How Are Water Rates Set?
The CPUC is an independent regulatory agency responsible for setting water rates that reflect the costs of providing water service and approving a reasonable return on capital investments that the utility makes in water system infrastructure, similar to interest that is paid on a bank loan. Cal Water is only allowed to earn on invested capital; all other prudently incurred costs are reflected in rates on a dollar-for-dollar basis.
The CPUC thoroughly reviews expenses, operations, service, and proposed water system improvements before approving any change in rates. The process takes approximately 18 months, and customers are encouraged to provide input to the CPUC either in writing or by attending public meetings.
Water Rates:
Kern River Valley District
In July 2009, California Water Service Company (Cal Water) was required to file a request with the California Public Utilities Commission (CPUC) for a full review of our rates and costs of service. This filing is called a General Rate Case or GRC. The last GRC for your district was filed in 2005 and became effective in 2006.
Why is Cal Water Filing a GRC in 2009?
Cal Water is required by the CPUC to file a GRC for all of our service areas in 2009. The GRC process takes approximately 18 months, which means the 2009 GRC will become effective in January 2011 or later. Future GRCs will become effective every three years, beginning in 2014.
How Much of an Increase is Cal Water Requesting?
The 2009 GRC reflects water system improvements already constructed and in service in your community, as well as preliminary estimates for future water system improvements and expenses. If approved as filed, in 2011 the company would receive an overall increase of 36.5%. For the typical residential customer using 9 Ccf (6,732 gallons) per month, monthly bills would increase by 28.6%, or $18.09 (60 cents per day). This increase reflects a higher discount from the Rate Support Fund, which allows for some costs to be shared by customers in other Cal Water service areas. Cal Water is also requesting smaller increases of 2.5% effective in January 2012 and 2.4% in January 2013 to fund continued infrastructure investment and account for inflation.
However, the CPUC could approve lesser increases than requested; also, some of the 2011 increase could go into effect earlier with CPUC approval due to the length of time since the last GRC for your district.
What's In It for the Customer?
In our 2009 GRC, Cal Water is proposing the following improvements to your water system:
- Water Supply & Facilities Master Plan
- One new well and three new storage tanks
- Additional water treatment
- About two miles of replacement water mains
Other cost increases in the 2009 GRC include higher expenses for government-mandated conservation programs, system maintenance, transportation, additional employees and associated costs, and centralized services, including engineering, billing, water quality, and regulatory compliance.
There are several advantages to getting an essential service such as water from a financially stable utility:
- A financially stable water utility has the resources to maintain and improve the infrastructure necessary to provide a reliable supply of high-quality water.
- A financially stable water utility can employ trained, certified, committed water professionals.
- A financially stable water utility provides local jobs, supports the local economy through local purchasing, and supplies the water needed for local businesses to thrive.
Does This Mean Water Rates Will Change Every Three Years?
Regulated utilities such as Cal Water are required to file GRCs every three years, and the majority of any approved rate increase would occur in the first year following a decision by the CPUC on the GRC filing. In the second and third years after the decision is issued, there are typically “escalation” rate increases, which are usually close to the rate of inflation. Outside of the GRC process, rates can also be adjusted by the CPUC if the utility constructs a large capital project with prior approval, or if certain outside costs increase or decrease, such as those for power, purchased water, and pump taxes.
What is Cal Water Doing to Help Customers?
At Cal Water, we recognize that rate increases are never welcome, and we know that many of our customers have been affected by the economic downturn. Here are some ways we are helping our customers and communities:
- We offer a wide range of conservation programs, including appliance rebates and free, high-efficiency plumbing fixtures, to help you reduce your water use and lower your water bills.
- We offer a Low-Income Rate Assistance program for qualified customers.
- We have a program that focuses every employee on identifying ways we can operate more efficiently, and increased efficiency translates into lower water rates.
- We support local charitable organizations that provide services to our customers; this support comes from shareholder funds and is NOT included in water rates.
- We are increasing the Rate Support Fund subsidy from $20 to $25 per month to lower bills in your district.
The Value of Water
Considering all the ways that water makes our lives better — keeping us alive, clean, and fed — it really is a good value. For a fraction of a penny per gallon, you get a reliable, high-quality water supply delivered right to your tap after we capture it, store it, treat it, and test it. We promise to keep doing our best to provide this essential service as cost-effectively as we possibly can.