Here We Go Again: Water Rates

Author: Marlene King

Date: August 31, 2020

As you may know, large water users in the Santa Fe Irrigation District (SFID) subsidize low water users. During the last Cost of Service Study (COSS) in 2018, the study authors, Carollo Engineers, proposed that a new local water reserve fund be established such that when SFID generates excess revenues in high rainfall years, the excess money be segregated, and then paid back to those water users who were overcharged.

During higher than average rainfall years, large water users continue be charged expensive imported water rates even though they are delivered lower cost local (rainfall) water. Hence the logic behind the proposed local water reserve fund.

However, SFID staff are now backtracking, looking to to expand ways the overcharged monies could be used, rather than returning the overcharged amounts to those who were overcharged. If you think that large water users should get a rebate from being overcharged during high rainfall years, please email kjohnson@sfidwater.org, or via postal mail to the attention of Kim Johnson, Board Secretary, SFID, P. O. Box 409, Rancho Santa Fe, CA 92067, or physically deposited in the District’s payment drop box located at District offices on Linea del Cielo.  All emails/letters must be received no later than 7:30 am on September 17, 2020.

Background

SFID’s August 20^th Board meeting discussed Reserve Funds, and the staff memo noted a “New Unrestricted Fund – Local Water Fund – PROPOSED”.  Here’s where it gets interesting…

• During the 2018 Cost of Service Study (COSS) process, Carollo Engineers, responding to the complaint that owners of large properties subsidize the water costs of small property owners during a drought, suggested that the District set aside, in a new, separate reserve fund, the increased revenue that is generated in high rainfall years when large properties are billed imported water prices for delivered local rainfall water. During that COSS process, it was suggested that the overcharged amounts could be essentially returned to those customers who consume tiers 3-5 water in calculating the next COSS rate structure. 
  
  
• For example, in 2015, the worst year of the most recent drought period, SFID received only 822 AF of rainfall (2500 AF of rainfall is an average rainfall year), resulting in $3.6 million dollars transferring out of the Rate Stabilization Fund to pay expenses. In 2016 the Rate Stabilization Fund dropped from $4.1 million to $0.5M. Historically the monies transferred into the Rate Stabilization Fund came during high rainfall years, when large property owners were overcharged imported rates for the excess rainfall, rather than being charged the local water rates when local water was delivered to their properties.   
  
  
• The subsidy argument exists because 40% of the single family residential customers never consume water outside of tiers 1&2 – the local water cost tiers – and therefore never contribute monies into the Rate Stabilization Fund.  But during the drought, those low water use customers were not asked to pay the actual cost of the imported water that was delivered to their properties.  It was the overcharged customers with large properties who subsidized those customers who only consume tier 1& 2 water.

Now, the August 20^th staff report stated "NEW UNRESTRICTED FUND…Local Water Fund – PROPOSED":

Could be utilized to segregate these savings and applied in a way the Board should choose to do so (i.e. offset imported water costs in cost-of-service, set-aside funding for Lake Hodges fix).  NO MINIMUM OR MAXIMUM. Does not obligate the District to fund this reserve at any time.  Contributions to this reserve would eliminate the largest source of funding for the rate stabilization fund, which would require movement of funding or contributions if minimum level not met.

My remarks at the August 20^th Board meeting were that I was disappointed that the staff memo did not clearly state that the Proposed Local Water Fund be used solely to segregate the overcharged monies derived when customers are charged tier 3-5 water rates when local rainfall water was delivered to their properties. I remarked there appeared to be a systemic effort to have customers with large properties continue to subsidize the water rates of those customers who only consume in tiers 1 & 2, regardless of what was stated during the Cost of Service process.  I expressed concern that the proposed language - “Does not obligate the District to fund this reserve at any time” - again demonstrates a systemic effort to have customers who only consume tier 1 & 2 water not pay the cost of imported water delivered to their properties in low rainfall years. The most telling sentence in the Proposed Local Water Fund description is that “Contributions to this reserve would eliminate the largest course of funding for the rate stabilization fund.”  Yes!  Precisely.  I asked the Administrative Services Manager if customers who only consume tier 1 & 2 water ever put one penny into the Rate Stabilization Fund.  His answer was that if the District received a grant, then the outside grant monies could be said to come from those customers who only consume tier 1 & 2 water.  My reply was that was a “Weak answer, at best”. 

What you can do about it: If you don’t like being overcharged, and you are currently being overcharged because the District received 3403.5 AF of local water in FY 20, email the District and tell them your point of view. Reserve Funds will be on the September 17, 2020 agenda for “Adoption of Reserve Policy & Set Reserve Levels”.  Make your voice heard to the Board if you believe the overcharged amounts should be returned to the customers who were overcharged.