Water Briefing

for Elected Officials

and Staff

February 17, 2017

Agenda

• Introductions

• Drought Update

• Water Rates

• Looking Ahead

• Q&A

CUSTOMERS

CONSERVED 29%

2013 2016

13 BILLION GALLONS SAVED

Drought Update

US Drought Monitor

January 3, 2017 February 7, 2017

Drought Update

■ Much improved conditions (snowpack,

reservoirs, groundwater)

■ Surcharges and allocations removed effective

February 1, 2017

■ Santa Clara Valley Water District extends 20%

conservation target

■ State Water Resources Control Board extends

water conservation emergency regulations

Need for Investments

■ “D” grade from American Society of Civil

Engineers

■ Infrastructure replacement era (Nation - $384

billion, California - $45 billion by 2030)

■ Investments in water system critical to provide

safe, high quality and reliable water service

■ Our turn to invest for future generations

*United States Environmental Protection Agency

Rate Setting Process

■ Authorized by the California Public Utilities

Commission (CPUC) through comprehensive

review process

■ Balances just and reasonable rates with safe

and reliable water service

■ General Rate Case (GRC) application once

every 3 years

■ Cost of service rates (revenue requirement)

■ Forward looking projections

Rate Increases

■ SJWC’s CPUC-approved rates through GRC

averaged 5.1%

■ Santa Clara Valley Water District (SCVWD)

wholesale rate increases averaged 9.6%

Where Your Dollar Goes

$0.38

$0.22

$0.21

$0.11

$0.08

Water Supply Operating Costs

System Improvements Taxes and Fees

Cost of Capital

■ CPUC approves sale projection of 10 units of

water in coming year

■ Regulatory requirement to invert fixed-variable

proportions

■ Projected usage equals actual usage

Utility (cost of service)

- Fixed 7.00

- Variable 3.00

Total Cost $10.00

Customer Bill

- Service 3.00

- Quantity 7.00

Total Billed $10.00

Rates-Conservation Nexus

Customer Bill

- Service 3.00

- Quantity ($0.70/unit) 7.00

Total Billed $10.00

Customer Bill

- Service 3.00

‐ Tier 1 Quantity (1-5 @ $0.50/unit) 2.50

- Tier 2 Quantity (6-8 @ $0.82/unit) 2.46

- Tier 3 Quantity (>9 @ $1.02/unit) 2.04

Total Billed $10.00

Uniform Rate Design

Tiered Rate Design

Rates-Conservation Nexus

Rates-Conservation Nexus

■ 20% conservation scenario

■ Fixed costs remain same, savings on variable

costs

Utility (cost of service)

- Fixed 7.00

- Variable 2.40

Total Cost $9.40

Customer Bill

- Service 3.00

- Quantity 5.60

Total Billed $8.60

■ Deficit between cost and bill

■ Results in higher unit water rates

Rates and Drought Surcharges

■ Rates set based on

cost of service

■ Water Conservation

Memorandum

Account (WCMA) in

place to track

uncollected revenue

from drought rules

and restrictions

■ Drought surcharges

are price signals

designed to

encourage

conservation

■ Collected and tracked

separately

■ To be disposed of as

directed by CPUC

Rates and Drought Surcharges

■ WCMA 2014 ($4.3M)

■ $0.08/CCF surcharge from December 2015 through

December 2016

■ WCMA 2015 ($19.8M)

■ $0.1441/CCF surcharge from May 2016 through May

2017

WCMA 2015 $19.8M

Surcharges 2015 ($12.1M)

Net Recovery $7.7M

Looking Ahead

■ Conservation as a way of life

■ Maximize reliability of current supplies

■ Delta fix, reservoir upgrades/expansions

■ New water supplies critical

■ Continued pressure on water rates

■ Infrastructure replacement, water supply,

conservation, and water quality

■ Continued stakeholder engagement

Q&A