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Zone 7 narrowly approves water rate hikes

Increase necessary for reserves, water reliability, agency says

The Zone 7 Water Agency Board of Directors approved new water rate increases for the next four years in a 4-3 vote at its regular meeting Wednesday night.

About a dozen community members and a few retailer representatives showed up to the three-hour-long meeting in Livermore, primarily voicing concerns about the rate increases, but also expressing appreciation to the water agency for improved transparency and dialogue with the public.

The board decided to approve the staff-recommended option to increase water rates by about 3.7% per year, plus add a 3% consumer price index adjustment, bringing the overall annual increase to 6.7%.

This scenario will fund three of the agency’s reserves at target levels, provide $3 million for water supply reliability projects and account for a gradually increasing fixed charge component from 35-45% by 2022. The fixed charge increase was included in all the options evaluated.

Directors Dick Quigley, Sarah Palmer, Dennis Gambs and Bill Stevens voted in favor of the recommended scenario one, with directors Olivia Sanwong, Angela Ramirez Holmes and Sandy Figuers voting against it. Though they did not state why they voted against the motion, the dissent appeared to be somewhat a matter of minor differences of opinion on details -- “semantics,” in the words of a few directors, who also asserted that they would re-examine the rates in two years.

Zone 7, which serves as the potable water wholesaler for southern Tri-Valley water service providers such as the city of Pleasanton, held a series of public meetings on the upcoming water rates decision starting at the end of August, during which they presented various options based off a recent cost study by utility consultant Raftelis.

Two options were specifically discussed Wednesday night, though Board President Ramirez Holmes emphasized early in the meeting that all options were still on the table.

The variables for the different scenarios included the timeline of the schedule to how much funds would be directed to the operating, emergency and drought contingency reserves.

Ultimately, the board settled on the staff recommendation of scenario one -- though directors noted the close similarities between the two presented options.

“The difference is pennies,” Quigley said.

The second scenario presented would have still allocated $3 million for water supply reliability projects, but would fund just the operating and emergency reserves at target levels, while the drought contingency reserve would be funded at the minimum level -- resulting in a 3% rate increase, instead of 3.7%.

All calculations are based off measurements in centum cubic feet (ccf), which is equivalent to 748 gallons of water. According to the U.S. Environmental Protection Agency, an average American uses 100 gallons of water per day, and when considering the future water rates, staff looked at households that consume 10, 15 and 20 ccf per month, respectively.

In 2018, the total charge per ccf was $3.18, which included $1.14 for fixed costs and $2.04 for variable charges. Under the newly passed schedule, that total will increase to $3.33 next year, $3.53 in 2020, $3.73 in 2021 and $3.96 in 2022.

Scenario two would have the total charge per ccf to $3.31 in 2019, $3.48 in 2020, $3.66 in 2021 and $3.86 in 2022.

For single-family-home Pleasanton customers using 10 ccf of water per month (who are currently seeing a bimonthly water bill of $50.21), this would amount to a $2.70 bimonthly increase -- this accounts for the city’s bimonthly fixed charge increase of 80 cents and variable cost increase of $0.012 that will happen in 2019. For customers using 20 ccf (a current bimonthly water bill of $81.81), that difference comes out to $4.60.

Kathleen Yurchak from the city of Pleasanton and Dan McIntyre from Dublin San Ramon Services District spoke to the Zone 7 board during the public comments period, representing two of the agency's four retailers. Officials from the city of Livermore and Cal Water did not speak.

However, the two retailers present had opposing positions on the rate increases.

Yurchak, speaking on behalf of the city as director of operations and water utilities, presented a resolution the City Council had passed the previous night, urging the Zone 7 board to delay its vote so the city and the public could further analyze the proposed rates, and asking the agency to revisit its reserve policy.

“We’d also like you to consider taking out bonds for your capital projects,” Yurchak said. “And looking at the useful life of those projects, to ensure the future users pay their fair share of those projects.”

But McIntyre didn't think Zone 7 is going far enough in funding reserves and water supply reliability projects.

“Looking at water reliability for the Tri-Valley, the do-nothing option will have catastrophic consequences for the Tri-Valley,” McIntyre said. “It is unthinkable that we will not do one or more water reliability projects.”

“The idea of $3 million over four years doesn’t seem like the best start on that now,” he added.

He asked the board to make their final rates decision by the end of November, so that DSRSD could be more accurate in moving forward with their own rate adjustments.

Staff had previously proposed allocating $9 million to $15.2 million for water supply reliability projects over the next four years, but they reduced this down to $3 million at the board’s direction.

When discussing how to proceed, the board discussion centered largely on the rate schedule’s timeline and on ensuring the agency is prepared for a future drought. Directors pointed to California’s most recent drought, which depleted the drought reserve by $26 million -- neither option presented will replenish this, they said.

Sanwong referenced one public speaker who had said the agency needed to be good stewards of ratepayers’ dollars.

“We also need to be good stewards in planning for these emergency scenarios, such as a drought,” she said.

Palmer added that in order to be able to pursue a debt-financing option, as was suggested by Pleasanton, they would need to retain good credit scores -- determined in part by the state of their reserves.

Timeline-wise, staff said that some retailers preferred longer time periods, for planning purposes -- a perspective McIntyre confirmed when he spoke, adding that DSRSD would prefer a five or six-year schedule.

Stevens also noted that the water agency needed to remain competitive salary-wise, in order to retain employees.

“You cannot keep the employees unless you pay them,” Stevens said. “We want to steal them from everybody else in the water industry. That 3% (CPI) is a minimum level that we need to maintain our employees, because our water treatment plants have to be maintained, 24/7.”

Eight audience members spoke during the public comments period on this item, many of whom lauded the current board and staff for improved transparency and communication with the public.

“I want to second a prior speaker’s compliment to you as a board, for being much better about, I feel, this year, about being transparent and welcoming communication from community members,” said resident Tish Niehans.

However, several also asked Zone 7 to delay the vote, in accordance with the city of Pleasanton’s wishes, and to really think about the impact of the increases on customers.

“When you’re on a fixed income, and you don’t see those increases in income all the time, (rate increases) keeps dropping you down,” Joe Cunningham said. “Your status is getting pretty low.”

In other business

* The board unanimously approved untreated water rates for 2019, along with 2019 municipal and industrial water connection fees for new developments.

Untreated water rates come out to a delivery charge of $167 per acre-foot for all metered water delivered per month, while the temporary untreated water service monthly rates come out to a charge of $860 per acre-foot, or $2.64 per 1,000 gallons. The non-scheduled untreated service rates would also be $860 per acre-foot.

In terms of the water connection fees, new developments in Alameda County will see the fee per dwelling unit equivalent rise from $28,170 to $29,070. Dougherty’s Valley’s fee per dwelling unit equivalent would increase from $27,030 to $27,900.

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