EAST PALO ALTO
CITY COUNCIL
STAFF REPORT
DATE: April 5, 2022
TO: Honorable Mayor and Members of the City Council
VIA: Jaime M. Fontes, City Manager
BY: Humza Javed, City Engineer
Greg Henry, Senior Management Analyst
SUBJECT: San Francisco Public Utility Commission Wholesale Water Rate Increases Recommendation
Receive and file update on expected wholesale water rate increase and the City’s planned response.
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:
Priority No. 5: Improve Communication and Enhance Community Engagement Background
According to the San Francisco Public Utility Commission’s (SFPUC) latest update provided at the annual wholesale customers meeting earlier this year, the SFPUC is currently projecting a
15.9% wholesale rate increase for FY 2022-23 and another 10.9% increase for FY 2023-24.
The two increases would result in a projected wholesale water rate from the current rate of $4.10 to of $4.75/ccf (centum cubic feet or a hundred cubic feet) in FY 2022-23. The FY 2022- 23 rate notice will be distributed by the SFPUC in early May 2022.
When SFPUC notified the City of the FY 2022-23 increase, it also included an expectation that rates will increase further in 2023 to $5.28/ccf in FY 2023-24. Staff will be monitoring this additional increase and will update the Council next year.
Analysis
The City included a “pass-through” provision in the last Proposition 218 rate-setting process found in Resolution 5154. This allows the City to adjust the retail water rate as needed to “pass-through” the cost increase of the wholesale water to our customers without another Proposition 218 process. Specifically, for each 1 cent increase by SFPUC, the retail rate of water is schedule to increase by 1.2 cents.
Council needs only approve the rate increase by resolution and staff must notify all customers via a mailed notice. While this process won’t diminish the burden on our customers, it will allow the City itself to respond quickly to this unanticipated and extreme rate increase by SFPUC.
Once the rates for FY 2022-23 are finalized by SFPUC and notices are provided to consumers through the City’s water operator, Veolia, this will initiate the pass through of these whole sale rate increases consistent with Resolution 5154.
City Staff will return to City council for the rate increase approval in May 2022. Upon City Council approval, 30-day notices will be provided to customers regarding the planned increase.
It should be noted that the City has limited control over the cost of water itreceives. The City is simply a customer of SFPUC and does not currently have the ability to use any other sources of water.
Fiscal Impact
On July 1, 2022 the water usage charge is scheduled to increase to $7.77 per ccf from the current rate of $7.66. With the additional pass-through rate of $0.76 anticipated, the water usage charge will be $8.53 per ccf.
The pass-through rate is calculated as follows: ($4.75 - $4.10) * (1.2) = $0.64*1.2 = $0.768.
The is rounded down to $0.76.
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto.
Environmental
The action being considered does not constitute a “Project” within the meaning of the California Environmental Quality Act (CEQA), pursuant to CEQA Guideline section 15378 (b)(5), in that it is a government administrative activity that will not result in direct or indirect changes in the environment.