CITY OF COMMERCEAGENDA REPORTCITY OF COMMERCEAGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
Item No. Item No.
Item No.
Item No.
TO: Honorable City Council
FROM: City Manager
SUBJECT: Commerce Water System Rates – Continuation of PFAS Surcharge Meeting Date: August 13, 2024
RECOMMENDATION:
The City Council will consider adopting a Resolution to leave in place a PFAS surcharge that is part of the current rate structure due to expire on September 1, 2024.
BACKGROUND:
On September 1, 2021, the City implemented a 3-year rate increase for the Commerce Water System’s operational costs and Capital Improvement Program (CIP) that included a PFAS Surcharge for the 3-year period. Typically, as a result of the 3-year analysis, staff has had to recommend a rate increase in past years which requires a Proposition 218 notification to customers and a public hearing. However, this year, staff does not recommend a rate increase at this time. Staff does recommend however that City Council approve leaving the PFAS Surcharge currently in the rate structure in place rather than allow it to expire on September 1, 2024 as originally planned. The rate structure for the City’s public-owned system and Cal Water’s private-owned system that provides water to its residents and businesses is depicted below as an average monthly bill:
Description
City
Cal Water
Number of Customers
Average Monthly Bill
Number of Customers
Average Monthly Bill
PFAS Surcharge in Rates
$0.62/CCF
Current Rate - residential
479
$37.07
1,585
$71.60
Current Rate– non-residential
477
$72.75
676
$96.89
The PFAS Surcharge is $0.62 per Centum Cubic Feet (CCF), which equate to approximately $6.20 on an average residential monthly bill (10 CCF x $0.62) and included in the average monthly bill noted above. This Surcharge was recommended due to the State of California Division of Drinking Water changes in Response Levels (RLs) for per- and polyfluoroalkyl substances (PFAS) in July 2018 (DDW). PFAS are typically found in Class B firefighting foam, carpets, rugs, textiles, non-stick cookware, metal plating, tech industry, and food packaging.
In March 2019, DDW ordered the sampling of approximately 600 wells adjacent to landfills and airports for PFAS. In September 2020, DDW expanded the order to approximately another 900 wells on or near military bases. The data from these samplings were used to create a Maximum Contaminant Level (MCL).
In January 1 2020, the Health and Safety Code Section 116378 made effective a requirement that all community water systems, including pumpers like the City of Commerce, must either notify their customers of PFAS detections exceeding the RLs or shut down the well providing water. As a result, Commerce shut down Well 7-01 in February 2020 and began purchasing and importing water at a higher cost than pumping it from the ground.
ANALYSIS:
Purchased Water
Purchased water cost more than double the cost to pump groundwater. Historically, the City pumped 80% of its water needs and purchased approximately 20%. A PFAS surcharge was necessary due to the significant increase in purchased water related to issues with PFAS, man-made chemicals that now need treating at certain levels, which resulted in a well shutdown until a treatment plant could be constructed at the well site. The surcharge was to be applied to all water customers in the Public-owned Commerce Water System for both residential and non-residential bills for the 3-year rate period until a new water rates analysis could be conducted.
Timeframe
Total Purchased Water Cost
Total Surcharge Collected to Date
Shortfall
February 2020 - April 2024
$2,844,000
$1,355,111
($1,488,889)
WRD Grants – Treatment Plant Construction at Well 7
Since the Water Replenishment District of Southern California’s (WRD) mission is to protect and preserve the groundwater supplies within the Central Basin Municipal Water District for beneficial uses, WRD created a PFAS Remediation Program to fund treatment projects in the District. City staff and Cal Water worked with WRD for 8 months to justify the need for a total project cost of $2,449,817.36 award to the City of Commerce, which WRD’s Board awarded on January 20, 2022. Construction of the Treatment Plant at Station 7 required 3 years and 3 months between planning and construction and was permitted to operate by DDW and back in operation on July 3, 2023. The City was finally able to significantly reduce its purchased water amounts and begin pumping groundwater again. However, construction took longer than originally anticipated due to lead time for equipment and materials as well as the State’s inspections and securing their permit to operate, which required purchasing water for a much longer time than the originally planned.
Carbon Treatment – ongoing costs
Carbon is used for water treatment and is now necessary at the new Treatment Plant constructed at Well 7 adding a new cost. The carbon change outs that were occurring at Well 4 need to occur more often from every 2 years to now every 18 months for PFAS. The added costs for PFAS treatment for both wells is estimated in the $200,000 range.
WRD Grants – Operations and Maintenance for Well 4
On January 23, 2024, the City entered into a Memorandum of Understanding (MOU) with WRD as part of the State of California Water Resources Control Board’s Proposition 68 Treatment and Remediation Grant Program which funds groundwater contamination treatment projects for drinking water in disadvantaged communities. The WRD administers the grant on behalf of the State. The City was selected to receive funding for allowable operations and maintenance (O&M) activities for Well 4 up to a maximum amount of $1,299,500 for costs incurred between July 19, 2022 through December 31, 2025. These costs include power, chemicals, labor, analytical testing, solids disposal, media replacement, and equipment replacement directly related to the well’s treatment of drinking water.
These grant opportunities helped to recoup some of the City’s water system expenses and a great benefit to the City and contributed to why staff recommends not increasing water rates at this time. However, due to having to purchase water at a significantly higher cost for a longer period of time than originally anticipated due to construction and permitting delays, staff recommends City Council authorize leaving the PFAS Surcharge in the current rate structure for now. A rates analysis will be conducted next year and results reported to the City Council at a future meeting date.
ALTERNATIVES:
Approve staff recommendation
Disapprove staff recommendation
Provide further direction to staff
FISCAL IMPACT:
There is no fiscal impact. The results of a future water rates analysis will be reported to Council with recommendations at a future date.
RELATIONSHIP TO STRATEGIC GOALS:
This agenda item relates to the 2016 Strategic Goal
Infrastructure and Facilities
Guiding Principle 2: Develop and implement a sustainable Capital Improvement Program to ensure the quality of existing infrastructure and to support future plans for the City.
Recommended by: Gina Nila, Department of Public Works
Reviewed by: Vilko Domic, Assistant City Manager
Approved as to form: Noel Tapia, City Attorney
Respectfully submitted: Ernie Hernandez, City Manager
ATTACHMENT:
Resolution