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Proposed water rate hike could cost East Palo Alto customers 36 percent more

By Tobin Asher | 1 May 2014

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(Graph: Tobin Asher/Peninsula Press // Data: SFPUC)

(Graph: Tobin Asher/Peninsula Press // Data: San Francisco Public Utilities Commission)

Water users in East Palo Alto may be required to pay, on average, 36 percent more for water in fiscal year 2014-2015 due to a proposed increase in wholesale water rates.

At a City Council meeting attended by approximately 30 residents on Tuesday, April 22, the council members voted 5-0 in favor of approving the request by the director and deputy director of East Palo Alto Community Development to authorize a public notice to customers of a proposed increase to water rates and charges.

The public hearing for the proposed increase will occur on June 17. Residents may protest the measure in accordance with California Proposition 218. The hearing is open to the public, but any official protests must be in writing. Council members explained to residents that most cities across California are facing similar issues, in part due to the drought, but largely due to capital improvement projects.

Residents at the meeting, held in council chambers, audibly gasped in shock and murmured in disapproval at the announcement. Longtime community activist Tiombe Jama told city council members that they were elected to do what is best for the community. She urged them not to trust reports on face value: “We expect you to look further; we expect you to come up with the most reasonable thing for us. Just because it’s industry-standard does not necessarily mean it’s good or the only way.”

Community Development Director John Doughty empathized with residents saying at the meeting that the substantial rate increases are horrible. However, he does not see any other option. Doughty said it is unrealistic to expect the city of East Palo Alto’s general funds to subsidize rate increases as that could bankrupt the city.

According to Doughty, some cities have, over decades, created funds to offset rate increases. East Palo Alto has not done that. Doughty said that rates have been proportional to the wholesale charge, and there are no “rainy day” funds. Additionally, there is no money for major capital replacement projects; more than $30 million of work is needed to repair and replace pipes alone, he said.

After a water rates and financial model study is completed this fall, Community Development may propose a capital improvements surcharge in addition to the current rate raises. Approval of such a measure would see customers’ monthly water fees increase even more.

Members of the city council expressed concern about the water rate increases, but acknowledged they have been expecting them for a long time. The city’s newest council member, Donna Rutherford, urged residents to conserve water and hope for rain.

The proposed rate increases come at the request of American Water Enterprises (AWE), which operates the water system under lease from the city. The company buys the water from the San Francisco Public Utilities Commission (SFPUC), which sets the wholesale water price. The current rate increase is largely due to a water system improvement program by SFPUC to make water infrastructure more seismically sound.

While the maximum proposed retail charge is $5.50 per centum cubic-foot (CCF), equal to 780 gallons, a 44-percent increase from the current rate of $3.82 per CCF, Doughty said he expects the actual increase to be less.

The city’s retail projections are based on a maximum wholesale rate increase of 32 percent. However, officials at the SFPUC have confirmed that they do not expect the rate to increase more than 19.6 percent from the current rate of $2.45 per CCF. The official vote by SFPUC members to approve the new wholesale rate will occur on May 13 and the measure is expected to pass.

Despite any relief that may arise from the moderate as opposed to high increase in wholesale price this year, SFPUC’s projection for the next decade indicates that rates will continue to rise. By fiscal year 2023-2024, SFPUC predicts that the wholesale water rate will increase to almost twice the current cost — though 10 years is a long time and many factors could affect the actual price. The city’s current proposal includes a pass-through clause, which would allow future charges to automatically increase with SFPUC’s rates. Customers would receive a notice 30 days prior to any price changes.

The second component contributing to the projected 36-percent increase in water pay is a plan to replace water meters. Doughty explained that current meters are 25 to 30 years old and no longer accurately record water usage. Meter size would determine the exact price increase.

Homepage image of tap courtesy of Flickr, Steve Johnson.

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