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PUC staff proposes $2.80 wholesale water rate, trigger mechanism and environmental surcharge; hearing set for May 10
Summary
Staff recommended continuing the current wholesale rate methodology and proposed raising treated‑water wholesale rates to about $2.80 per 100 cubic feet, a trigger to increase rates if deliveries drop, and a tiered environmental surcharge to fund environmental enhancements; public hearing and adoption scheduled for May 10.
PUC staff on April 12 presented proposed wholesale treated‑water rates and an environmental surcharge the commission will consider for adoption on May 10.
Assistant General Manager and CFO Todd Reedstrom said staff reviewed three alternatives that produced the same wholesale revenue requirement and recommended continuing the current rate‑setting approach. Under staff’s proposal, wholesale rates would rise to about $2.80 per 100 cubic feet to recover prior undercollections (staff described $25 million to be recovered over the coming year). Staff also proposed a trigger mechanism that would ratchet rates up further if deliveries fall below a defined threshold to protect bond ratings and revenue stability.
On the environmental surcharge, staff said the water supply agreement requires the commission to propose a surcharge if deliveries exceed a specified system threshold; staff proposed a tiered structure that would increase marginal costs for deliveries above interim supply allocations and place surcharge proceeds into a dedicated environmental enhancements fund to be forwarded to the Board of Supervisors for adoption.
Art Jensen, representing wholesale customers, asked staff to provide modeling of alternate delivery assumptions (for example 135, 140 and 145 million gallons per day) and to show the effect on rates and triggers; staff agreed to provide historical purchase charts and scenarios in advance of May 10. Reedstrom said outreach and comment have been ongoing and that one letter from the city of Daly City did not object to the proposed untreated water discount for a customer that takes untreated rather than treated water.
Next steps: the public hearing and the vote on the wholesale rates and environmental surcharge are scheduled at the PUC’s May 10 meeting; staff will circulate sales and revenue monitoring data for April in advance of that session.
Quotation: "What we were trying to do is basically solve an equation that resulted in the exact same number of dollars being recovered, but gave us increased certainty that those would come in in the fiscal year we expected them to come in," Todd Reedstrom said.
