can the water department told the Council what the rates would look like if they did yearly increases like for example we didn't increase every January broader than January and then July and I was hoping that the water department could actually give the councilmembers options rather than this is a ticket related approach. And wise that preferable? Just simply because the consumer would not have to deal with such a large increase so quickly? That is a major concern that I have. If you are a family struggling on a fixed income and you have only three months or I'm sorry nine months to figure how you want to adjust to a 17% increase is very quick and that's a big increase. But it's also preferable because I want the Council to have more information. My organization appears in from the Public Utilities Commission and we do with another utility [ Indiscernible ] electric and when they propose increases the commission examines multiple different scenarios. What is possible? What can we do? If we increase over here what we have to decrease and where and how often and how long for? I'm not seeing through this proposal for the city Council's options. They are left with what the staff leaves and what I believe the step honestly believes is the [ Indiscernible ] left with one proposal. What is Brent at the rationale between two increases in the next year? One in January and one July? There's a couple of reasons why we are proposing that. First and foremost we are already dipping into our reserves to just keep this rate as low as we are. I know that sounds kind of strange given what Mr. Kelly just said about the rate we're dipping into the tune of $32 million from her reserves just to offset this rate increase. That is how significant the water world changed for us when the governor gave us this mandates on restrictions into your point about reduction in use. Changer medically for us in April earlier this year and that's a real big consideration of earlier today. We also have to be mindful of our financial standing in the markets. We per money to do large infrastructure projects. We have a very good credit rating that we've built up. The city has worked hard to increase our credit rating me very pleased with where we are in the markets have already financial agencies Haverty indicated to us that they are watching us very carefully and what's make sure that in the end in the long-term it's more than official for our customers for us to have the ability to burn money at a lower rate to invest in these infrastructure needs them to have to buy or borrow more money so it is very important that we have is rate increases and jittery to make sure that we maintain those levels. Snack and July is AutEx Pinnock right July as well. Don Kelly is just said the idea might be to provide options for the city Council. Would you be going back and perhaps looking at that between now and November when the city is going to be voting on this? So those options over to be presented to the city Council in a variety of different ways and it may not be necessarily in the manner that you can is available with both[ Indiscernible ] by determining what infrastructure they want to improve and those all have costs associated so they made the policy decisions that we go to them and say this is what the cost is to implement to run her operations and to deliver the services that are Council once delivered to the community. And so to your exact question, now that these notices are in the mail this is the proposal that has to be voted on. Our customers due to know exactly what's being determined work of the Council can't change it upward in November. Their limited to what is being publicly noticed. Some of my question to when there is this time of people cutting back during the drought and conserving their water use is this the best time to be allocating money for improving the water infrastructure? Is also something you reluctant to? World is not locked into his stuff a policy decision that the made by the city and has been for years. We did have some outside pressure we did a compliance orders from the city required us to replace pipelined. We've met and are meeting those orders we also know that we need to save water we need to stop the brakes as best we can and so we are investing in the infrastructure to make sure that we are minimizing breaks we're better response times now when there is a break those all require us to invest in the system. Don, rented mentioned the fact that the city Council has asked them to come up with some sort of ideas of how the city might change its structure its rate structure for water rates. What might you can add to that conversation? Welch is going back for second with regard to the city Council that's provided options with regards to rate increase with the water department did not provide the city Council is if you only have a 10% increase in January and then you follow through every January the rafter rather than twice a year in this case January and July what those rates would look like and what the amount of revenue needs to be recovered. The water to permit did not provide those scenarios to the city Council. Is my understanding of our department several sneers about rate design to recover these funds. And those I am hopeful that those scenarios get in front of the city Council so they actually understand what the variance options are. I understand apprentice thing that through the infrastructure the city budget they already prove they should have the Council was on notice that various cost drivers to the water department's budget have been approved by the Council but that's far different from providing an actual scenario of if you increase the smell into a increase of this amount is how much revenue is going to be generated. With regards different structures operates design I understand that Chris Kate has asked the water department do a study adding more fixed charges to the bill and shifting revenue to commodity terms of verbal rates fixed charges. You can is actually going to be meeting with or hopes to meet with several different city Council members about the same topic. I don't think we're going to be totally agree with any proposal out there we're certainly willing to talk to everybody and we're hopeful that we can come up with the right design or people are actually able to conserve into a smaller bill. The equinox center[ Indiscernible ] San Diego issues is suggesting that residents be assigned a per capita amount of water taste on the household size and so forth and then be billed if they exceed that amount. Let me ask you both will first with you.what is your opinion on that? We have an idea of what a per capita amount of water might be? For a household of sending a? The legal problem with that is that the courts of appeal just came down on a case [ Indiscernible ] that says you can only charge based upon provision Brent already excited [ Indiscernible ] the city can only charge for the cost to deliver the service. And so if there is a study that can be done that can actually say this is what will cost us to deliver per capita I am unaware of how that would be done. I to see a lot of legal problems with that proposal and I have a feeling the city attorney's office would as well or go And you agree Brent? Beaumont attorney some acoustical modality of it will tie you the result study that the city conducted a few years ago that looked at that opportunity and there some other challenges outside of just legal challenges which we have been advised to [ Indiscernible ] so the city Council just SSL to move forward with it. Finally dongle you can be protesting this proposed rate hike up the Council in November? What you can is hopeful that we're going to be getting is to get information to the Council. Right now we are in we have asked the water department to provide us more data we are opposed to the structure as it presently exist so it all depends upon the answers of their kind be giving is working to be submitting [ Indiscernible ] Emily asked for personnel to get this information. All right then I've been speaking I contributed. External affairs for the and Don Kelly Executive Director of you can't thank you both for much. Inc. you.

City of San Diego customers are about to get a letter telling them the City Council will vote on Nov. 17 on a five-step plan that would raise rates by more than 40 percent in less than four years. The first rate hike — nearly 10 percent — would take effect in January.

It may be a hard pill to swallow for San Diegans who have responded positively to the state-mandated call to conserve water. In July 2015, city residents used 32 percent less water than during July 2013.

San Diego Public Utility Department staff said one reason the higher water rates are needed is because water users have been conserving so well.

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Brent Eidson, deputy director of external affairs for the city of San Diego Public Utilities Department, said the majority of the city's water is purchased from the San Diego County Water Authority. The agency then purchases water from the Metropolitan Water District. Both agencies have voted to increase water costs.

"We need to be able to increase revenues in order to meet those challenges," Eidson told KPBS Midday Edition on Wednesday.

Don Kelly, executive director of the Utility Consumers Action Network, said he isn't opposed to an increase but the proposal reflects dramatic increases.

"A 17 percent jump (in July) is extraordinarily high," Kelly said. "We deal with so many customers who struggle to keep the water on."

Kelly said he hopes the department will offer other options to deal with rate increases.