In an ironic twist of drought economics, the East Bay Municipal Utility District (EBMUD) is considering charging its customers more for water starting this summer in part because they’re doing such a good job of using less.
The utility district board at a July 11 hearing will consider a proposal to increase water rates by 9.25%, effective July 12 of this year, and another 9% on July 1, 2018.
The proposed increases are earmarked for infrastructure improvements, and to make up for revenue declines linked to lower than projected water use during the recent drought, said Jenesse Miller, an EBMUD spokesperson.
“We can’t say it enough, we don’t want folks to feel they’re being punished for conserving; conserving is what we asked folks to do, is what the entire state was asked to do,” Miller said.
“Conserving water during this historic drought was critically important. But yes, there is a financial hit to us as a water utility for selling less water.”
The utility district serves 1.4 million customers in Alameda and Contra Costa counties.
Historically, EBMUD rate increases have averaged 7% a year going back about a decade. But juxtaposed against conservation, customers’ water bills have increased by less than 4% a year during this time.
Before the drought, about six years ago, the average EBMUD customer used 250 gallons of water a day. Today, average use is at around 200 gallons a day.
About 90% of EBMUD’s operating costs are fixed, or don’t decline when demand for water drops. With people buying less water during recent drought years, there was only about a 10% dip in the cost of running the system, Miller said.
“Whether we deliver 1 gallon of water or 130 million gallons, the infrastructure remains in place and has to be updated and maintained,” Miller said.
By comparison, “[EBMUD] revenues are 72% variable and 25% fixed,” said EBMUD Director Andy Katz, who represents Berkeley.
Katz supports the proposed rate increase. “It’s important for customers to pay proportionate to the amount of water they’re using, so there’s an incentive to conserve,” he said. “But we still have the same 4,200 miles of pipe to maintain and repair.”
Not all his constituents are on board, however.
A form letter opposing the rate hike is circulating on Berkeley area Nextdoor sites, urging people to customize and mail it in. The letter reads in part. “ . . . many of us have permanently incorporated water conservation practices into our water usage. As a result, we now find we will pay more for less. This isn’t a reasonable way to encourage conservation and will be a hardship on people like myself who are on a fixed income and are seniors.”
Comments on at least some of the Nextdoor EBMUD posts reflect mixed opinions.
In recent budget projections, EMBUD factored in conservation, but underestimated just how much people would cut back by about 11%, translating to about a $32 million shortfall, Miller said.
“People stepped up to the plate more than we could have ever asked for and saved more water,” she said.
EBMUD uses two-year budgets tied to the fiscal year. The proposed budget, starting this July 1 fiscal year, which assumes the revenue increase, is $2.03 billion for the water system, waste water system, capital appropriations and debt service. The prior two-year budget, ending June 30 this year, is $1.7 billion.
The budget projects East Bay residents will keep their drought mindset, maybe loosening up water use a little, Miller said. “We’re looking at this as a permanent behavior change and continuing to expect our customers to conserve, perhaps not as they did at the height of the drought.”
She adds that it’s helpful for water consumers to know when it’s OK to ease off a little compared to serious or emergency drought conditions. “In some ways, you want to be able to raise the red flag when it’s absolutely necessary.”
During the drought, EBMUD added a 25% emergency surcharge to all water bills, and charged penalties to the heaviest users. These were dropped when water availability improved. Some of this was to encourage conservation, but it also helped fund emergency steps the utility took to access water such as purchasing from other agencies.
Around 35% of the current proposed rate increase is needed for capital improvements or to upgrade treatment facilities and to replace and repair aging pipes, much of which is aging-out. About 30% is to offset the revenue drop linked to conservation efforts, and the remainder is for ongoing operational costs, Miller said.
The proposed budget also calls for tapping into a $95 million rate stabilization set-aside to cover some of the costs of upgrading water treatment plants, replacing reservoirs, and repairing pipes.
How will the current proposal affect household water bills?
The average EBMUD household uses 6,000 gallons of water a month or 200 gallons a day. With the proposed rate increase, monthly water bills would increase by $4.34 in 2017 and $4.63 in 2018.
Meanwhile, thanks to the wet winter, the water supply is ample, with East Bay reservoirs at 89% full and overall system storage at 82%.
This leaves the East Bay in good water shape for a spell. “Our water production rates are at historic lows. We’re very confident in securing reliable water. We have to invest in our aging infrastructure,” Katz said.
Public comment on the proposed rate hike will be taken at the July 11 public hearing, scheduled for 1:15 p.m. in the boardroom of EBMUD’s main administrative building at 375 11th St., Oakland. Other meetings on the increase have been held over the past several months in different locations in the district.